By Stephen Hardy, editorial director
June 21, 2002 -- Spurred by optical technology vendors who are fed up with the beating they're taking on Wall Street, the Telecommunications Industry Association (TIA) hopes to release a report in early September that will provide benchmarks for measuring optical capacity and its use. The vendors hope that the TIA report will bolster their claims that the much discussed "fiber glut" is widely misconceived and prevents carriers from borrowing money to install new infrastructure. Financial sources, however, suggest that the vendors have a few misconceptions of their own.
The September report will be the second part of a two-phased look at the current state of optical capacity. Early this month, the TIA released "Optical Network Capacity and Utilization: Clarifying Terms and Definitions," a white paper that defines terms for discussion of optical capacity and how much of it is being used. (See www.tiaonline.org.)
Having defined its terms, the TIA now wants to use them to both provide industry benchmarks for such factors as the peak-to-average ratio for data traffic and to provide a snapshot of how much capacity is currently going unused -- and where additional capacity might be necessary. "It's very important now for us to reach out to others who are involved in either using the technology or writing about the technology or in other ways having an impact on the market -- it's important for us to reach out to them to make this as complete a report as possible," said Eric Nelson, the TIA's vice president of global network marketing, in an interview for an article on the subject that will appear in the August issue of Lightwave.
Janice Haber, vice president, systems engineering and market development, at OFS Fitel, says that having an organization with the reputation of the TIA on their side will help combat what they see as the widespread dissemination of misinformation among the financial community. "I think that when you talk about overcapacity or overbuild, certainly there is no debate that there is that situation in long-haul, U.S. Tier 1 cities," she admits. "But I think that that perspective is one that's been broadened to include all markets and all segments -- and that's what's not accurate." Haber points to assertions she has heard that China is suffering from fiber glut as an example.
"One thing that I think is happening is that service providers are in fact reacting as much to Wall Street in some cases and to their stock prices as they are to the kinds of network planning that they might otherwise be doing," she continues. "They're running past normal utilization rates, and I think it's triggered as much by fear and not wanting to be seen spending 'unnecessary' capital."
Simon Leopold, senior analyst at Merrill Lynch, believes Haber may be overreacting to Wall Street herself. "It may influence some short-term thinking in terms of how they present information," he says of the carriers. "But nobody runs their business based on what Wall Street says -- not over the long term. To me that's sort of bizarre and I think underestimates the intelligence of carriers."
Leopold agrees that the TIA's stamp on a positive look at the market would carry weight. However, he doubts it would have much of an effect on investment decisions. He also wonders how successful the organization will be getting the carriers to divulge traffic data. "If it were easy, somebody would have done it already," he says.
Nelson admits that, as of last week, the TIA was still formulating its strategy for getting the carriers to talk. The development of this strategy -- and its subsequent success -- will determine whether the optical communications industry will have anything new to discuss on Wall Street this fall.