Optical Fiber Market

David L. Shenkenberg, Features Editor, david.shenkenberg@laurin.com

According to the FttH Fact Book 2009 by BuddeComm and Chiltern, more than 40 million people worldwide currently subscribe to fiber optic networks including FttH, or fiber to the home. Although DSL has more market share of broadband customers around the world, some experts say that optical fibers could overtake it within five to 10 years.

The optical fiber market could reach this level of growth even sooner, but certain obstacles could prevent this. For example, some technologies are extending the life of DSL, which will make telecoms more resistant to switching to optical fibers. At the local level, project managers need to plan the installation of fiber optic network infrastructure without disturbing other underground systems. The populace may complain about the impact of the construction on community appearance, the environment and public safety. People also might vandalize or steal the equipment.

However, these issues are relatively minor. The three primary factors affecting the optical fiber market are cost, regulation and competition.

A discussion of the market cannot begin without addressing the elephant in the room: the global recession. However, despite the economic downturn, the optical fiber market is moving forward.

Some countries help roll out fibers

In Europe, broadband access has been viewed as a matter of public welfare. This outlook has helped promote the expansion of fiber optic networks. Competition between countries also has spurred growth.

In Sweden, Denmark, Finland and the Netherlands, governments have helped telcos roll out fiber optic networks. In response, France, Italy, Germany, Portugal, Spain and the UK have been rolling out fiber networks as well. However, these countries have favored hybrid fiber-copper networks due to the cost of optical fibers.

In Australia, a 2007 initiative of the Labor Party would have helped optical fiber rollout, but this measure was resisted by Telstra, which controls the largest market share on the continent.

As one might expect, growth is slower in poorer continents such as Africa and South America. However, there are opportunities in relatively wealthy and politically stable countries such as Brazil and Algiers.

“Asia is the one region in the world where FttH has started to emerge as a serious broadband platform,” states the FttH Fact Book.

A report from the market research firm Infonetics Research emphasizes that there is room for telecom growth in China. Out of the 1.3 billion people in China, only about 500 million subscribe to mobile services and 51 million to broadband services. The Chinese government views broadband access as a necessity for global competitiveness and, during the time leading to the 2008 Beijing Olympics, it spent a lot of money on next-generation telecommunications.

The FttH Fact Book 2009 notes that fiber to the home is growing rapidly in the US, thanks in large part to Verizon’s FiOS, an all-fiber-optic network. In its full-year report to investors for 2008, Verizon stated that it had gained 303,000 net new FiOS TV customers and 282,000 net new FiOS Internet customers, the largest increase in customers so far for the company.

Optical fibers still overtaking copper

In February, AT&T announced that it plans to invest approximately $1 billion in 2009 to build its global network and add services for businesses. The expansion will include new undersea fiber optic cables to Alaska, Australia, Asia, India and Puerto Rico. The company also will offer private enterprise networks to 18 more countries.

Although the optical fiber business unit of Corning Inc., Corning Cable Systems, has reported slower than expected growth in 2008 because of the global recession, its president and CEO, Clark S. Kinlin, said, “The substitution of fiber over copper lines continues as bandwidth requirements in individual homes grow.”

The company’s 2008 report of the telecom market noted worldwide growth of 12 to 15 percent in terms of volume sold. Fiber to the home grew by 15 percent, while DSL declined by 25 percent. Growth in data centers offsets slower demand from other businesses.

Corning forecasted that the telecom market will be down 10 to 15 percent in 2009 versus 2008, with public carrier networks down by 10 percent and private enterprise networks down by 20 percent.

Similarly, the Dell’Oro Group forecasted that fiber optic equipment will decline 9 percent in 2009, with growth resuming in 2010. However, the group forecasted that the market for optical fiber equipment for wavelengths compatible with 40 Gb/s data rates will grow at least 50 percent in the next five years. The report also indicates that shipments of equipment for 100 Gb/s wavelengths are expected in late 2011.

Jimmy Yu, director of optical transport research at the Dell’Oro Group, explained, “There continues to be an opportunity for technologies that will help service providers reduce their capital expense while still expanding their network capacity. We think that 40 Gigabit is one of those technologies as the price per bit of a 40 Gb/s wavelength starts to be lower than that of a 10 Gigabit wavelength in a DWDM long-haul system.”

According to the Plastic Optical Fiber Market and Technology Assessment Study 2008, plastic optical fibers have been doing well in the recession because they are relatively cheap, and technical developments and the adoption of standards have enabled them to compete with glass fibers. The report noted that new companies are entering the field from China, Taiwan, Japan, US, Canada, Europe, Korea, Australia and Ireland.