Fibre conference welcomes 'life after downturn'
Probably the biggest news at KMI Research's seventh annual Conference on Fibreoptics Markets in Europe held last month in Paris was that it happened at all. The atmosphere was upbeat despite the global factors of war in Iraq that divided long-time allies and the impact of the SARS virus.
"The boom is over and will not happen again," Nicholas Critchell, senior director of applications marketing, EMEA, at Ciena, told the conference. "It is important to understand this is true and to move on."
According to presentations by KMI, Alcatel, and Corning, the worst may be over in the European fibre and cable market. However, we will not see any real improvement in 2003. Capex will be flat this year.
In the opening presentation KMI analyst Patrick Fay reported, "Recently, Asia-Pacific has been the most buoyant regional market. Its global market share has increased from 30% in 1999-2000 to more than 50% during 2002-2003." He expects a modest market rebound in 2004 of about 2% overall and the years after should see the growth rate climb to between 4% and 6%.
Fay also forecasted that conventional fibre sales will be exceeded for the first time by "low water peak fibre" in 2005—a year when both types should experience sales of about 30 million km.
Growing bandwidth demand and EU and national efforts to promote broadband projects are driving Corning's hopes of a recovery starting in 2004, said Dale Niebur, director of worldwide commercial operations at Corning Optical Fibre. Niebur cited national broadband initiatives in France, Ireland, and Sweden.
This year's conference theme was "Strategies for Survival." Considering that there are now too many players, 2003 will be a year of stabilisation and consolidation. Driving home this message was the announcement on the eve of the conference that Avanex had agreed to acquire Alcatel's optical-component business and certain Corning assets.
Bruce Bowden of France's LD Com announced his company had finalised its latest acquisition, bringing to eight the number of rival Internet service providers and communications companies that it has purchased since 2001. Today, like many communications companies in Europe, LD Com is investing heavily in the residential DSL market. LD Com and others are using DSL to compete with former incumbent France Telecom, which has based its broadband access strategy on DSL. France Telecom is equipped to offer xDSL technology to more than 85% of the French population.
There are two million DSL subscribers in France. New high-bandwidth xDSL technology that requires more and closer optically based central offices will drive the demand for fibre, explained FT's IP director, Dominique Hagerman.
Hagerman and DSL Forum vice president David Greggains said that DSL technology continues to drive the demand for fibre in the backhaul network but that DSL will remain the dominate broadband access technology. DSL, they concurred, has not yet been pushed to the limit in the access market. Greggains said that the main problem is lack of broadband content and broadband applications to drive residential access demand.
Increasing broadband penetration is driving IP traffic growth; however, Laurent Grimaldi, chief executive of Tiscali International Network, cautioned that bandwidth pricing has only begun to stabilise in the main northern European routes. On southern European routes, prices continue to decline.
Grimaldi also warned that advances in optical-networking technology will boost the network capacity of pan-European carriers, and lead to more companies exiting the market. Based on forecasted bandwidth demand reaching 9 Tbits in 2005, Grimaldi said it would be possible for two pan-European carriers to carry all Europe's traffic in 2005.
Brady Rafuse, president of Level(3) Communications Europe, picked up the theme of consolidation. "There is continuing oversupply in the backbone, there is aggressive price compression, and there are deferred purchases."
He also noted the resurrection of a number of U.S. players that had been embroiled in the Chapter 11 bankruptcy procedure. He hinted that some of these companies had been rather fortunate to be able to return to trading—in contrast to the breakup that befell the KPN Qwest European network.
But Rafuse didn't only have grim observations. In agreement with several other industry figures, he saw several bright spots in the marketplace: broadband, IP services, and the growth of MPLS, to name a few. "We also need to remember the impact of the generation younger than this [middle-aged] audience. They are setting up their own Websites, sharing music files and movies, and they cannot contemplate their computer activities without a broadband connection," he said to many knowing nods around the conference.