Optical MAN's Hope
That appears to be the take of In-Stat/MDR, which published a report earlier this week stating that the optical MAN service market is still growing by leaps and bounds (see In-Stat: MANs Still Strong).
Despite a decline in overall telecom service revenues, the report predicts that between 2001 and 2006, revenues from optical services like Ethernet, DWDM, and Sonet in the MAN will grow more than 360 percent, rising from $1.9 billion to $6.9 billion.
“This area will certainly continue to have strong growth,” says Daryl Schoolar, the analyst who authored the report, pointing out that both consumers and business users are continuing to move to faster Internet connections. From the fourth quarter of 2001 to the first quarter of 2002, he says, the Internet consumer market grew about 1 percent. At the same time, however, the broadband share of that market grew from 15.4 percent to 21 percent.
According to Schoolar, the broadband growth isn’t due to that notorious “killer app” that everyone’s waiting for, but to regular consumers and smaller offices migrating slowly from dialup to broadband. “People are increasing broadband five- to ten-fold.”
DWDM is, according to the report, the technology that is expected to experience the most growth in the five-year timeframe. This is mainly due to its flexibility in handling multiple data protocols, as well as the low cost of dark fiber. While Sonet is expected to account for the majority of revenues for optical MAN services over the next couple of years, the report forecasts that by 2006, DWDM will have taken the lead in the U.S. (the report deals exclusively with the U.S. market).
The incumbent local exchange carriers (ILECs), such as BellSouth Corp. (NYSE: BLS), SBC Communications Inc., Qwest Communications International Inc. (NYSE: Q), and Verizon Communications Inc. (NYSE: VZ), own the majority of the MAN fiber routes and are therefore benefiting the most from the growth in the optical MAN market, the report says. “For the foreseeable future, this will continue,” Schoolar says.
But the report isn't all rosy. In fact, the analyst appears conflicted by his own observations of the obvious. As the entire telecom industry struggles with bankruptcies, restructuring, and possible network shutdowns, the MAN market also faces major challenges, he says. “The major challenge is the financial health of this market."
“When one company has problems, people attribute it," he says, to the entire market. He doesn’t see an upturn coming in the economy before next year at the earliest.
Another major challenge facing the market is limited fiber deployment: “There are a limited number of buildings on fiber, or that will ever be on fiber.
Still, Schoolar finds reason for optimism. Consumer broadband might not be growing as fast as some would like, but it is still growing. “I think the good news is that when you dig down into these companies’ balance sheets, they’re still posting strong numbers in metro.”
— Eugénie Larson, Reporter, Light Reading