Study confirms 2001 cable over production

19 July 2002 -- A web-based survey from April 2002 has confirmed the industry's suspicion that fiberoptic cable manufacturers worldwide produced millions more kilometers of cabled-fibre than were installed in 2001.

19 July 2002 -- A web-based survey from April 2002 has confirmed the industry's suspicion that fiberoptic cable manufacturers worldwide produced millions more kilometers of cabled-fibre than were installed in 2001.

As part of research company KMI's investigations for its annual Worldwide Report on Optical Fiber and Fibreoptic Cable Markets published in December 2001, the company estimated that as much as 16m fibre-km in inventory could affect the worldwide fibreoptic cable market in early 2002.

During most years, KMI assumes some amount of cable is carried over from a previous year, but that number is believed to not significantly vary from year to year. For this reason the amount of cabled-fibre installed is equivalent to the amount manufactured in any given year.

In 2002, however, there appeared to be a significant accumulation of cable from the previous year. KMI believes the previously announced inventory of 16m fibre-km could actually be as much as 18m fibre-km. KMI will determine the volume of cabled-fiber produced in 2002 as part of its annual update Worldwide Optical Fiber and Fiberoptic Cable Markets to be published in November 2002.

What do these excess inventories mean for the cable market?
To further verify that such a large inventory was carried into 2002, KMI undertook an email survey. KMI selected 2,016 email addresses from industry magazine readers that had been identified as having purchasing influence on fibreoptic cable. KMI received useful information from 45 of about 100 respondents, relatively evenly split between the United States and the rest of the world.

Two U.S. respondents reported substantially more cabled fibre held over into 2002 compared with typical year-end inventories. The excess amount in 2002 (the amount in excess of the reported "typical" amount) for these two companies totaled 13m fibre-km.

Respondents were asked to explain why their inventory differed from previous years. The results show change in corporate strategy (37%) and capital budget adjustments (30%) as the most common reasons for increased fibreoptic cable inventory among the 30 respondents.
Twenty-three of the 31 respondents reported their year-end 2001 inventory higher than their typical inventory, while five of the 31 reported a lower than typical inventory.

What do these excess inventories mean for the cable market?
Fibre carried over from 2001 and 2002 may partially offset demand for new cable to install in 2002. This is probably true for carriers that have ongoing demand for fibre to maintain and expand their networks. Much of the excess inventory, however, is attributed to carriers that are restructuring, exiting the telecom business, or otherwise unable to continue with construction plans.

The range of cable designs, fibre counts, and performance specifications make it unlikely that reels of cable are fungible from one application to another or from one carrier to another. In fact, much of the 18m fibre-km excess inventory is high-count, high-performance cable for longdistance applications, and other operators may not require these counts or fibre types.

This unused cable is a byproduct of the well publicised collapse in the telecom market. The resources to install much of this surplus cable are not available, and may not be available for some years to come. For this reason, much of the 18m km of cabled fibre is likely to remain uninstalled and should not dampen future demand beyond 2002.

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