Gartner analysts provide outlook for optical networking during OFC

The dedicated fiber-to-the-home (D-FTTH) market promises great potential for networking vendors, but governments will need to take an active role in setting the environment for investment in the access fiber infrastructure for this industry to succeed, according to Dataquest Inc., a unit of Gartner, Inc. (NYSE:IT)(NYSE:ITB). Gartner Dataquest analysts are providing their analysis on this market during the Optical Fiber Communications Conference and Exhibit, March 17-22 at the Anaheim Convention Center in Anaheim, California.

Gartner Dataquest analysts recommend that governments encourage/enable new entities -- infrastructure providers -- to own and operate the access fiber infrastructure. These infrastructure providers would have special privileges and obligations. They would provide each household within their area with access to a D-FTTH network over which any operator could provide broadband services. Gartner Dataquest analysts provided the following recommendations for infrastructure providers:

* The infrastructure providers should lease the use of their infrastructure to operators on a per-customer basis, according to the customer's choice of operator.

* The infrastructure providers should be independent of any operator interests and should allow all operators equal or fair access to their infrastructure.

* The infrastructure providers should have an ownership that is oriented toward long-term, low risk investments and that will accept modest internal rates of return in business cases.

"The most important enabler for the D-FTTH market will be a regulatory environment that promotes the take-up of the technology by reconciling the interests of subscribers, governments and network operators," said Frank Fabricius, principal analyst for Gartner Dataquest's worldwide Telecommunications and Networking group.

Optical fiber will offer the best access solution in terms of both lifetime and bandwidth scalability, according to Gartner Dataquest analysts. While state-of-the-art commercial systems today can offer megabits per second, optical fibers are capable of offering terabits per second -- way beyond any estimate for access requirements in the foreseeable future.

"Bandwidth demand will continue to be price elastic -- when the price per bit falls, demand for bits increases and total spending on bits increases," Fabricius said. "This elasticity of demand results from consumers substituting new communications services for other conventional consumer goods. This trend will continue for the next five years."

The dominant cost in D-FTTH deployment is the cost of installing the fiber infrastructure, which cannot be recovered once spent. Achieving an adequate return is therefore a risky enterprise, and the greatest risks in D-FTTH deployments are likely to be the accuracy of technology adoption and penetration forecasts, and the ability to secure and retain customers.

"Governments and regional authorities will continue to want a D-FTTH infrastructure due to the many positive spin-off effects of a high-performance broadband infrastructure to the general economy," said Peter Kjeldsen, industry analyst for Gartner Dataquest's worldwide Telecommunications and Networking group.

Gartner Dataquest analysts are providing additional information on the optical networking industry at the Optical Fiber Communications Conference and Exhibit at the Anaheim Convention Center.

About Gartner:

Gartner Dataquest is a provider of high technology and financial market intelligence for the semiconductor, computer systems and peripherals, communications, document management, software, and services sectors of the global information technology industry. Gartner Dataquest's Telecommunications and Networking group has key focus areas around optical networking. These groups track and forecast next-generation optical solutions as well as the classic optical technologies. Gartner Dataquest covers the entire optical value chain with research on optical components, equipment, networks and advanced services. Gartner helps clients achieve business objectives through the intelligent and efficient use of technology. Additionally, Gartner helps technology companies identify and maximize technology market opportunities. Gartner's technology content and strong brand reach IT professionals globally through Gartner Research, its research and advisory unit; Gartner Consulting; Gartner Events, including Gartner's renowned Symposia; and at www.gartner.com. Gartner subsidiary TechRepublic Inc. (www.techrepublic.com) is an online destination developed exclusively for IT professionals by IT professionals. Gartner, founded in 1979 and headquartered in Stamford, Connecticut, achieved fiscal 2000 revenue of $859 million. For more information, visit www.gartner.com.