Carrier survey indicates spending upswing, reports KMI

23 September 2003 Providence, RI Lightwave--Telecom carrier responses to KMI's 2003 Optical Networking Equipment Survey indicate that carriers plan on increasing their optical-networking equipment spending in 2004 and beyond.

Sep 23rd, 2003
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23 September 2003 Providence, RI Lightwave--Telecom carrier responses to KMI's 2003 Optical Networking Equipment Survey indicate that carriers plan on increasing their optical-networking equipment spending in 2004 and beyond.

"Across all regions and among all types of carriers surveyed, expectations are that there will need to be a spending increase in the next couple of years as capacity on the presently deployed equipment becomes increasingly filled up," said Michael Arden, KMI analyst. For example, 35% of respondents indicated that their 2003 purchases of DWDM equipment would increase over their 2002 purchases. For 2004, 59% of respondents indicated an increase in year-over-year DWDM spending.

This is the second year that KMI has conducted a web-based survey of telecom operators to get a quick mid-year "progress report" on carriers' spending and plans for optical networking equipment. In the July 2003 survey, KMI received responses from 141 carriers worldwide, with 44% in North America, 5% in Latin America, 18% in Europe, 31% in Asia-Pacific, and 2% in Middle East/North Africa.

To collect information on a major factor in the demand for optical networking equipment, the KMI survey directed questions to the carriers about the growth of bandwidth on their networks. The responses show that bandwidth continues to grow at strong rates, but the rate of growth is declining. The graph above shows the average of carriers' responses to questions about the year-on-year growth in bandwidth on their networks. This average is trending downwards from 44% in 2001 to 36% in 2003 and 27% in 2004. It should be noted that these growth rates are in reference to total bandwidth, which would include voice, Internet-related traffic, and other data communications. The average responses varied among the major regions, with North American and European carriers reporting the lowest growth rates in recent years and the most conservative expectations. The most aggressive outlook was from the emerging markets of Latin America and Middle East/North Africa.

The survey data showed a shift in the type of optical networking products to be procured in the near future. As carriers look to evolve their networks to more intelligent systems, equipment manufacturers will see an increase in spending on optical add-drop multiplexers (OADMs), optical crossconnects (OXCs), next-generation SONET/SDH transmission equipment, and similar advanced technologies. Also, the presence of Ethernet will increase in networks -- both long-haul and metro -- over the next several years.

For example, the survey data showed that carriers expect to increase OADM deployment from 2003 to 2005. At the same time, there will be a shift to more advanced OADMs, as shown in the table below. The percentage of carriers who will be deploying at least 40% of their OADMs as reconfigurable OADMs (versus fixed) will increase among all types of carriers surveyed.

The "Optical Networking Survey 2003" provides carrier insight into the following issues:

• bandwidth demand growth trends;
• deployment of Ethernet line-cards;
• use of secondary markets for equipment purchases;
• spending trends for SONET/SDH, DXCs, DWDM, and OXCs;
• breakdown of DXC categories;
• use of next-gen equipment versus traditional SONET/SDH and DXCs;
• deployment of OADMs;
• network capacity and trigger points for deployment strategies; and
• OXC deployment trends.

Information is provided in aggregate for all respondents and is also broken down into regional and carrier-type categories.

KMI Research provides optical networking intelligence through its market reports, semi-monthly newsletter, and conferences on fiberoptics markets. "Optical Networking Survey 2003" can be ordered online at:http://www.kmiresearch.com/fiberoptics_market_studies/optical_outlook.htm

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