Sonet transmission market to grow 12% annually through 2003

April 1, 1997

Sonet transmission market to grow 12% annually through 2003

The Sonet equipment market is expected to exhibit strong growth due to the high-bandwidth requirements of telecommunications service providers and large enterprise organizations

grant rose

frost & sullivan

The Synchronous Optical Network (Sonet) transmission equipment and services market is expected to rise steadily from $4.97 billion in 1996 to $10.96 billion in the year 2003 at a compound annual growth rate of 12%, according to the Frost & Sullivan Report "North American Sonet Transmission Equipment and Service Markets." The Mountain View, CA-based market research company declares that, in 1996, revenues for Sonet transmission equipment totaled $4.79 billion, and the Sonet services market equaled $180 million. Both segments are forecast to reach $8.56 billion and $641 million, respectively, in the year 2001 (see table).

By the year 2003, the overall size of the Sonet transmission equipment and services market in North America (United States and Canada) is estimated to grow to $10.96 billion. New network applications are expected to emerge that will necessitate greater throughput capacities during this time. These applications include tele medicine; imaging; fast packet-data and video services; and computer-aided design and manufacturing.

Sonet market growth is attributed to the steady demand for high-bandwidth services over fiber-optic networks. Much of this demand is from telecommunications service providers and large organizations, such as financial institutions, health care organizations, and electric utilities. Combined with Asynchronous Transfer Mode (atm) switches, Sonet networks appear to be the answer for telecommunications service providers and large organizations looking to consolidate their voice, data, and video traffic simultaneously onto one network. This approach eliminates the need for three separate networks, thereby improving network reliability and reducing lifetime costs.

Major market trends in Sonet transmission equipment include increased interoperability, flexibility, functionality, and survivability; improved operations, administration, maintenance, and provisioning tasks; and more scalability to accommodate network growth.

Important trends in Sonet services include more service guarantees; additional enhancements and shared rings; increased Sonet service speeds for both point-to-point and ring topologies; new concatenated signal rates; and fractional Sonet services at native lan rates.

Equipment types

Three types of Sonet transmission equipment are available. Sonet transport nodes perform as network elements that can be configured in various ways, such as terminal or add/drop multiplexers, repeaters, hubs, and ring nodes. These nodes are also used in fiber-optic and microwave-radio networks. Sonet digital crossconnect systems switch telecommunications traffic at specified line rates. Next-generation digital-loop carrier equipment is used by telecommunications service providers to deliver a variety of narrowband, wideband, and broadband telecommunications services to businesses and residential customers.

Currently the largest end-users of Sonet equipment and services are telecommunications service providers. They are implementing Sonet transmission equipment and purchasing Sonet services and capacity from other service providers and offering atm, frame relay, high-definition television, video-on-demand, and high-speed Internet access.

In general, telecommunications providers operating in North America are offering Sonet services in point-to-point or ring connections at speeds of OC-3 (155 Mbits/sec), OC-12 (622 Mbits/sec), and OC-48 (2.5 Gbits/sec). These providers comprise regional Bell operating companies, local exchange carriers, interexchange carriers, and other carriers such as competitive access providers and alternate telecommunications service providers.

Network convergence

In the past, networks were designed to carry specific types of traffic. For example, the public switched telephone network carries only voice traffic. Data networks such as X.25 networks simultaneously carry data packets from different sources that share specific routes. Cable-TV networks consisting of fiber-optic and coaxial cabling transport multiple television channels to customers. However, this situation is quickly changing.

In the future, all three types of traffic--voice, video, and data--will be carried over the same fiber-optic network. Because one network will replace three separate networks, costs are expected to drop significantly as less equipment, cabling, and routine maintenance, and fewer network operating systems, are required.

To retain their current market share as competitors invade their respective turfs, incumbent carriers must also use Sonet transmission equipment for network upgrades. Many telecommunications service providers are also projected to begin offering services in new areas by purchasing Sonet services and capacity from other carriers at wholesale rates based on volume. The purchased Sonet services are, in turn, expected to be bundled along with existing Sonet services that carriers already provide.

Sonet transmission equipment manufacturers are integrating more functionality into their equipment to provide a versatile, multifunctional product. This trend applies to all types of Sonet transmission equipment, as follows:

Fiber-optic transport nodes are expected to incorporate more digital crossconnect switching. Some vendors will add atm switching capabilities.

Radio transport nodes are anticipated to include wireless atm capabilities.

Digital crossconnect vendors are slated to include more add/drop multiplexing and atm switching capabilities.

Next-generation digital-loop carrier equipment will soon be able to deploy additional wideband and broadband services such as atm, video-on-demand, and asymmetric digital subscriber line.

End-users of Sonet transmission equipment want products that can be expanded for additional capa city as traffic levels increase and new, high-bandwidth applications emerge. u

Grant Rose is information technology industry analyst at Frost & Sullivan, Mountain View, CA, tel: (415) 237-4383.

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