Fiber-optic cable sales for premises networks to increase nearly fivefold over next decade
The growth rate of North American sales for fiber-optic cables from 1995 to 2005 is being driven by the continuing trends to higher data rates, increasing complexity and number of network nodes, and longer-distance connections
Stephen Montgomery
electronicast Corp.
North American sales of premises data network interconnect cables totaled $775 million in 1995, with a 49% market share for fiber-optic cables and 51% for copper wire and coaxial cables. However, by the year 2000, market shares are forecast to
reverse markedly, with fiber-optic cables achieving 65%, with sales of $718 million. Falling to a 35% market share are copper wire and coaxial cables, with about $387 million in sales (see Table 1).
Projecting to the year 2005, fiber-optic cables sales are anticipated to zoom to an 83% market share, with $1.8 billion in sales. Over the same period, sales of copper wire and coaxial cables are estimated to drop sharply to $357 million and a 17% market share.
For premises data networks, copper wire and coaxial-cable usage increased impressively during 1993 and 1994, but its growth rate is projected to dip during 1995 to 2000, with an average annual growth of -0.5%. An additional decline is gauged over the 2000 to 2005 period, when the average annual growth rate is expected to decrease to -1.6%.
As local area network and premises data link distances and data rates have dramatically increased recently, voice-grade twisted-pair copper-wire cables have proven inadequate for most new installations. Moreover, they hold no long-term performance potential for future upgrade capabilities. Categories 3, 4 and 5 twisted-pair copper wires are expected to find continued deployment in extending existing (legacy) networks, but they do not provide the upgrade communications capabilities that network planners and providers need for anticipated new service adaptability. Therefore, their market share should plummet from 49% and $382 million in 1995, to 34% and $377 million in the year 2000, and to 16% and $351 million in 2005.
Throughout the 1980s and early 1990s, fiber-optic cables were kept out of many network designs, and preference was given to copper cables due to the higher cost of fiber during that period. In addition, network planners were unwilling to commit to fiber technology as long as the established copper technology satisfied network requirements. But as backbone and node rates skyrocketed, copper cable designers fought off the encroachment of optical fiber by moving beyond the limits of Category 3 and 4 copper wire to the advanced Category 5 copper wire capabilities of transmitting 100 Mbits/sec over acceptable link distances.
Some radiation, interference and crosstalk problems emerged at these higher rates. Copper wire designers, however, claim to have solved most of the problems by using Category 5 twisted-pair copper-wire cable. But industry analysts contend that Category 6 copper cable will most likely fall under the reference of an improved Category 5. Network planners are leaning toward fiber-optic cables as the next step beyond Category 5.
For premises network applications, coaxial-copper cables provide certain performance advantages, but industry standards have proven inadequate. The leadership has since shifted in interconnect cable standards from major computer manufacturers to network product suppliers and, more important, to network users. The simple and inexpensive design of voice-grade twisted-pair copper wire has outclassed that of coaxial-copper cable in the evolution of data networks. Coaxial-cable market share in premises networks was barely visible in 1995, at 2% and $15 million. It is estimated to drop further by the year 2000, to 1% and $10 million, and to virtually disappear by 2005, at only $6.6 million.
In contrast, fiber-optic cable usage should show a strong increase at a 13.7% average annual growth rate from 1995 to 2000 and climb even steeper, at a 20.1% average annual growth rate, from 2000 to 2005.
Cable definitions
The cabling application categories, as presented in this study, are based on the eia/tia-568 Commercial Building Wiring Standard. In the United States, this standard has evolved since 1991 to guide the design of wiring systems that support a multivendor, multiproduct environment.
Premises data network wiring is defined primarily by its location within the inside plant structure (see figure). These plant structures include the work area, horizontal cabling, riser backbone, campus backbone, equipment room and administration.
The work area encompasses the cables that travel from the information (wall) outlets to the end-user`s telephone, workstation or terminal. Horizontal cabling includes the cables that run from the work area wall outlets to the communications wiring closets.
The riser backbone covers the cables that are routed between multiple closets within a building. A maximum distance of 800 m is specified by the eia/tia-568 standard for unshielded twisted-pair (UTP) copper wires. For multimode fiber-optic cables, the standard specifies a distance of 2000 m, an increase in length that is 2.5 times that allowed for copper.
For accommodating interbuilding connectivity, the campus backbone provides the same function and distance factors as those for the riser backbone in accordance with the eia/tia-568 standard. However, some key differences exist between the two backbone structures: cable sheath (jacketing) types and the means of protecting the cables where they enter a building.
The equipment room cabling connects installed gear in the main equipment rooms or in satellite wiring closets to either the riser backbone or the campus backbone structure. Cables, such as copper-wire and fiber-optic patch cords and cable assemblies, are used to interconnect private branch exchanges, mainframe computers, multiplexers, network hubs and media subsystems.
The administration cabling structure provides linkage and connectivity among all the other structures. Consisting of crossconnect hardware, labels, jumper wires, patch cords and cable assemblies, it is considered the main hub of a structured cabling system. Circuit modifications are accomplished by rearranging patch cords or inserting jumper patch wires and cords.
Premises network wires are also classified by their jacketing type and the operational ratings of jacketing materials.
Risers climb
In 1995, the two leading sales areas for premises data network interconnect cables were riser structures or links at $337 million and 44% market share and horizontal cabling links at $273 million and 35% market share (see Table 2). By the year 2000, riser link sales are figured to climb to $539 million, with a 49% market share and an average annual growth rate of 10%. At an even steeper rate, riser link sales are expected to soar to $1.3 billion, with a 60% market share and a 19% average annual growth rate by 2005.
All the other premises data network interconnect cable structures are expected to endure a relatively flat market share over the same period.
For premises networks, fiber-optic component prices are decreasing steadily because of increased fiber production demands, advances in optical technology and a growing base of trained installers. Fiber-optic local-area and premises data networks no longer incur a cost premium associated with systems operating at 100 Mbits/sec or faster, and incur only a slight cost premium for standard Ethernet and token ring networks.
Furthermore, over the years, the superior performance and reliability of optical fiber are resulting in decreased operational costs during the life of premises networks because of fewer outages. In contrast, the latest and stringent tia/eia-568a requirements for Category 5 copper cables have increased the costs of installing, testing and operating unshielded twisted-pair copper wires.
Through accumulated statistics over several years of experience, fiber-optic cables have become synonymous with high-performance local-area and premises networks. For instance, the high bandwidth of optical fiber supports all current and proposed premises data communications protocols without the need to deploy additional cable. Protocols such as Ethernet, token ring, escon, Fibre Channel, Fiber Distributed Data Interface and Asynchronous Transfer Mode all specify the use of multimode fibers with the same physical and optical parameters.
Decreasing prices
The average long-term (10-year span) price of various network configurations for both singlemode and multimode fiber-optic cables is calculated to drop dramatically. The declining cost factors include
Increasing standardization and interchangeability among fiber products from different suppliers because of customer pressures
Increasing production volume of specific cable designs, with increased automation and redesign that lower production cost
Increasing competition as market volume becomes more attractive to new entrants
A trend to install more fibers per cable, thereby decreasing the relative added costs of jacketing and coating materials.
Sales channels
Competition in the North American premises data network interconnect cable market has developed because of a two-tiered sales channel comprising
Major manufacturers of twisted-pair copper cables for telecommunications, which have been later supplemented by fiber-optic cable suppliers
Distributors that serve the installers of data networks, where individual job requirements are small compared to the typically large telephone company installations.
During the past 20 years, data communications network deployments have expanded more rapidly than have telecommunications deployments. A mushrooming number of corporations and telephone companies have been spending millions of dollars for data interconnect link components. However, the two-tiered distribution channel has still remained the dominant means for purchasing premises networking products. Distributor markups of factory data communications products range from 5% to 45%, depending on volume, sales efforts and other marketing costs.
At the low mark-up end, large-volume users generally select a particular supplier, negotiate a contract and arrange for a factory-to-user drop shipment. The distributor receives a small commission for its part in the transaction. At the high mark-up end, thousands of small-scale installers, cable assemblers and users buy job kits that cost a few thousand dollars, but they cumulatively make thousands of purchases per year.
This buying pattern tends to isolate the supplier from the final decision-maker at the user site. The more successful suppliers, accordingly, devote substantial resources to bridging this distribution pattern gap by developing a close relationship with users and installers. u
Stephen Montgomery is vice president and chief operations officer at ElectroniCast Corp. in San Mateo, CA.