Fiber-optic cable sales to climb steadily as prices continue to tumble
Rising moderately at 17% a year, the fiber-optic cable market is expected to reach $4.78 billion in sales by 1999, despite dropping prices resulting from intense supplier competition
In 1994, North American market sales for fiber-optic cables totaled $2.22 billion. This market is expected to increase strongly at 17% a year over the next five years to $4.78 billion in 1999. But this quantitative growth may be partially offset by a continuing decline in average price. Consequently, from 1999 to 2004, the fiber-optic cable market is predicted to slow down to an annual average growth rate of 10%, to $7.82 billion.
On the other hand, North American production of fiber-optic cables is estimated to expand from $2.46 billion to $9.43 billion from1994 to 2004. The difference between production and consumption equals the trade balance. Over the next decade, the trade balance should improve in favor of North American fiber-optic cable producers, as more foreign cable producers establish North American production plants to serve this market. During this time, North American producers are anticipated to increase their ratio of export sales relative to domestic sales.
In 1994, the telecommunications market segment accounted for $1.45 billion, or 65%, of the North American consumption of fiber-optic cable. This segment includes outside plant, inside plant and undersea cables.
Although the deployment of fiber in feeder and distribution networks is projected to expand rapidly during the next five years, other telecommunications sectors are figured to rise slower, thus leading to an average annual growth of 15% from 1994 to 1999. During the next five years, the telecommunications segment is gauged to slow down considerably at an average annual rate of 8%, reaching $4.11 billion in 2004.
The interexchange carrier sector of telecommunications is predicted to rise through the first half of the 1994 to 2004 period, and grow faster thereafter. Long-haul fiber-optic networks are projected to compete directly with satellite transmission technology for distributed broadband video during the latter part of this period. Interexchange carriers, however, are figured to supplement their long-haul networks with additional fiber capacity to support expansion into local and global subscriber services.
From a business perspective, long-haul carriers are expected to seek additional sources of revenue, beyond traditional long-distance telecommunications services, for their well-amortized installed fiber base. Presently, no regulatory impediments are foreseen to video and voice distribution to residential and business subscribers by long-haul carriers.
The undersea fiber-optic cable networks now deployed and planned for the next five years are graded as inadequate to handle turn-of-the-century global communications. Presently, installed cables typically contain 4 to 12 fibers, and are transporting tens to hundreds of thousands of voice channels. But this capacity is projected to be swamped by the future interactive multimedia demands of global corporations.
Staggering worldwide transmission demands are estimated to drive both the upgrading of existing fiber-optic cables to higher-data-rate opto-electronic and wavelength-division multiplexing, or WDM, technologies, and a major expansion of the number of installed undersea fiber-optic cables.
User premises data networks encompass communications systems within the user`s facility and include data system interconnection links, local area networks and private branch exchanges.
The second-leading market segment after telecommunications in 1994 was premises data networks, with a 14% share of fiber-optic cable consumption. Market analyses disclose that by 1999, when fiber-optic cable consumption totals $4.78 billion, the premises data networks segment should still rank at 14% market share, while telecommunications drop to 60% and cable TV and broadcast rise to 18% from 11%.
By the year 2004, however, when fiber-optic cable production increases to $9.43 billion and consumption to $7.82 billion, the telecommunications segment is diagnosed to drop slightly to 53% market share, premises data networks to rise slightly to 22% and cable TV and broadcast to drop slightly to 16%.
Regional expansion of fiber-optic cable deployment in telecommunications over the next five years is expected to be driven by increasing competition in regional, continental and global transport networks. Substantial duplicate trunk and feeder capacity is figured to be installed with surplus fiber in each cable. Much of the expansion of capacity (in gigabit-kilometers) during 1994 to 2004 should occur because of mergers, trunk capacity sharing and dark fiber activation as new cable deployment decreases.
In 1994, singlemode fiber-optic cable sales totaled 86% of North American fiber-optic cable consumption; multimode fiber, 14%; and specialty fiber, less than 1%. By 1999, singlemode fiber share is assessed to rise to at 88% market share, and to drop slightly to 85% in 2004 at $6.67 billion. During these 10 years, fiber-optic cable consumption should climb steadily from $2.2 billion in 1994 to $4.78 billion in 1999 and to $7.8 billion in 2004.
Singlemode fiber is expected to be deployed in growing telecommunications feeder lines in support of distribution networks. Beyond 1998, premises data communications is estimated to boost the deployment of multimode fiber.
The specialty fiber-optic cable market segment includes automotive, medical and intra-machine or intra-enclosure sectors. The consumption of fiber-optic cables in specialty applications is anticipated to undergo strong growth, from $3.82 million in 1994 to $22.6 million in 1999.
In 1994, the leading consumer of fiber-optic cable in specialty applications was medical, at a 82% share, and should remain so through 2004. During that time, the automotive sector share should rise from 1% to 6%.
Public electric and gas utilities own and operate substantial fiber-optic cable networks, serving their internal communications and controls needs. In addition, a substantial share of utilities` spare fiber capacity is being leased to communications carriers. Railroads, publicly owned, but regulated, have also extensively installed fiber-optic networks.
These utilities, as well as water and steam utilities, possess major rights-of-way for installing fiber-optic cable networks. These rights-of-way are relatively unimpeded and accessible, compared to available alternatives.
Electric utilities have been the major user of optical-power ground-wire fiber-optic cable, which can be substituted for standard power grounding cable. These ground wires are generally strung from the tower tops--tower-to-tower--of high-voltage power transmission systems. The trend among electric utilities in North America is to direct-bury fiber-optic cable along their rights-of-way; however, the export market for optical-power ground-wire fiber cable remains strong.
The North American region is ranked as the leading consumer of fiber-optic cables and opto-electronic components over the forecast period. It is also expected to be a net exporter of high-performance fiber-optic products, mainly to Europe.
A long-term shift in the trade balance of fiber-optic cables and components (as well as other advanced technology products) has been underway for several years and is estimated to continue over the next decade. Among the reasons for this shift are:
Increasing cost of labor and capital at foreign competitors relative to North American producers
More aggressive holding and defense of technology rights (such as patents) by North American producers
Restructuring by North American
producers for more-effective global market competition
North American governments` trend toward interpreting existing laws (such as antitrust, fair trade and sensitive technology judgments) in the context of global, rather than domestic, competition
Evolution of Canada, United States and Mexico toward a
North American Economic
Community, leading to productivity increasing faster than in other world regions
Increasing strategic partnerships among North American optical system, subsystem and component producers. u
Stephen Montgomery is vice president and chief operating officer of Electronicast Corp., San Mateo, CA.