Optical access to drive reinvestment

The U.S. optical access market will grow from $2.1 billion in 2003 to just over $3 billion in 2007, driven mainly by growth in Ethernet, coarse wavelength division multiplexing, passive optical networking and free-space optics, according to market tracker CIR.

In time, newer technologies like CWDM, PON and free-space optics may generate the volume and subsequent low unit costs of the 30-year-old Ethernet, CIR notes. In turn, that should grow the overall market one would think.

Other requirements, like security, can then be layered above the optical access transport infrastructure without “destroying” volume efficiencies, CIR notes.

But are service providers or corporations going to wait for 30 years until this stuff gets cheaper? Ethernet is the exception, not the rule. There are plenty of other technologies that lived and died within that 30-year window and failed to achieve the ubiquity Ethernet enjoys.

Then again, good ol’ circuit switching has been around for 100 years, and voice is pretty cheap right now…

But moving right along… Production scale and cost reduction of these new optical access technologies will be driven by sales to corporations, not service providers, CIR asserts. Ethernet and CWDM are examples of this, and it is also the reason why free space optics start-up Terabeam is now selling equipment directly to business customers, the firm notes.

And we all thought it was to make money… who knew?

Service providers implementing these new optical access technologies will generate the press coverage; but it is the decisions of CTOs and IT managers at thousands of universities, hospitals and brokerages that are the real determining factor for any new technology’s success, CIR claims.

And this growing end-user demand for bandwidth will accelerate broadband deployment by Verizon and other phone companies, which will increase demand for SONET/SDH systems, Insight Research says. Insight expects a gradual return to network infrastructure investment by carriers as early as the fourth quarter of this year because even as carriers ratcheted back their capital spending in 2001, end-user demand for bandwidth continued to grow.

Carriers met that bandwidth demand by using up existing spare capacity in their networks. Now that recent regulatory rulings on UNE-P have given local carriers the incentive to begin reinvesting – according to Insight – the firm expects “real” growth to return to the optical equipment market, especially in SONET/SDH.

Insight forecasts compounded growth of more than 50% from 2003 to 2008 in the SONET/SDH terminal market and an 18% compounded annual growth rate in the fiber-optic cable market.

“Local access trends are the drive wheels powering the entire telecommunications industry,” Insight President Robert Rosenberg says. “We expect SONET/SDH upgrades in metropolitan areas to become a major carrier priority.”