China embarks on fiber-equipment spending spree

By ROBERT PEASE

For several years, China has been deploying fiber-optic cable to connect its many provinces. Thanks to a recent bureaucratic reorganization that formed a new Ministry of Information Industry, a new emphasis has been placed on further network expansion, report U.S. industry sources. As a result of an "open-door" policy to foreign investors, along with the establishment of "special economic zones" with reduced taxes, companies from around the globe have streamed into the mainland to offer advanced fiber-optic equipment.

The attention on China may appear rather sudden. Some analysts, though, are quick to point out that the situation in China today is the result of many years of intensive upgrades. "If you follow this back more than just a few months or even a few years, you`ll see there was a time when lots of announcements were made in China for laying fiber-optic links from one province to another," says Stephen Montgomery, president of ElectroniCast Corp. (San Mateo, CA). "There was a large plan conceived for laying dark fiber over a multiphased plan. But until it was all connected, there really was no need to light it."

If you look back in the fiber-optic news banks over the past few years, Montgomery`s take on events in China seems well-supported. Until the beginning of 1998, most of the fiber business involved the deployment of fiber-backbone sections, followed by projects to interconnect these sections.

Although expansion of the backbone network with additional fiber-optic deployments continues, China is ready to deploy the equipment needed to light sections of the system, accounting for the recent flurry of contracts. The major beneficiaries include global vendors of Synchronous Optical Network (sonet) multiplexers, transmitters, receivers, optical amplifiers, and an array of dense wavelength-division multiplexing (dwdm) equipment.

Companies such as Lucent, Nokia, nec, Alcatel, and Nortel are creating joint ventures to take advantage of the windfall created by China`s new interest in voice, video, and data-communications upgrades. Other companies are trying their luck alone. Among them, Alcatel, Lucent, Ericsson, and others have hundreds of offices and thousands of employees working within the country. Technologies include Synchronous Digital Hierarchy/sonet, fiber-to-the-curb, Asynchronous Transfer Mode, broadband cable TV, Internet access, dwdm, and all the related hardware, software, and management tools that will bring it all together into a modern telecommunications infrastructure.

With the contract floodgates wide open and a market that`s growing steadily, these and other companies are bound to see China as an appealing market opportunity. According to ElectroniCast`s Montgomery, the contract bidding will continue, as China strives to upgrade its local area networks and metropolitan areas--mostly for data transmission--to remain competitive in the world marketplace. A recent edition of Ericsson`s customer magazine, Connexion (March 1998), noted that China has a fascination with anything high-tech. As Internet access becomes more relaxed across the mainland, there is potential for huge growth and opportunity. Currently, it is believed that 86% of China`s citizens have never touched a computer, only 1.6% of Chinese families own one, and most Chinese people--approximately 1 billion out of a total population of 1.3 billion--have never heard of the Internet.

Transforming a poor and inward-looking country into an economic giant is sure to create ample opportunities for ambitious companies--if they`re willing to adapt to the realities of doing business in the country. U.S. industry sources report that price pressure is high, negotiations are extensive, and most of the projects open for bid are relatively small. Still, Montgomery believes the equipment vendors may be taking advantage of at least one technology market that might not exist had Chinese decision-makers exercised a bit more foresight. He says the fiber count in China is relatively low and cables contain only a few fiber strands. China`s decision-makers may be realizing too late that they didn`t deploy enough fiber to meet their population`s growing bandwidth requirements. "The decisions made back then are now forcing them to buy into dwdm as a means to increase capacity in their backbone," says Montgomery. "Deploying more fiber would have been cheaper than having to deploy the dwdm systems. There really is no excuse for it."

Though hindsight is always 20/20, China`s fiber-optic network is growing and maturing within its existing constraints. Equipment is being deployed now that will allow major expansion in the near future. That`s good news for the network-equipment vendors, who aren`t complaining about China`s lack of fiber strands. They`re too busy working on price quotes and preparing their contract bids. q