Sources of fascination
Now that 2003 is mercifully coming to a close, it's time to look forward to what 2004 will bring. I certainly have no claim to clairvoyance (otherwise, I'd be much wealthier than I am currently), so I don't know any more about what's going to happen next year than you do. However, there are several stories that we began to cover this year that will likely reach resolution in the next 12 months. Here are a few that interest me in particular.
First, because I actually would like to be wealthier than I am now, I'll be interested to see whether the optimism I discussed in this space last month turns out to be more than wishful thinking. Nothing I've heard in the past four weeks has contradicted the points I made last month; in fact, about 70% of the respondents to a recent "QuickVote" poll on our Website feel that 2004 will be either somewhat or significantly better for their companies than was 2003. Do people feel this way because 2004 couldn't possibly be worse or is a recovery truly within sight?
One factor that will determine the answer to this question is whether the carriers—particularly in the United States—figure out a way to make money providing wireline services again. Like everyone else with a stake in the optical communications market, I'll be closely watching the emergence of MCI from its legal entanglements and the company's subsequent approach to pricing. Carrier revenues will have to stabilize before a significant recovery in optical communications spending occurs. That may mean consolidation in the carrier space could become a bitter but necessary pill to swallow over the next 12 months. I do predict there will be a fair amount of "stealth" spending to upgrade capacity—several component vendors have already reported stronger than expected sales recently in their long-haul component-product lines—but optical technology vendors won't see much spending above subsistence levels until carriers reduce their debt and see demand for their services more closely match the capacity of their current infrastructure.
One exception to this dilemma is in the access space. And of course, you can bet that having spent so much ink this year reporting on the Verizon/BellSouth/SBC fiber to the premises (FTTP) competition, I'll be interested to see what becomes of it. Will Verizon follow through on its claims of early first deployment? Will BellSouth and SBC follow Verizon's lead? As readers saw when they compared October's "Viewpoint" column (p. 14) with my generally rosy comments on RBOC FTTP plans, debate continues about how seriously one should take the three Baby Bells' initiative. Meanwhile, as Meghan Fuller's article on the front page this month describes, optical access equipment vendors also have to sweat an upcoming U.S. Supreme Court ruling on whether municipalities have the right to provide communications services. Municipalities and the public utilities with which they frequently partner have played a large role in proving the capabilities of passive-optical-network (PON) technology. Even if the RBOCs do mean business, the PON space will cool significantly without municipalities in the mix.
Speaking of consolidation, you can bet there will be more of it on the vendor side. In particular, there are way too many transceiver vendors out there. In this vein, now that Bookham Technology has purchased Ignis Optics, it will be interesting to see whether the management at Avanex believes they need to match this move with another acquisition. The Avanex Website does list both 2.5-Gbit/sec SFP and 10-Gbit/sec XFP devices in the company's product portfolio, but data sheets on these devices weren't available from the site at press time. Of course, you don't need to be acquired to leave a market segment—you can just move up or down the food chain. Blaze Network Products, for example, is in the process of transforming itself into Aduro—and at the same time transforming the company's product line from CWDM transceivers to subassemblies. I'll be looking for more companies to try a similar tactic.
Finally, I'll be keeping my eye on Asia, particularly on the efforts of companies in China and Korea to become more than regional players. Certainly, Huawei is off to a good start. Whether it's Samsung or some other company like SK Optics, I expect Korean enterprises will start making more noise next year as well.
In short, there will be plenty to read about in the next 12 months. I look forward to discovering with you how these stories and the many others that arise turn out.
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