Market top-heavy for WDM/optical networks in North America, research shows

By KATHLEEN RICHARDS

Purchases of dense wavelength-division multiplexing (DWDM) equipment in North America will almost double over the next four years, reaching $3 billion in 2002 from $1.86 billion in 1998, according to WDM and Optical Networks: Technology & Market Analysis, a report published last month by telecommunications researcher RHK Inc. (Ryan, Hankin, Kent) of South San Francisco. While interexchange carriers accounted for the largest total expenditures in 1998, deployment by regional Bell operating companies and competitive local-exchange carriers is expected to increase in 1999 and 2000.

A separate study, released in November by RHK, entitled SONET and DCS Technology and Market Analysis, indicates that despite strong demand for Synchronous Optical Network (SONET) equipment in North America in 1998 to the tune of $4.5 billion, growth will slow and the market will reach only $5.4 billion in 2002.

ONetwork elements now incorporate SONET functionality?ATM [Asynchronous Transfer Mode] switches and IP [Internet protocol] routers?so the market for stand-alone SONET [equipment] is slowing down,O observes Dana Cooperson, RHK senior telecommunications analyst. OWDM will become the transport network of choice for all these kinds of transmission systems.O

Nortel Networks (Atlanta) realized the biggest market share gain in 1998, emerging as the number-one manufacturer in both WDM and SONET equipment shipments in North America, according to RHK research. Lucent Technologies (Murray Hill, NJ) had the second-highest share in both sectors.

ONortel tied their OC-192 system to the WDM system; it is really targeted at the interexchange carriers who are building big networks right now,O explains Cooperson. OThere are a lot of new carriers?Williams, IXC, ITC, Deltacomm. They?ve really done a tremendous job in getting a toehold in those new carriers?they?re all building OC-192 [10-Gbit/sec] networks. And Nortel has been really the one that?s had a very successful OC-192 program. It?s been around for several years now, as opposed to most of the other vendors who are just now getting into the OC-192 market.O

Nortel has a 67% market share in integrated or embedded WDM systems, according to RHK?s WDM and optical-networking report. The company?s dominance in this segment stems from its OC-192 program and its success with the new carriers, says Cooperson. At the very highest level, the WDM market is becoming segmented, according to the analyst. OThe kind of systems that Nortel does extremely well with are tied very directly to their SONET systems,O he notes. OIt has a wavelength converter in the SONET system so that the [conversion] is already done by the time it gets to the WDM system. They can?t necessarily take a signal coming out of a Fujitsu box and integrate it into their Nortel system, they pretty much work with Nortel.O

CIENA Corp. (Linthicum, MD) had the third largest WDM equipment shipments in 1998, according to RHK research. OThey?ve got a very good share in the open WDM market, which Nortel doesn?t play in at all,O says Cooperson.

Fujitsu posted the third-largest SONET equipment shipments in North America last year. OThey?re very big in ILECs, the RBOCs in particular,O observes Cooperson. OThey tend to go toward the shorter-haul systems, that?s where their share is very good, but they?re not really anywhere in WDM yet.O

Market share in both sectors is concentrated?the top three manufacturers represent three-quarters of the total market in each respective segment, RHK reports. Other players in the North American market include Alcatel, which ranks fourth in both segments with an 8% to 9% share, and NEC. Pirelli is a player in the WDM equipment segment.

Meanwhile, many companies are trying to enter both markets. Hitachi is hoping to penetrate both the SONET and WDM segments, although the company does not have Omuch share yet,O notes Cooperson. q