Report: Broadband services will boost European fiber-optic market

May 2, 2005 Nashua, NH -- The fiber-optic market for European broadband access networks will increase with a CAGR of 49%, from $950 million in 2005 to $7.05 billion in 2010, according to a recent report published by KMI Research.

The firm's European market analysis includes optoelectronic transmission equipment, fiber-optic cable, and passive apparatus used in the optical cable networks including splitters, cabinets, and closures. The firm concludes that FTTP systems will be the major contributor to this fiber-optic market, representing 65% of the market value in 2010; other broadband access network architectures, such as fiber-to-the-node (FTTN) and fiber-to-the-building (FTTB) are seen comprising the remaining 35%.

"The past five years have seen rapid growth in ADSL deployments, mainly in Western Europe," observes Richard Mack, analyst at KMI. "The next five years will be marked by slower growth of ADSL but faster growth of VDSL and fiber-based architectures."

KMI notes that several factors that will contribute to this forecast. "We already have started to see new service providers entering the market to overlay or to compete with the incumbent telephone company," continues Mack.

The firm reports that this trend began "two to three years ago" in Denmark, Italy, the Netherlands, Norway, and Sweden, where utilities, municipal or regional governments, housing corporations, and CLECs are providing broadband services or operating open-access networks; more recently, similar competitive operations have begun in some French communities. KMI forecasts the build-out of such competitive networks in larger cities and in more European markets during the next five years.

Secondly, the firm says that incumbent operators will use fiber-optics to extend or upgrade previously installed ADSL networks. In some markets, the firm contends that such upgrades will be in response to competitive threats; in other cases, incumbents will simply pursue opportunities to increase revenues by offering new services, such as faster Internet, digital television, or bundled packages of services.

As an example, the firm cites France Telecom's (FT) January 2006 announcement of plans to install FTTP pilot networks in Paris and nearby Haute-de-Seine starting in June 2006. This announcement is noteworthy, says the firm, because FT also announced that it was dropping its plans to deploy VDSL2 in favor of faster, fiber-based GPON technology.

According to the firm's analysis, a lesser contributor to the overall European market for fiber-optic access network equipment will be the market in Eastern Europe. KMI's Mack notes that most markets in Eastern Europe are several years behind Western Europe in rolling out broadband access technologies.

However, Mack sees economic growth, investments by Western operators, and other sources of financing as contributing to recent broadband deployments.

"Although Eastern Europe's near-term broadband deployments are predominantly ADSL, some operators already have begun installing FTTB systems in certain high-density or higher-income residential areas," he contends.

According to KMI, the combined result of these trends will be a 25% CAGR from 2005 to 2010 in Europe's total number of broadband subscribers. This effect will be less rapid than the 62% CAGR achieved from 2000 to 2005; however, the firm concludes that fiber-optic technology will capture more of the future growth, driving the 49% CAGR in fiber-optic market value.

The firm notes that such growth will result in strong demand for several fiber-optic products. For example, according to the analysis, the cumulative total of fiber-optic cable installed in Europe's broadband access networks from 2005 through 2010 will be 37.3 million km. of cabled fiber; this quantity is larger than the amount of fiber installed throughout Europe in all applications, including metropolitan and inter-city networks, after the telecom market's collapse in 2001 through 2005.

Also according to the analysis, FTTP networks in Europe will require a cumulative total of 25.5 million optical network terminals (ONTs) from 2006 through 2010; this quantity will be more than forty times the 625,000 ONTs installed from 2003 through 2005 in Europe's FTTP networks.

For more about the report, "Fiber-optics in Europe's Broadband Access Networks, Market Analyses and Forecasts," visit www.kmiresearch.com.