Analysts see disappointing growth in passive optical networks

Last year, the passive-optical-network (PON) market was marked by high growth and numerous deals in the making; this year, the market has slowed dramatically, resulting in a refocus in vendors' product lines and target markets. Probe Research (Cedar Knolls, NJ) forecasts a still respectable annual growth rate of 59.3%, though this percentage pales in comparison to last year's revenue growth, which had more than doubled from the year before, report analysts.

"There are a couple of factors contributing to the growth-rate decline," explains Maria Zeppetella, vice president of network infrastructure. "The U.S. economy began to slow in 2001, which was exacerbated by the Sept. 11 attacks. Telecom, in particular, has been one of the hardest-hit sectors. Carriers consequently announced overall spending cutbacks in 2001."

Zeppetella also cites ongoing U.S. regulatory and legislative changes regarding broadband access as another factor hampering the commitment to passive-optical-networking and other broadband technologies. "With carriers still unsure what the final outcome will be, spending by service providers has come to a standstill," she says.

Because this regulatory and legislative turmoil is not likely to be ironed out until next year, the RBOCs have delayed deployments of passive-optical-networking and other equipment until they are sure of the rules that will affect them in the local loop. Fiber-to-the-building (FTTB) business deployments also have not taken off as expected. SONET/SDH and Ethernet can now be offered more cheaply, eroding the market for business PONs.

On a more positive note, Zeppetella believes the growth drivers will come from competitive and incumbent local-exchange carriers purchasing PONs for fiber-to-the-home deployments. Cable multiple service operators are also stimulating FTTB PON purchasing.

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