Technological Darwinism alters optical networking market, says Frost & Sullivan

July 20, 2001--The optical networking market is undergoing rapid changes to accommodate dramatic increases in network traffic and demand for lower bandwidth costs.

The optical networking market is undergoing rapid changes to accommodate dramatic increases in network traffic and demand for lower bandwidth costs. New analysis from Frost & Sullivan, "Traditional SONET/SDH Optical Networking Systems," reveals this industry is rapidly yielding revenues to next generation systems. After producing revenues of $15.5 billion in 2000, this market will decline below $9.4 billion by 2005.

"More than 50 percent of all optical network spending went toward traditional optical equipment in 2000," says Mark Storm, Frost & Sullivan optical networking program leader. "However, the trend is clear that service providers will transition their purchasing patterns toward Next Generation equipment as they migrate toward higher capacity, multi-wavelength, intelligent optical networking solutions."

Although the shift from traditional optical networking has begun, the battle against traditional SONET/SDH suppliers will not be easy. According to Storm, it will be very difficult for new entrants and start-up companies to wrestle market share from incumbents who have been successful in winning and retaining customers.

"Incumbent equipment vendors are going to fight to retain and expand their market positions and will strive to evolve their existing customer networks," says Storm. "They will leverage their customer relationships, customer service organizations, and technical experience to remain vital to network operators."

The decline of traditional SONET/SDH revenues is the result of a major product transition, but does not indicate that the optical networking market is in trouble.

"Vendors that do not adapt to rapid product cycles and embrace a distributed manufacturing model will perish," says Storm. "However, vendors that prune their product mix and operations and embrace customer demand for multi-vendor network deployments will be very difficult to displace."

About Frost & Sullivan:

Frost & Sullivan is an international strategic market consulting and training firm. This ongoing research is part of the Optical Networking Market Service, which includes market analyses on Disruptive Optical Components and Technologies and Next Generation Optical Networking Systems. For more information, visit www.frost.com.

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