The dynamics of the long-haul core optical networking market have changed dramatically over the past two years, resulting in a declining growth rate for such networking equipment as SONET, DWDM, and intelligent optical switching. According to a new report from market-researcher Pioneer Consulting LLC (Boston), softness in the market will give way to impressive growth with total, global long-haul, core optical networking equipment purchases expected to reach $24.2 billion by 2005.
Despite the recession, market opportunities in this area will remain in the short term and increase substantially in the long term.
"Several factors--adequate capacity in backbone networks, a shift in emphasis toward metro network build-outs and the soft economy--have caused carriers to scale back long-haul equipment purchases," explains Jason Marcheck, senior market analyst for optical networking. "However, the clear need for carriers to migrate toward more intelligent, less costly optical equipment will keep sales stable throughout this 'soft' period and cause them to increase dramatically in 2003 and beyond."
According to the report, both next-generation, long-haul SONET and legacy long-haul SONET equipment (OC-48 and above) will offer the greatest market opportunities. Pioneer predicts that the need to efficiently handle increasing volumes of message traffic will require purchases of next-generation transport equipment. Such equipment is projected to increase to $7.4 billion by 2005.
However, contends Paul Kellett, senior director of research, "Legacy long-haul SONET equipment purchases will continue to remain strong during the forecasted period, despite growth in demand for 'next-gen' SONET." As carriers continue to purchase legacy long haul SONET, the market should reach more than $7.1 billion by 2005.
Of the three major categories of equipment in the long-haul core optical networking equipment market, long-haul DWDM equipment will offer the smallest growth opportunity, comprising a diminishing portion of total DWDM sales due to the current focus on metro deployments. Pioneer predicts that 70 percent of total new DWDM deployments will be deployed in the metro by 2005.
North America will continue to deploy the majority of DWDM systems; however, North American deployments versus the rest of the world are expected to decline from 69 percent in 2001 to 57 percent in 2005.
"Pioneer Consulting sees a shift in carrier investment in DWDM equipment away from long-haul to metro area networks for some time to come," says Marcheck. "This will tend to decrease demand for long-haul DWDM equipment but not for DWDM equipment as a whole. In terms of regional demand for long-haul DWDM, North America will continue to represent the largest market opportunity in absolute terms. However," he adds, "Europe and Asia-Pacific will exhibit increasing growth relative to North America."
Pioneer also examined the optical-electronic-optical (OEO) and all-optical (OOO) switch markets and determined that these devices should find their niche in the networks of the future over the next several years.
While OOO switches are still in their infancy, they are expected to be deployed at increasing rates over the next three to six years. Pioneer forecasts that long-haul optical switches--both OEO and OOO--will have sustained growth during late 2002 into 2003 and will grow to over $3.7 billion by 2005.
"If carriers are to realize the full potential of optical networking, then they must deploy intelligent optical switches as integral parts of their network," asserts Kellett. "In the long-term, demand can only increase for optical switching and core optical networking equipment in general, as current long-haul networks are optimized and new, state-of-the-art long-haul networks are deployed."
For more information or to obtain a copy of the report, "The New Optical Core: Photonic Switching and Next-Generation Optical Transport in Long-Haul Core Networks," visit the company's Web site at www.pioneerconsulting.com.