The optical networking market has topped $3 billion for the seventh consecutive quarter. In the coming months, the market is
predicted to remain strong as more companies begin using optical networks, which are faster, hold more information, and allow
for more traffic flow than traditional copper cabling or wireless
During the past quarter, North America spent just over $1.3 billion on optical networking, outspending all other regions.
Why so? North America is moving the most quickly to Wavelength Division Multiplexing (WDM) technology, (where one optical
fiber carries multiple signals through different wavelengths). As Dana Cooperson, VP and practice leader of network
infrastructure for Ovum, says, Verizon and AT&T are expanding their networks with the latest WDM equipment. Few other
service providers around the world have done this, or have such high competition from alternative communications providers,
such as cable.
Today, companies have the choice to either buy a network or build their own. Companies such as financial firms or health
care centers are more likely to build their own networks so they have more control over aspects like communication costs and
“Photons can’t be “hacked,” so optical signals are inherently more secure,” Cooperson points out. “Using an optical
network as transport infrastructure to carry voice, video, and data, however, is typically not a risky proposition because
transport networks have decades of “carrier class” 99.999 percent reliability behind them, and offer the lowest latency and
so are less prone to reliability problems of any kind.”
Optical networks have obvious benefits, but there are some challenges associated with use. For example, companies
building their own networks need to have the know-how to sustain them. Correcting misconnected or dirty fibers can be very
time consuming and therefore costly. Or if companies choose to lease a fiber, finding one to lease can be difficult.
Although a vendor relationship is important, price is usually the key factor companies go by when
deciding from which vendor to lease.
Earlier this month, Ovum announced the top 10 optical equipment networking vendors’ preliminary quarterly results.
“Ciena, Fujitsu, NEC
and Tellabs all posted positive sequential and year-over-year results; Alcatel-Lucent and Huawei both followed strong 4Q07
results with expected sequential declines; and only Nortel posted both sequential and
year-over-year declines. The sequential decline [only a -1.1 percent difference], particularly after a super-hot 4Q07, was
expected, while the strong growth over 1Q07 points to continued strength in spending for ON (optical networking) gear used
for consolidating disparate services onto a single network and supporting growth in broadband consumer and enterprise
services,” Cooperson says.
The optical networking market should continue to do well into the coming months. Last year, enterprises spent about $1.6
billion in on optical networking equipment alone, of the $14.5 billion spent in the entire global market. In 2012, that
number is estimated to increase to $2.6 billion. “If the indirect spending by service providers is included, direct and
indirect enterprise spending is more like $3.3 billion rising to $4.8 billion, or about 25 percent of total global ON
spending. So, this is a big market getting bigger,” says Cooperson.
Many service plans are charging residential consumers a flat rate for bandwidth use, instead of charging by the proportion
for the amount of bandwidth used. A more direct relationship between bandwidth use and charges needs to occur. Although
growth in the optical networking market will slow down a bit, the world has gotten used to craving more bandwidth and will
therefore continue to spend in this area. Regions that are slower to adopt new technologies will especially keep the growth
of this market alive once they jump on the bandwagon.