The worldwide market for dense wavelength-division multiplexing (DWDM) gear will more than double in the next five years, as service providers around the globe use the technology to provide bandwidth at lower costs, says a new report from Communications Industry Researchers Inc. (CIR--Charlottesville, VA). Other industry research supports this view and highlights the opportunity for vendors making products for the DWDM market, specifically optical components and switches.
The new CIR report Wave Division Multiplexing, Photonic Switching and the Coming of All Optical Networks 1999-2000, Volume 2, International Market Opportunities points to the fact that while most service providers are still installing DWDM only on especially busy routes, DWDM will become major strategic technology for many service providers as competition heats up for them. According to the report, expenditures on DWDM equipment for deployment outside of North America will amount to approximately $1.2 billion this year, growing to $2.9 billion in 2004.
The report notes that, internationally, such trends have gone the furthest in Western Europe, where an ever-growing number of service providers are building backbone facilities. According to the report, the European DWDM market is expected to increase from $580 million now to $1.2 billion in 2004. CIR foresees that there also will be a growing need for metropolitan DWDM systems, especially in Europe, and expects these expenditures to grow from $72 million in 2000 to $231 million by 2004. The submarine DWDM market is also large and growing; according to CIR, $400 million will be spent on submarine DWDM systems worldwide in 2000, and this figure will grow to $900 million by 2004.
Such growth will demand an increase in the optical components market, and new statistics issued by Ryan Hankin Kent Inc. (RHK--South San Francisco, CA) support that. The firm reports that the market for key terrestrial DWDM optical components grew to $1.4 billion in 1999, and predicts that these components will experience an annualized growth rate of 50% through 2003, reaching $7 billion. Jay Liebowitz, co-director of RHK's optical component service, explains that improvements in optical components contribute to growth in telecom traffic, which leads to greater demand for optical components. "We see the cycle perpetuating throughout the forecast period," says Liebowitz.
According to CIR, the growing intensity of competition is causing service providers to seek new ways of lowering the cost and time to market for new high-bandwidth services. DWDM and other optical networking systems, such as optical switches, will provide a way of meeting such goals. Core Optical Networks: Market Opportunities for Optical Switching Systems in DWDM Networks, the latest report from Pioneer Consulting (Cambridge, MA), has quantified the long-term demand for optical switching systems.
In North America and Europe, where DWDM-based fiber-optic networks are being rapidly deployed, the need for optical switching systems will create a 5-year, $31-billion market opportunity for vendors of optical switching systems. In North America, the market for these systems will expand from a projected $427 million 2000 to over $10 billion in 2004. In Europe, the market is forecast to grow from $116 million in 2000 to over $4 billion in 2004.
"The rules are changing in the optical networks market," says Scott Clavenna, principal analyst and author of the Pioneer report. "Capacity is not enough today, rather the ability to manage this new optical layer with intelligent, dynamic systems that actually create service opportunities and increase reliability of terabit networks will be the key to success in the coming decade." CIR agrees, stressing in Volume 1 of Wave Division Multiplexing, Photonic Switching and the Coming of All Optical Networks 1999-2000 that success in the optical networking market over the next few years will have less to do with suppling huge chunks of bandwidth than it will with managing that bandwidth to provide value-added features over an optical physical layer.