In 2002 Europe will see market consolidation and only 200,000 further fibre-km installed. Before market growth returns innovative carriers should find ways of meeting undiminished customer demand for bandwidth
Since 1997, pan-European carriers have rapidly built cross-border networks throughout Europe, linking major metropolitan centres. At the end of 1997 there were only about 3,500 route-km deployed but within four years cumulative fibre deployment on long-distance routes by pan-European carriers reached more than 170,000 route-km. Considering the explosive annual growth of fibre counts, pan-European carriers had deployed more than 17 million fibre-km by the end of 2001.
KMI Corp. has studied long-haul fibre deployment by 27 fibre-based pan-European carriers that have leased fibre to expand beyond their domestic networks (not including the carriers who have exclusively lease their fibre to assemble a pan-European network nor incumbent carriers, such as BT, France Telecom, Deutsche Telekom, and Telecom Italia). Measures of network size include only portions installed (laid or pulled through conduit) by the carrier and thus are net of the leased-fibre segments.
By carrier, the Titan of the pan-European networks is Telia; by the end of 2001, Telia's own-built network spans 25,000 route-km across Europe. Telia's network is 50% larger than the next largest pan-European network, TyCom's 16,600 route-km submarine network. Interoute and KPNQwest also each have about 16,000 route-km of own-built network in Europe. Adding in COLT, the top five networks account for half of total pan-European network.
Measured in fibre-km, Telia remains at the top of pan-European networks with nearly 4.8 million fibre-km deployed by the end of 2001. Telia's network is more than twice the size of the next largest networks, KPNQwest (1.9 million fibre-km) and Interoute (1.7 million fibre-km). Combined, these three carriers account for nearly half (47%) of pan-European fibre deployment (see Fig. 2).
By country, most network building has occurred in Germany and France. Germany encompasses 35,000 route-km of pan-European network and France has about 32,500 route-km. The United Kingdom and Spain follow with 12,000 route-km each. Similarly, pan-European carriers have deployed 4.4 million fibre-km in Germany, 3.3 million in France, 1.7 million in Spain, and 1.3 million in the United Kingdom.
Measured by fibre routes (meters) per square-kilometre (sq km) of geographic area, countries that have deployed terrestrial pan-European fibre optic routes in western Europe average about 55 route-meters per sq km, while eastern European countries average about 10 meters per sq km. The densest fibre deployment by far has been in Denmark, with an average of 190 route-meters of fibre per sq km. Small but centrally-located, Belgium acts as an important transit hub and has 107 route-meters per sq km (see Fig.1).
Measured by per-capita deployment, Sweden and Denmark top the list with 144 fibre-meters and 138, respectively, of fibre deployed by pan-European carriers per person. These countries far exceed the average in western Europe of 40 fibre-meters per capita.
Moving into 2002, the outlook for pan-European network growth is dim. KMI identifies only four pan-European carriers with concrete plans for fibre deployment this year. Infigate, Silk Route, MTCAG, and Grapes are expected to deploy a total of 576,000 fibre-km.
This amount is around one-tenth of the 5.6 million fibre-km deployed by pan-European carriers during 2001.
The drivers for pan-European network expansion - bandwidth demand, telecom deregulation, and European economic integration - have been strong, but not strong enough to sustain the business plans of the throng of competitors that have entered this market.
The abundant financing that supported network expansions dried up last year.
During 2001, five of the 27 carriers reviewed by KMI encountered substantial financial problems and cancelled network expansion plans, and several either sold their networks or are planning to sell them. Pan-European carriers are likely to continue a trend of consolidation this year.
We expect that pan-European carriers will deploy only a small amount of long-haul fibre (about 200,000 fibre-km) during 2003.
Because of the winding down of network build-outs in Europe, equipment expenditures have also suffered recently - but not as dramatically as has fibre deployment. In a recent separate study, KMI estimates that long-haul DWDM transport equipment in Europe represented a weird1.8 billion (US$1.6 billion) market in 2000 and 2001. This market will rise slightly to about €2.1 billion (US$1.8 billion) in 2002.
Given the carriers' financial state, the growing part of this market is not deployment of new systems, but rather the addition of channel cards to previously deployed systems to keep pace with customer bandwidth demand. As carriers fill their DWDM systems, KMI forecasts the market for new DWDM systems will begin to grow again starting in 2003 as European carriers light new fibres.
Beyond 2003, pan-European fibre deployment will depend on the answers to at least three key questions:
Carriers may find economic incentive in bringing their networks within reach of additional cities.
Upgrading to 10Gbit/s and even 40Gbit/s transport equipment may become attractive, possibly involving the deployment of non-zero dispersion-shifted fibre. Also, the extra conduit that many carriers have laid will make it cost effective to overbuild with improved fibre.
Some new carriers may emerge to target as yet unserved markets, perhaps in eastern Europe.
KMI believes fibre deployment will slowly rise to about one million fibre-km by 2006.
In the meantime, the focus in Europe will be on developing metro and access networks to resolve the bottlenecks in getting traffic on the backbone and to take bandwidth closer to the consumer.
This report was adapted from KMI Corp.'s fibre optic Networks of Pan-European Carriers: Market Developments & Forecast (2001).
For more information and other reports, visit www.kmicorp.com.
Patrick Fay directs market research on worldwide optical fibre, fibre optic markets, and splice closures.
Neil Dunay leads KMI's research in markets for fibre optic transmission equipment, including WDM and fibre deployment by long-haul carriers.