US fiber Internet providers and their suppliers are seeing significant traction, and that's generating plenty of excitement among analysts.
"We have a boom in new FTTH [fiber-to-the-home] deployments. These will peak in 2024-26 and continue throughout the decade," wrote Strategy Analytics analyst Dan Grossman in a post to the firm's website. "It seems that not a single business day passes without yet another announcement from some operator that it is beginning construction of an FTTH network in one of its communities."
Jeff Heynen, an analyst with Dell'Oro Group, agrees. "Fiber infrastructure buildouts are resulting in more new subscribers and more CPE [customer premises equipment] with advanced Wi-Fi technologies as service providers look to differentiate their services in increasingly crowded markets," he said in a release. As a result, "we've made significant upward revisions to our long-term broadband and home networking forecast."
Specifically, Dell'Oro recently raised its global revenue forecast for passive optical network (PON) fiber equipment to $13.6 billion in 2026. The firm attributed the increase in part to XGS-PON deployments in North America, Europe and elsewhere. XGS-PON is an updated standard for PON that is capable of supporting 10G symmetrical data transfer.
Grossman, of Strategy Analytics, is seeing a similar trend. "One thing that stands out is the uptake of XGS-PON," he wrote. "For example, one [unnamed] vendor reported a 93% increase in XGS-PON ports shipped year-over-year."
Grossman explained that the price of XGS-PON equipment has fallen to the point where it makes sense to use the technology in new fiber network buildouts.
"Operators tend not to want to upgrade existing networks, while using XGS-PON for new deployments, so numbers of XGS-PON OLT [optical line terminal] ports shipped is a pretty good proxy for numbers of homes and businesses newly passed by PON," he said.
The supply side
Grossman noted that several fiber vendors such as Adtran, Calix, DZS and Nokia have reported significant increases in their fiber equipment sales. And some of them haven't been shy about their wins.
The "enormous secular opportunity we are capitalizing on grows every day," Calix Chairman and CEO Carl Russo said during his company's recent quarterly earnings call.
Calix reported a 33% increase year-over-year in US revenues in the second quarter of 2022.
Indeed, many vendors have begun raising prices on their equipment. Executives have pointed to several reasons behind the price hikes, from inflation to a tight supply chain to a willingness among customers to pay more.
For example, Corning reported a 22% year-over-year increase in sales in its fiber division, "primarily driven by strong volume and price increases," according to CFO Edward Schlesinger.
"We believe we're in the early phases of a multi-year build cycle across multiple segments in the passive optical market," Schlesinger said on the company's recent quarterly conference call, according to a Seeking Alpha transcript. "We're responding to this demand by ramping up production and opening new facilities. As always, we de-risk these investments by requiring meaningful commitments from customers, often including funding before beginning construction."
The demand side
Fiber network operators certainly appear keen to ensure a continuous flow of fiber equipment.
"We're out there building more fiber than anyone else, adding on average more than 350 customer locations per hour across the country," wrote AT&T's network chief Chris Sambar in a recent post to the company's website. "This fast track puts our fiber network on pace to cover more than 30 million locations by the end of 2025."
AT&T's fiber buildout stumbled last year, but this year company officials have said it remains on track.
AT&T isn't the only US operator building out fiber at a furious pace.
For example, Altice reported that it added 270,000 new FTTH passings in the second quarter. Separately, Lumen said it added 205,000 fiber-enabled locations in the quarter. And Frontier said it built fiber to a record 281,000 new locations in the quarter, up from 211,000 in the prior quarter.
As reported by the Financial Times, all that fiber demand is putting a strain on fiber supplies. Citing data from Cru Group, a market intelligence firm, the publication noted that fiber prices have globally increased by up to 70% during the past year. Europe, India and China are among the regions most affected by the crunch.
But the situation doesn't seem to be as bad in the US. Citing Corning's CEO, the Financial Times reported that fiber prices in the US have increased by only 2% this year – after falling nearly every year for the past decade.
According to the publication, part of the reason for increasing prices has to do with fiber components. For example, there's a shortage of helium, a key component in manufacturing fiber-optic glass. Separately, prices of silicon tetrachloride, another key fiber production component, have increased by up to 50%.
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