Dell'Oro: Transport Market Down 23%

Spending on DWDM and Sonet/SDH equipment isn’t going to pick up at all until 2003 and won’t return to the levels experienced last year for the foreseeable future, according to a market forecast published yesterday by the Dell'Oro Group.

The forecast, for the worldwide optical transport market, says overall revenues for this type of equipment will total $17.7 billion this year, down roughly 23 percent from last year's total of $22.9 billion.

Additionally, the firm doesn't predict the market will start growing again until 2003. And even then, it forecasts only a small increase of about 3 percent from the preceding year.

The figures are no surprise. Late in May, Dell’Oro predicted that the dwindling fortunes of key players in the optical networking market, such as Nortel Networks Corp. (NYSE/Toronto: NT), would have a negative impact on overall revenues this year (see Nortel Drags Down Market).

It’s a trend that won’t be easy to budge. According to Shin Umeda, principal analyst at Dell’Oro, the lack of spending by service providers represents more than a mere cutback. It’s the result of many carriers turning a corner in network development.

”Many emerging [service providers] embarked on constructing new large North American and global fiber optic networks,” the report states. “In late 2000, many of these [service providers] completed the main construction phase of their optical networks and began transitioning their purchasing patterns from high volume infrastructure build-outs to more modest incremental bandwidth acquisitions.”

Not to mention the carriers who’ve gone bust during the recent downturn.

Dell’Oro’s figures seem to tally with other firms’ findings about the displacement of Sonet/SDH with DWDM gear. Another research firm, Frost & Sullivan, has reported that by next year, traditional Sonet/SDH gear will start to decline in proportion to a burgeoning market for next-generation equipment, including DWDM gear with Sonet interfaces (see Report: Next-Gen Gear Replacing Sonet).

- Mary Jander, Senior Editor, Light Reading
http://www.lightreading.com Want to know more? The big cheeses of the optical networking industry will be discussing this very topic in a session at Opticon 2001, Light Reading’s annual conference, being held in San Jose, California, August 13-16. Check it out at Opticon2001.

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ajo2 12/4/2012 | 7:56:22 PM
re: Dell'Oro: Transport Market Down 23% Come on Light Reading - show us the rest of the data. What did the market do before 2000? Is 2001 forecast to be better or worse than 1999? If you measure from the very top of the bubble, of course it is going to look down. Talk about a micro view of things.
networking_legend 12/4/2012 | 7:59:45 PM
re: Dell'Oro: Transport Market Down 23% "Attila the Hun, Joseph Stalin, Adolf Hitler, Mao Zedong and Bill Clinton all thought like that"

Who ever authored this quote should be commended. After all, how many people can type so well with a straight jacket on :)
LightCycle 12/4/2012 | 7:59:47 PM
re: Dell'Oro: Transport Market Down 23% > ... Fujitsu (who is really screwing the pooch
> in their biggest accounts product and

You said it!

Naturally, the analyst don't pay nearly as much attention to Fujitsu as they do NT, LU.
optical_guy 12/4/2012 | 7:59:47 PM
re: Dell'Oro: Transport Market Down 23% "Attila the Hun, Joseph Stalin, Adolf Hitler, Mao Zedong and Bill Clinton all thought like that.
Anyone who could put any American president in the same list with Attila, Stalin, Hitler and Mao is either ignorant of history, flippant to the point of callousness, or an idiot. "

I agree. I personally would put Bill Clinton in the same list as Marion Barry, Al Sharpton, and actually Richard Nixon. But what the hell do I know.

[email protected] 12/4/2012 | 7:59:58 PM
re: Dell'Oro: Transport Market Down 23% true points....

The bigger you are means the higher the external expectations so in a slowing economy it means that if you sell 5% less than you and the folks around you thought that you would, the result is a major problem. Also, ONI and CIEN do not need to sell as much to look good.

If you sell products that people find to be inadequate, then you have an even bigger situation for the shortfalls start approaching 20% and that is what causes the 25-30% reductions in work force and 6-% drop in share price.
jghutchison 12/4/2012 | 7:59:59 PM
re: Dell'Oro: Transport Market Down 23% It is unfortunate that most journalists, pundits, gurus, and analysts throw SONET/SDH equipment into the same basket with next generation equipment. This is akin to lumping Yugos with Ferraris. Worlds apart.

The legacy equipment market is suffering, as it should, during this period of lower capex spending. However, next generation equipment sales continue to improve, as they should, due to the simple fact that this stuff offers better than a ten fold efficiency improvement in the network. This efficiency translates to lower operating and capital costs.

No wonder companies that offer next generation equipment like Ciena and ONI continue to do well in this environment.


Jack Hutchison
optera 12/4/2012 | 8:00:00 PM
re: Dell'Oro: Transport Market Down 23% What you will see happening eventually is that the market is adjusting between (extremely high growth) and (almost no growth) for bandwidth.

In a crowded market, what the end result should bring is a competitive landscape where prices are low and affordable down to the end consumer.

This is all good.
[email protected] 12/4/2012 | 8:00:05 PM
re: Dell'Oro: Transport Market Down 23% http://www.teledotcom.com/arti...

This is an interesting story. I have a few contacts in some SPs who say that they have seen some cutbacks but not as bad as everyone claims. Nortel, Lucent, Fujitsu (who is really screwing the pooch in their biggest accounts product and service wise....I hear that Cisco kicked their ass in 2 RBOC accounts) etc are victims of having produced shitty equipment and are being lead by morons.

CIR just kicked a report that claims that Sprint and Worldcom are not as bad off as everyone else claims: www.cir-inc.com

Perhaps the problems that we are experiencing in this industry are a function of poor technology choices and not the horror that everyone claims...

360 Networks was doomed to fail, Level 3 close to follow and Williams bringing up the rear because they have bad busines models.

Reality check after all?
[email protected] 12/4/2012 | 8:00:07 PM
re: Dell'Oro: Transport Market Down 23% Note to editors:

Please stop writing stories about these people. The reaction on these boards should tell you something about how seriously the market takes them.
Naquada 12/4/2012 | 8:00:07 PM
re: Dell'Oro: Transport Market Down 23% The following article deserves some attention:

NTT launches 100-Mbit/s fiber-optic service
By Yoshiko Hara
EE Times
(07/31/01, 5:55 p.m. EST)

TOKYO GÇö Nippon Telegraph and Telephone Corp. will launch a fiber-optic service in Japan on Wednesday (Aug. 1) capable of supporting 100-Mbit/second transmissions, opening the way for full-scale fiber to the home.

The service will depend on the readiness of Internet service providers to connect to NTT's fiber-optic network, which will be offered at a basic rate of $73 per month.

NTT's pricing is almost a quarter as much as it had originally planned to charge for the service, but the company lowered its rates after a small company named Usen Corp. initiated a 100-Mbit/s fiber-optic service in a limited area of Tokyo this past March. Known as a cable music distributor, Usen shocked the Japanese communications industry by beating NTT to the punch with a 100-Mbit/s service priced at $40 per month.

Usen has already signed up 3,400 subscribers and is now expanding its fiber-optic service area to include greater metropolitan Tokyo and other cities with populations of 1 million or more, which it plans to support starting in October.

Usen acts as the information provider for its 100-Mbit service, and does not allow other ISPs to connect to its network.

In a trial service that began last December, NTT offered a best-case service of 10 Mbits/s and set a monthly rate of about $258 at that time.

"Usen's business surely had some impact on NTT's [pricing] strategy," said Atsuo Takahashi, senior analyst at ABN Amro Securities (Japan) Ltd. "But at present Usen is skimming the cream off. Sooner or later, the company will reach the point where it cannot keep the low rate. NTT should not take Usen's service a big threat."

What can you get?

To demonstrate the capabilities of a broadband network, NTT recently launched a joint experiment with Dai Nippon Printing and Sharp Corp. The program is to last six months. .

"This experiment targets market creation. We are going to show images and videos that are not available through current networks and that will make consumers realize [the service is] worth paying for," said Shigehiko Suzuki, senior vice president of NTT.

A Japanese government project, dubbed e-Japan, intends to connect 10 million households to 100-Mbit/s networks and 30 million households to 10-Mbit/s networks by 2005. That level of penetration would involve more than 90 percent of Japanese households. "To realize 10 million households connected to broadband networks, it is really necessary to involve consumers widely," Suzuki said. "To demonstrate what the broadband networks can do will practically expand the market."

In the three-company experiment, DNP will serve as contents provider, Sharp will work on in-home terminals, and NTT will provide the network infrastructure.

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