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Ethernet passive optical network (EPON) is an emerging access network technology that provides a low-cost method of deploying optical access lines between a carrier's central office (CO) and a customer site. The EPON can provide more bandwidth than xDSLs which are most widely deployed broadband solutions. In this paper, we propose a cost effective structure of optical network unit (ONU) for EPON. The proposed ONU is suitable for apartment that is a typical residential model in Korea. The ONU system can process layer 2 functions such as VLAN, bandwidth management, priority control, etc. In addition to these layer 2 functions, other services, such as L2 IGMP snooping, can be deployed easily.