A functional demonstration of bit-interleaving TDM downstream protocol for passive optical networks (Bi-PON) is reported. The proposed protocol presents a significant reduction in dynamic power consumption in the customer premise equipment over the conventional TDM protocol. It allows to select the relevant bits of all aggregated incoming data immediately after clock and data recovery (CDR) and, hence, allows subsequent hardware to run at much lower user rate. Comparison of experimental results of FPGA-based implementations of Bi-PON and XG-PON shows that more than 30x energy-savings in protocol processing is achievable.