NOVEMBER 26, 2008 -- Tier 2 and Tier 3 network operators in North America will quickly abandon further investment in SONET-based optical transport products in favor of emerging packet optical transport systems (P-OTS), and investment in optical transport gear by smaller operators will peak over the next two years, according to a new report from Heavy Reading.
"Over the next five years, multiservice Sonet and long-haul DWDM will lose considerable market share to P-OTS and metro/regional WDM systems," says Sterling Perrin, senior analyst with Heavy Reading and author of the report, Optical Networking for Tier 2/3 Operators in North America. "Multiservice SONET is expected to drop precipitously over the next five years as Tier 2/3 operators shift their spending to P-OTS, driving significant growth in P-OTS over the forecast period."
Spending by North American Tier 2/3 network operators on optical transport gear will peak at just over $1.3 billion in 2010, before leveling off and declining over the next two years, Perrin predicts. "The projected decline in revenues for 2011-2012 reflects the maturity of the North American transport market, particularly the multiservice SONET equipment category, which is set to decline sharply in the latter forecast years," he explains.
Other key findings of Optical Networking for Tier 2/3 Operators in North America include:
- Total North American optical transport equipment revenue was $3.3 billion in 2007 and will increase at a very modest 1.3 percent compound annual growth rate to reach $3.5 billion by the end of 2012. The modest growth reflects a mature market segment. Of that total, Tier 2/3 optical transport accounts for roughly 36 percent of revenue today and is expected to essentially hold steady over the next five years.
- Infinera (search for Infinera) is now the North American leader in optical transport for Tier 2/3 network operators. Infinera is a relative newcomer as a vendor, and it competes only in a single transport category -- long-haul DWDM. But long-haul DWDM is a large market, and Infinera is the dominant supplier in that sector.
- Huawei (search for Huawei) is emerging as a force in the North American optical market. Huawei has been quietly gaining traction within the Tier 2/3 markets in North America and is now ranked seventh in overall market share for sales of optical transport gear to this market. This is certain to strike some fear in competing optical suppliers, which have been highly skeptical of Huawei's ability to compete in North America.
- Cisco (search for Cisco) remains the leading metro/regional WDM supplier in the Tier 2/3 sector, holding steady at 22 percent market share. Ciena placed second, but rose a bit from 17 percent share in 2007 to 21 percent share during the first half of 2008. Both Cisco and Ciena (search for Ciena) are strong suppliers to the cable market, and cable MSOs are big buyers of metro/regional WDM equipment to support their video-on-demand (VOD) initiatives.
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