by Stephen Hardy

A refreshing aura of confidence surrounded this year’s OFC/NFOEC conference and exhibition. Two years ago, exhibitors and attendees expressed hope that the market would start to improve. Last year, they said they believed these improvements had begun-maybe. This year, few expressed doubt that the market had embarked on recovery.

As Avanex chief technology officer Giovanni Barbarossa explains in our OFC/NFOEC overview article (see “OFC/NFOEC Focuses on Longer Reach, Higher Speeds, and Smaller Modules” on page 1), this newfound confidence springs in large measure from a change in customer focus. While low price remains an important concern, it’s no longer the only concern among carriers and the system houses that supply them with equipment. Service providers now have an interest in new technologies that will enable them to run their networks more economically. To Barbarossa, that means improvements in efficiency, intelligence, and flexibility.

This, of course, represents great news for component and subsystem vendors, which now have the opportunity to sell new, higher-margin products-presuming they have any. The new market dynamic will test how well companies protected R&D in the rush to cut overhead and ship their manufacturing to Asia.

Participants at the OSA/Lightwave Executive Forum, held in conjunction with OFC/NFOEC, have raised concerns for the past two years about the future origins of innovation. Executives from component/subsystem companies report that their system vendor customers increasingly rely on them to replace the R&D work the box developers no longer feel they can afford to do themselves. Yet component/subsystem suppliers face their own economic challenges in the face of dwindling margins.

This factor opens the door for startups, either to carve a market niche or finally to provide their investors with that exit strategy they’ve craved. OFC/NFOEC saw three young companies find willing buyers. With innovation now as important to success as a low-cost manufacturing strategy, component/subsystem vendors will quickly learn that if they couldn’t afford to spend money on new product development over the past several years, they now had better be able to afford to buy someone who has.

Stephen M. Hardy
Editorial Director & Associate Publisher

by Kurt Ruderman

Fibre to the home has gone mainstream in Europe. France Telecom is rolling out an FTTH network as other European incumbents are building FTTX networks. The FTTH Council Europe attracted more than 1,300 participants-a record number-to its annual conference, held in Barcelona this February. And industry observers like the French consultancy IDATE are going with aggressive forecasts for the next five years.

But despite Europe’s conversion to FTTH, the European market remains very diverse, with national and regional markets moving at different speeds.

Participants at the council’s Barcelona conference raised a lot of questions and presented a lot of ideas, but not a set of answers that fits all of Europe. The council’s rallying cry of “Fibre for all! When? Why?” worked. Europeans agree that FTTH is the best solution for their long-term broadband needs. However, like leaders of political revolutions, the leaders of Europe’s fibre revolution have different views and country-specific strategies for achieving their goals.

The European Union has removed trade barriers and opened borders, but it has not (and will not, at least in the near future) made the continent one big homogenous broadband market, as some Asian governments have done in their countries through national policies.

In the Netherlands and Scandinavia, local and regional governments favour a three-tier network system, in which competition takes place among service and content providers on the third level. Supporters of this type of network argue that it does not make sense economically for cities to have more than one FTTH network and that citizens benefit more from having competition only at the service content level. This situation-one alternative FTTH network operator per city-in the Nordic countries will limit the number of fibre-optic cable, transmission, and CPE contracts.

In France, where France Telecom has become the first European incumbent to build an FTTH network, the market is driven by competition. France’s DSL market, the most competitive in Europe, paved the way for the transition to fibre. After an initial FTTH launch in Paris last year, France Telecom has begun building FTTH networks in Lille, Lyon, Marseille, Poitiers, and Toulouse. The question now is: Will France Telecom succeed in these cities, and will its FTTH competitors compete head on, as many have announced, with the incumbent? If they do, then France will become an even more attractive market for fibre-optic cable, transmission, and CPE vendors.

Developments in these diverse markets will make 2007 a pivotal year for the FTTH industry, and will likely influence FTTH decisions in nascent FTTH markets in southern and eastern Europe.

Kurt Ruderman
European Editor

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