Will bigger lead to smaller?
by Stephen Hardy
With shareholders of Finisar and Optium scheduled to vote on their proposed merger at the end of August, we are reminded of three things:
- Analysts continue to suggest that consolidation is essential if the optical components and subsystems space is to regain its health.
- Systems houses say they want to reduce the number of vendors from whom they have to buy products, leading to a desire for big companies with broad product lines.
- Despite these first two points, the number of companies in the components and subsystems space isnâ��t shrinking very rapidly.
When the Finisar/Optium merger was first announced, speculation suggested that the creation of a new behemoth would finally trigger the consolidation the industry has long expected but has yet to see. A pair of giants bestriding the marketâ��JDSU, of course, being the otherâ��would finally cause other companies intent on staying in the game to beef up through acquisitions, the thinking went. Such theories gained credence when Opnext announced shortly thereafter that it would acquire StrataLight Communications.
But since then, nothing much has happened.
I donâ��t think we should be surprised by this. Several factors hinder major consolidationâ��and thatâ��s ignoring the egos of executives who will go to almost any financial length to be among the last men standing.
First and foremost, there is such a broad range of necessary technology (a range compounded by the multiple form factors in which each product is presented) that itâ��s difficult for one company to get its arms around a critical massâ��not to mention more than one company. Itâ��s expensive, and discretionary income among component and subsystem vendors isnâ��t exactly plentiful these days. Itâ��s also difficult to maintain differentiation in each product niche as oneâ��s portfolio expands, as well as remain best-in-class.
And thatâ��s just taking into account the off-the-shelf products. As systems houses continue to request customised offerings, the difficulty in meeting every customerâ��s requirements compounds.
Finally, most of the consolidation scorekeeping focuses on Western companies. New companies are being formed almost every day, it seems, in places like China, Taiwan, and, soon, India. So for every North American or European transceiver company that gets taken off the board, another two or three from Asia appear to take its place.
I agree that consolidation would benefit our industry. Iâ��m just not sure I can foresee how it will occur.
Stephen M. Hardy
Editorial Director & Associate Publisher
by Kurt Ruderman
Get ready for the next round of FTTH deployments in southern Europe. In France and Portugal, government agencies are working on legislation regarding the sharing of fibre-optic cabling and ducts in apartment buildingsâ��considered by both countries to be a final obstacle to mass FTTH deployments.
Today, French and Portuguese FTTH network builders negotiate entry into apartment buildings, often one building at a time. The process is slow and is complicated by the lack of building cabling regulation. But that could soon change. ARCEP, Franceâ��s telecoms regulator, adopted regulation in July that requires France Telecom to open its metro ducts to competitors on an equal access basis. The regulator also ruled that when a broadband provider builds a fibre-optic network in an apartment building the provider must open the vertical network to its competitors on an equal access basis. ARCEP said it would publish in mid-September the details regarding interconnection points.
In August, Anacom (Portugalâ��s telecoms regulator) launched a consultation on fibre-optic cabling in apartment buildings. A decision could be published as early as October. The decision is expected to be a catalyst for Portugalâ��s FTTH market, which has taken off, thanks to Anacomâ��s regulation adopted two years ago requiring Portugal Telecom, the incumbent, to open its metro ducts to competitors.
FTTH service providers have yet to make any new announcements in the two countries, but the end of the summer holidays often brings surprises to Europeâ��s telecoms markets. In France, the rentrÃ©eâ��return to workâ��is often used to announce new deployment plans. In 2006, Free (Groupe Iliad) surprised France Telecom and its competitors with news that it had signed an agreement to deploy fibre in Parisâ�� sewers as part of an FTTH plan that would catalyse the French FTTH market. Iliadâ��s announcement early this summer that itâ��s buying Alice, Telecom Italiaâ��s French operation, is a possible harbinger. The deal will give Iliad more than 950,000 ADSL subscribers and an FTTH GPON network in Parisâ�� 10th arrondisement that passes more 300 apartment buildings.
In Portugal, the big FTTH news could come from Portugal Telecom (PT), the incumbent, which has yet to announce any plans. PTâ��s competitors have already begun FTTH projects and announced plans to pass more than 1 million households over the next three years. The catalyst for PTâ��s move will likely be additional competition from alternative service providers following a government decision on the sharing of vertical fibre-optic networks in apartment buildings.