Optical add/drop multiplexer market to grow slowly

April 1, 1998

Optical add/drop multiplexer market to grow slowly

The U.S. optical add/drop multiplexer market will grow from about $55 million this year to about $420 million in 2002, according to a study released in January by Trans-Formation Inc. of Birmingham, AL. Optical Add/Drop Multiplexer Market Brief predicts that as traffic on wavelength-division multiplexing (wdm) systems reaches critical mass, optical add/drop multiplexers will be needed to add and drop the wavelength.

In the short term, international exchange carriers, such as at&t, Sprint, and WorldCom Inc., will drive the market and purchase the majority of optical add/drop multiplexers. Since interexchange carriers tend to send their traffic from point to point rather than dropping it off for specific customers, local exchange carriers and competitive local exchange carriers will be the biggest buyers of add/drop multiplexers in the long run, according to the report. An exception is Bell Atlantic, which the report anticipates will deploy wdm in significant volume in the short-term due to the amount of its network buried under streets.

The report notes that the only optical add/drop multiplexers available today are fixed and that programmable multiplexers are still a couple of years away from volume deployment.

The report assesses current and potential optical add/drop suppliers: "A relatively large number of players have recently entered the wdm market because of the success of ciena, as well as overhype in the industry about market expectations." Reasons cited in the report for overly high U.S. wdm forecasts, especially for the metropolitan market, are projections based on models that do not include industry history, significant price declines, regulatory matters, alternative technologies, customer behavior, and certain accounting procedures.

Assuming that there are about 15 major producers offering wdm systems and that each is a potential supplier of optical add/drop multiplexers, the report indicates it is likely that only two or three dominant wdm suppliers and a handful of niche players will remain in the U.S. market in the next few years.

In addition to discussing the multiplexer market, the report assesses the current and potential optical crossconnect suppliers. According to the report, Lucent Technologies and Tellabs are ahead of the competition, while Alcatel and dsc may have a long-term edge. Other companies examined in this section of the report include Nortel, Astarté Fiber Networks, Hitachi, ciena, and Tellium.

It will take at least five years for true optical crossconnects to be in general production, according to the report. Prices will have to be less than $50 per megabit to be cost-effective.

Technology issues that the report identifies as in need of resolution before optical crossconnects become viable include creating commercially available switching fabrics that lend themselves to high-density use and improved switch performance characteristics. "A main factor that needs to be resolved before evolving to an optical network is how the layer is managed," according to the report. These networks need to be similar to sonet networks, which provide extensive performance monitoring and management capabilities and allow for provisioning of circuits.

The potential impact of Asynchronous Transfer Mode virtual path crossconnects should also be considered, and it will take at least five years for a viable market to develop in that area, according to the report.

Other technologies and issues considered in the report include selling wavelengths to end-users, dynamic wavelength assignment, and optical time-division multiplexing systems.

For more information, contact Trans-Formation Inc., 3828 Briar Oak Drive, Birmingham, AL, 35243-4834. Tel: (205) 970-2250; fax: (205) 970-0363; e-mail: trans@ wwisp.com.u

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