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Packet Optical Market Set to Explode

Light Reading
News Analysis
Light Reading
9/14/2007
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Driven by strong carrier demand, the market for packet optical transport equipment will expand from zero revenues in 2007 to $1 billion in sales by 2012, according to Heavy Reading's inaugural Packet-Enabled Optical Networking Quarterly Market Tracker.

That's because there's strong demand from Tier 1 carriers to move Sonet/SDH, wavelength switching, and connection-oriented Ethernet functionality onto a single device, says Heavy Reading analyst Sterling Perrin.

As a result, the growth expectations are enormous for the new market segment of "packet optical transport systems" (POTS).

"This is a market that's going to start in '08 and really ramp up quickly," Perrin says. "What we end up with from 2008 to 2012 is basically a 115 percent compound annual growth rate (CAGR), which would make it the fastest area of optical transport."

By those figures, packet-optical equipment would represent about one half of all growth in metro/regional optical transport during the next five years. According to Heavy Reading, the latter market is expected to grow from $7.1 billion in 2007 to $9 billion in 2012 -- a CAGR of 4.8 percent.

During that time, the POTS segment is expected to grow from zero to 11.1 percent of all optical transport sales.

Sales of multiservice Sonet/SDH equipment are expected to fall slightly during that time, from $4.8 billion in 2007 to $4.3 billion in 2012. That will represent a decline from two thirds of the market to less than half of all optical transport equipment revenues.

Metro/regional WDM equipment is set to grow from $2.3 billion in 2007 to $4.7 billion in 2012, a CAGR of 15 percent. Non-ROADM-based metro/regional WDM equipment sales are set to rise from 26.7 percent of the optical transport market in 2007 to one third of all optical transport sales in 2012.

ROADM sales are expected to rise from $440 million in 2007 to $1.72 billion in 2012, a CAGR of 31.4 percent. Non-POTS-based ROADM systems are expected to increase their overall percentage of the market from 6.2 percent in 2007 to 8.1 percent in 2012.

The optical equipment boom of the late '90s was driven by speculative demand from alternative operators that were overfunded, but this spend cycle is different, Perrin says.

"This time around it's driven much more by Tier 1 carriers, and there's a lot more reality behind it," he says. Some of the carriers driving this optical boom, he adds, include AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ) in the U.S., and BT Group plc (NYSE: BT; London: BTA), with its 21CN project, in the U.K.

The shift in buying to Tier 1 carriers means that the primary beneficiaries of the growth in optical sales will be larger equipment suppliers like Alcatel-Lucent (NYSE: ALU), Fujitsu Network Communications Inc. , Huawei Technologies Co. Ltd. , and Nortel Networks Ltd. . "Whereas in the past there were a lot of startups out there, this isn't a market that is lending itself to much of a startup boom," Perrin says.

For more information on the report, click here.

— Ryan Lawler, Reporter, Light Reading


Interested in learning more on this topic? Then come to Optical Expo 2007, a conference and exhibition that will explore critical issues facing the optical networking industry. To be staged in Dallas, October 2 & 3, admission is free for attendees meeting our prequalification criteria. For more information, or to register, click here.


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Sterling Perrin
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Sterling Perrin,
User Rank: Light Sabre
12/5/2012 | 3:02:44 PM
re: Packet Optical Market Set to Explode
I don't believe I coined the term, but I did adopt it for this project. I've seen Carrier Ethernet Transport used by some, and packet-optical networking platform (P-ONP) has been put forth by Fujitsu.

I'm more than willing to call this something else, but hesitant to go for anything that's associated with a single vendor.

BTW, rocket scientists aren't particularly known for their creativity. Any (good) suggestions?
spelurker
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spelurker,
User Rank: Light Beer
12/5/2012 | 3:02:44 PM
re: Packet Optical Market Set to Explode

Ok, who's the frigging rocket scientist who coined the term "POTS" for a new market associated with Tier-1 carriers?

You couldn't create more confusing name ambiguity if you tried. Seriously. POTS?
Pete Baldwin
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Pete Baldwin,
User Rank: Light Beer
12/5/2012 | 3:02:44 PM
re: Packet Optical Market Set to Explode
Clearly, the key here is to think of the acronym first, then make up words to fit it.

Avoiding anything vulgar, I'd suggest PONG, PLOP, or PLONK.

Finding actual words to fit these is an exercise left to the reader. I don't want my bosses thinking I actually spent time on this.
Ryan Lawler
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Ryan Lawler,
User Rank: Light Beer
12/5/2012 | 3:02:44 PM
re: Packet Optical Market Set to Explode
The report numbers are correct. This was my fault, for doing fuzzy math and not accurately supplying numbers for each segment. I've corrected the story, and made the following changes:

The whole of the metro/regional optical transport market is $7.1b in 2007, rather than the $6.2 I originally posted.

Metro/regional WDM equipment sales, including ROADMs, increase from $2.3 billion in 2007 to $4.7 billion in 2012. And ROADM sales, including the POTS segment, go from $440 million in 2007 to $1.72 million in 2012.

CAGR numbers are correct and remain the same.
Ryan Lawler
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Ryan Lawler,
User Rank: Light Beer
12/5/2012 | 3:02:44 PM
re: Packet Optical Market Set to Explode
The report numbers are correct. This was my fault, for doing fuzzy math and not accurately supplying numbers for each segment. I've corrected the story, and made the following changes:

The whole of the metro/regional optical transport market is $7.1b in 2007, rather than the $6.2 I originally posted.

Metro/regional WDM equipment sales, including ROADMs, increase from $2.3 billion in 2007 to $4.7 billion in 2012. And ROADM sales, including the POTS segment, go from $440 million in 2007 to $1.72 million in 2012.

CAGR numbers are correct and remain the same.
optiplayer
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optiplayer,
User Rank: Light Beer
12/5/2012 | 3:02:44 PM
re: Packet Optical Market Set to Explode
I think you need a new CAGR calculator. 2007 to 2012 is 5 years yet in the article you give us the following:

Metro/regional optical market growing from 6.2B to 9B which you calculate as a CAGR of 4.8% (its actually 7.7%).

Metro/regional WDM growing from 1.9B to 3B which you peg as 15% CAGR (its actually 9.6%).

ROADMs grow from $440 million to $728 million ti which you give a CAGR of 31% when its 10.6%.

Really sloppy stuff for a report that I assume is not cheap.
paolo.franzoi
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paolo.franzoi,
User Rank: Light Sabre
12/5/2012 | 3:02:43 PM
re: Packet Optical Market Set to Explode

OP,

Its was just a splash dial from a CMWI.

seven
rahat.hussain
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rahat.hussain,
User Rank: Light Beer
12/5/2012 | 3:02:43 PM
re: Packet Optical Market Set to Explode
"ROADM sales are expected to rise from $440 million in 2007 to $1.72 million in 2012 ..." - you mean $1.72 billion.

Sterling - no need to diss a reader who is quite correct. POTS is taken - let's try to find a new acronym. Make one up or use one that has already been coined - VZ calls this the Packet Optical Transport Platform (Packet OTP) - how about using that? Nothing proprietary about it and the OEM vendors like this nomenclature.

Also, you include AT&T along with BT and VZ in your examples of carriers that support this category. AT&T, really? Could you check again? Or, give us some more data based on RFPs?

odo
OldPOTS
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OldPOTS,
User Rank: Light Beer
12/5/2012 | 3:02:43 PM
re: Packet Optical Market Set to Explode
You Rang?

OP
Sterling Perrin
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Sterling Perrin,
User Rank: Light Sabre
12/5/2012 | 3:02:43 PM
re: Packet Optical Market Set to Explode
Turing,
Really? How about Alloptical Transport Mechanisms (ATM). I don't think that one's taken...
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