Long road to recovery for long-haul market, but fewer bumps ahead next year

Feb. 1, 2003

Long-haul (LH) optical revenue, which comprised 51% of the total optical market in 2001, decreased by more than 50% in 2002, according to new findings from Probe Research (Cedar Knolls, NJ). Analysts there expect the market to remain relatively flat, showing only minor improvement in 2004—and still falling short of 2001 revenues as far out as 2007.

The current state of the LH market is being affected dramatically by a number of events, asserts Maria Zeppetella, Probe's vice president of optical infrastructure. Unrealistic traffic projections—many of which came from the carriers themselves—have resulted in network overbuilds. The bankruptcies of large carriers like 360networks, Global Crossing, and WorldCom, and the continued financial instability of others, including British Telecommunications and Qwest Communications, have also dampened the market. Other market forces include the excess availability of assets, the demise of several startups in the optical space, consolidation among optical equipment vendors, a lack of trust by investors, thanks to questionable accounting practices by service providers and vendors, and the carriers' inability to provide profitable new data services.

Until 2001, optical technology development focused on providing extended reach and higher throughput, driven by the anticipated swell in IP traffic. Today's service providers have come to terms with more realistic annual growth rates for IP traffic. Moreover, they have less cash available for purchasing equipment, and they face pressure to improve profitability.

"Consequently," says Zeppetella, "optical technology R&D, for both metro as well as long-haul, has focused increasingly on reducing the rack space required for housing optical platforms, lower power consumption for optical equipment, and continued reliance on/compatibility with legacy SONET/SDH equipment."

For more details on the report, "Global Long Haul Optical Markets, 2001-2007: Carrier Profiles," visit www.proberesearch.com.