Fiber-in-the-loop market prepped for rapid growth
Battling for leadership in delivering multimedia services over fiber-in-the-loop networks, telephone companies and cable operators are expected to boost overall market revenues more than threefold during the next five years
Stimulated by the intense competition among telephone companies and cable-TV operators for deploying interactive multimedia broadband networks, U.S. fiber-in-the-loop market sales are projected to more than triple from $761 million in 1994 to nearly $2.5 billion by the year 2000, an annual compound growth rate of 21.6 % per year. These forecasts were presented in a study by Mountain View, CA-based Frost & Sullivan, a publisher of technology reports.
The major impetus for this growth comes from the telephone companies, according to the study. In 1994, the telephone companies accounted for more than 76% of local-loop revenues. Trailing far behind are the cable-TV operators at approximately 17% and the competitive access providers at 6%. During the years to 2000, the overall market is expected to change only moderately. The telephone companies` market share is expected to rise rapidly in 1995 to 82% and then slide slowly down to 71%. In contrast, the market segments for the cable-TV operators and competitive access providers should drop markedly in 1995 to 12.7% and 5.1%, respectively, and then increase gradually to 21% and 9%, respectively.
Driving the growth of the fiber-in-the-loop market are the expansion needs of telephone companies, cable-TV operators and competitive access providers to support evolving high-bandwidth service deliveries over hybrid fiber/coaxial-cable communications networks. These applications include advanced voice, video, data and image transmissions to homes and businesses.
To bolster their markets, cable-TV operators and telephone companies plan to invade each others` business territories as soon as government regulations permit. The expected convergence of voice, video and data applications, states the study, is anticipated to take place during the next five years, and the competitive groups are all attempting to be the premier supplier of interactive multimedia services over fiber-optic-based networks.
Consequently, fiber-optic network installations are widespread. Telephone companies are in the initial stages of volume deployment of fiber-in-the-loop networks, supporting their market dominance for the next few years. Equally active, the leading cable-TV operators are in the process of upgrading their aging coaxial-cable networks to fiber, with the goal of replacing all but the last coaxial-cable drop to homes and businesses. Meanwhile, the competitive access providers continue to install fiber-optic ring networks in major metropolitan areas. Some access providers are partnering with cable-TV operators to gain financial support and to provide telephony experience.
Unlike the cable-TV operators, whose primary focus is on large residential markets, the access providers are concentrating on small business markets. However, both of them are preparing to offer future services to both markets, mainly because the telephone companies are pursuing that objective.
Because the telephone companies plan to invade the video service delivery market, industry analysts agree that the cable-TV companies need to protect their market share by expanding their one-way broadcast video networks into two-way interactive video networks.
Moreover, the cable-TV subscriber base appears saturated. To gain new revenues, cable-TV operators propose to add telephony services over their video networks. The deployment of fiber-optic networks should help cable-TV operators broaden their service offerings and subscriber base.
Most likely, contends the study, an increasing number of joint ventures and strategic alliances by telephone and cable companies will take place to leverage resources. These alliances should enable a telephone company or a cable-TV company to develop new business without overcommitting internal resources.
According to the study, the major technology trends for fiber-in-the-loop network equipment include:
Increased product flexibility, so an optical network unit can be used in different local-loop system architectures. For example, an optical network unit should be able to handle both the copper-wire drops for fiber-to-the-curb architectures and the coaxial-cable drops for hybrid fiber/coaxial-cable architectures.
Increased product modularity that easily accommodates new services, such as interactive video, by changing circuit boards without the need to reconfigure the network.
Increased interface capabilities to handle connections to new equipment, such as video servers and asynchronous transfer mode switches.
Fiber-optic cable technology trends are forecasted to be minimal, says the study, because optical cable has achieved commodity status. However, some suppliers package their fiber cable offerings in support of local-loop applications, such as:
Optimizing the fiber-optic cable for a specific market segment; for example, providing low fiber-strand counts for cable-TV applications.
Improving mechanical support characteristics to make the fiber-optic cable more resistant to harsh environments, by incorporating armor cover sheaths and steel center members.
In the fiber-in-the-loop market, competing on the basis of product differentiation is assessed as difficult because most products are structured to conform to Bell Communications Research recommendations. Even though these recommendations promote innovation, product performance or feature distinctions are anticipated to be limited. Consequently, equipment suppliers need to promote products based on marketing tactics.
Local-loop equipment suppliers, for example, should establish close business relationships with major service providers. These relationships would provoke service providers to check out the suppliers` equipment. In turn, the suppliers should provide technology support during this test phase to handle problems or specific requirements needed by the service provider. Equipment suppliers should also try to customize local-loop systems per the service providers` requirements, declares the study. u
This article was abstracted by the Lightwave editorial staff from the study: U.S. Fiber-In-The-Loop Markets, published by Frost & Sullivan, Mountain View, CA.