wdm benefits local and long-haul telephone carriers

July 1, 1998

wdm benefits local and long-haul telephone carriers

Wavelength-division multiplexing (wdm) is being widely deployed in both local and long-distance telephone networks as a way to maximize existing fiber-optic capacities while keeping costs low, according to a study by Communications Industry Researchers Inc. (cir--Charlottes ville, VA).

wdm`s benefits do not, however, come solely from its role as a cost-effective substitute for other fiber-optic transmission systems. cir`s research concludes that wdm also enables service providers with fewer lightwave facilities to remain competitive with other, more fiber-rich carriers. Additionally, owners of rights-of-way and dark fiber will likely find those assets significantly more valuable with wdm installed.

WDM challenges TDM

wdm could present a significant future threat to time-division multiplexing (tdm), a successful technology capable of maintaining reliable traffic flows. However, due to signal dispersion and other factors, cir believes there is some doubt whether tdm will function adequately at rates much above OC-192 (10 Gbits/sec). Long-distance telephone networks in the United States and elsewhere are already beginning to move past this rate, and will soon generate a need for wdm systems. According to the study, networks will likely consist of a mixture of tdm and wdm systems in the immediate future. Also, traditional suppliers will feel rising pressure to produce tdm systems at OC-192 rates and higher.

Synchronous Optical Network (sonet) and Synchronous Digital Hierarchy (sdh) systems are being used to connect key regional offices and to route traffic to the points-of-presence of long-distance carriers. For now, this part of the network can be adequately dealt with by OC-48 (2.5-Gbit/sec) facilities, but cir believes these capabilities will be strained in the next few years. The result will be a growing amount of OC-48 gear with wdm being deployed. There will also be a growing deployment of OC-192 in this area.

In the early days of long-distance fiber-optic networks, it was believed that upgrading conventional fiber equipment would provide enough bandwidth for the foreseeable future. This hasn`t been the case, and long-distance providers were among the first to invest in wdm equipment to maximize their existing fiber capacity while keeping infrastructure costs low. Most, if not all, major long-distance companies in the United States have implemented wdm technology to some degree in their existing networks.

Submarine networks

Because of the high data rates associated with some applications, submarine cable networks have become a particularly attractive market for wdm. Although reduced cost for additional capacity is still key in stimulating the market, the globalization of commerce also is driving an ever-increasing demand for international telecommunications from submarine cables,

To implement wdm in submarine cables, providers are adding shore-based terminals that can double or triple the capacities of existing undersea spans. Even more impressive are the new undersea systems being constructed using 16-wavelength wdm over distances as long as 12,000 km. Engineering for such long distances, cir says, will become even more demanding as wdm systems move beyond the 16-wavelength phase.

Demand from local carriers

Perhaps the most interesting forecast in this study involves the use of wdm by local-exchange carrier networks. Although the bulk of the wdm product market is dominated by long-distance applications, the demand for WDM from local telephone companies is expected to exceed that of long-distance carriers by the year 2005.

cir projects that from a 1998 figure of $112 million, the metropolitan and local-area wdm component market will rise by roughly 60% per year to reach $989 million by 2002. By the year 2005, that market is expected to reach $3.42 billion, exceeding the $3.04 billion market projection for long-haul wdm products. Two years later, in 2007, the local wdm market projection is 61%, or $5.13 billion, of the total market.

Local-exchange carriers have made extensive strides in the use of fiber optics. Initially used to connect local offices, fiber is now being pushed deeper into the local loop. Additionally, telephone companies have installed fiber-optic rings in major metropolitan areas.

The local telephone companies are under considerable pressure to install even more fiber to contend with competitive access and local-exchange carriers. These competing carriers frequently have installed their own fiber links to compete with the telephone companies for high-capacity corporate traffic and local telephone-company access to long-distance carriers. cir believes that wdm will eventually win a significant segment of the local-loop market over the next few years. This should create significant business opportunities for vendors to design and market products specifically intended for the U.S. local-exchange market.

For additional information or to purchase the complete report, Wave Division Multiplexing, Photonic Switching and the Coming of All Optical Networks: A Market Forecast and Opportunity Analysis, contact Robert Nolan at tel: (617) 923-7611 or e-mail: [email protected]. u

sonet/sdh transport equipment market boasts strong forecast

A new report released by kmi Corp. (Newport, RI) suggests an impressive growth rate for Synchronous Optical Network (sonet) and Synchronous Digital Hierarchy (sdh) transport equipment worldwide, including all add/drop multiplexers, terminals, and regenerators. The market for sonet transport equipment in 1997 was $3.9 billion. It is forecast to grow to $4.6 billion in 1998, an increase of 17%. sdh transport equipment will do likewise, increasing by 20%, from $4.3 billion in 1997 to $5.2 billion in 1998. For sonet equipment, the compound annual growth rate (cagr) of the market from 1997 to 2003 is projected at 13.1%.

The growth in the transport market is leading to growth in the module market. According to kmi, worldwide sales of sonet and sdh modules are expected to show a substantial increase during the next five years. The study shows steady increases over the last two years and expects that upward trend to continue through the next five years.

In 1996, about 1.3 million transmit/receive pairs were sold for $1.2 billion. Units sold increased by more than 29% in 1997 to 1.7 million, with sales of $1.6 billion, representing an increase of 27.2%. The upward trend continues in 1998, with expected sales of 2.2 million units worth $2.0 billion. That equates to a 30.3% unit-growth projection, with an increase of 27.2% in dollar growth.

sonet and sdh have rapidly evolved to become the standards for worldwide communications, and the increasing demand for bandwidth makes it essential for carriers to apply this technology to their networks. As competition drives network operators to install systems that are 100% sonet and sdh, wavelength-division multiplexing technologies have further fueled the demand for this equipment.

Breaking the transport equipment down further in terms of speed, the report depicts the demand for faster transmission capabilities in the future. The OC-3 (155-Mbit/sec) transport market, valued at $791 million in 1997, has the weakest expected growth of the more common sonet bit rates. kmi believes severe price erosion, due to intense competition among manufacturers for regional Bell operating company (rboc) contracts, will result in negative market growth for the next four years. Overall, the OC-3 market can expect an annual growth rate of just under 1% from 1997 to 2003.

Slightly higher will be the growth within the OC-12 (622-Mbit/sec) market. Worth $604 million in 1997, OC-12 transport equipment will show a cagr of 3.5% in the next five years. Again, resulting from the intense competition for rboc contracts, prices of OC-12 multiplexers have fallen considerably. As prices fall, the unit growth in the OC-12 market is expected to be higher than OC-3, as installation of OC-12 multiplexers becomes more economical. Carriers are realizing that paying twice as much for four times the bandwidth makes better financial sense.

The bulk of growth in the sonet transport equipment market is being generated in the higher bit-rate categories of equipment, namely OC-48 (2.5 Gbits/sec) and OC-192 (10 Gbits/sec). Although the principal customer base for this equipment has historically been the long-distance carriers, the customer base is showing a steady shift to include the rbocs.

Showing the most consistent growth over the next five years will be the OC-48 market. The cagr for OC-48 from 1997 to 2003 will be 15% in terms of dollars. The OC-48 market is being primarily driven by the immediate carrier demand for capacity on the long-distance backbone. Coupled with dense wavelength-division multiplexing (dwdm), OC-48 is rising to the occasion to meet the carriers` demands for higher capacities. Currently, OC-48 multiplexers are used in more than 90% of all dwdm systems.

According to kmi`s report, Nortel (Brampton, ON, Canada) controlled the OC-192 market in 1997, but kmi researchers expect several OC-192 equipment manufacturers to jump on the bandwagon in the next few years to satisfy an overwhelming demand. This market is expected to show phenomenal growth in the next three years, as long-distance carriers scramble to construct OC-192 backbones. Although technology is expected to initially leech some potential OC-192 sales, the advent of OC-192-based dwdm systems should ensure longevity of the OC-192 transport equipment market.

kmi`s report, Worldwide Demand for sonet and sdh Equipment and Modules, examines the markets for transport equipment, digital crossconnects, sonet-integrated digital-loop carriers, and five other categories of equipment. The report is available by contacting kmi at tel: (800) 343-4035 or e-mail: [email protected]. u

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