U.S. optical bandwidth services market to more than double in 3 years

July 1, 2003

The market opportunity for services provisioned over optically based circuits will grow from $2.08 billion this year to $4.62 billion by 2006, details a new report from analyst Communications Industry Researchers (CIR—Charlottesville, VA).

SONET-based OC-n services, according to CIR analysts, will dominate the overall market, capturing a 60% share each of the next four years as wavelengths have not and will not cut into SONET private lines the way some startups expected they would during the optical boom. However, CIR did find that wavelength services in both the wholesale and retail markets will enjoy reasonable growth opportunities beginning this year, with total sales of $353 million in 2003 reaching $800 million by 2006.

"While these figures do not reflect the conventional market hype of 2001 that saw obscene market projections of $8-billion wavelength services markets based on non-correlated events like growth in total U.S. population instead of termination points within carrier PoPs [points of presence], the numbers do point to an upward trend worth watching," contends the report.

Wavelengths have been a successful substitute for dark fiber in some cases, but they have not meant the end of dark fiber sales; large carriers in particular need access to full fiber strands and not just slices of capacity. Two additional factors in the sale and use of fiber are also worth noting, says CIR. Utility companies that built high-capacity networks across their home regions in the late 1990s are now helping each other expand by swapping dark fiber.

Also, carriers with large amounts of fiber—thanks to capacity overbuilding—often prefer to sell entire fibers and are pricing them accordingly. On the other hand, wholesale wavelengths and SONET lines are dropping in price and leases are becoming less restrictive for the customer. Smaller carriers and Internet service providers, therefore, are less likely to purchase dark fiber and will instead seek service agreements.

For more information about the report, "Bandwidth Services Forecast Report: 2003-2006," visit the firm's Website, www.cir-inc.com.