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You can reach Steve Litwin ( LUMM IR) by phone at 514-631-0023 and by email at steveli@interax.net.
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DWDM expected to average 28% annual growth over next five years
Worldwide sales of dense wavelength-division multiplexing equipment are expected to
increase from $2.2 billion in 1998 to $9.4 billion in 2004, an average annual growth rate of 28
percent.
The forecast, which KMI Corporation compiled for its report "Worldwide Market for Dense
Wavelength-Division Multiplexing (DWDM)", predicts that monetary growth despite an
estimated cost decline of about 17 percent.
The market growth in sales of DWDM equipment for 1998 was up 32% over the 1997 figure.
Although that growth will decelerate, the 2004 annual growth figure is expected to be up 26%
over the previous year, maintaining the 28% growth rate over the five-year period.
The 1998 sales covered over 4,000 systems, an increase of 94% over 1997. In terms of
systems sold the growth rate is expected to average 50% through 2004, in which 42,000
systems are forecasted to be sold.
"The explosion in the demand for bandwidth is really driving DWDM," said Neil Dunay, an
analyst for KMI Corporation.
The growth of the Internet is a major reason for the expansion in bandwidth. "It's a combination
of Internet and other corporate data needs, corporate WANs," Dunay noted.
Corporate backup centers are a part of the future demand, according to Dunay. "It's not a big
one right now, but it's growing."
Another cause for growth is the advantage of DWDM over synchronous optical network
(SONET) equipment. The development of erbium doped fiber amplifiers allows DWDM to
replace SONET regenerators. "With the EDFA and WDM combined you could take all of that
traffic and put it over one fiber," said Dunay. "Long distance carriers were finding that it was
cheaper to employ DWDM than to install new fiber."
Increased competition, pressure on carriers to reduce cost, and manufacturing efficiencies
have led to the decline in the cost of DWDM as well as the use of the DWDM technology.
"One of the hardest parts about doing this report was defining what the product is," said Dunay.
Dunay explained that he used units in terms of systems, specifically transmission from one
point to another point in both directions.
The dividing line between long-distance units and short-distance connections is approximately
80 kilometers and officially short-distance was defined as a system which would not require
in-line amplifiers. "The shorter distance products are going to grow in market share. That is one
factor in bringing the cost down," Dunay explained.
Currently the long-distance segment accounts for nearly all of the DWDM market.
Short-distance systems, which currently account for less than five percent of the market, will
grow due to penetration into metropolitan markets and adoption of DWDM for premises
applications and are expected to account for one-third of the market by 2004.
The long-distance share of the market will also decline due to laser retrofits to previously
installed systems, which currently are a negligible portion of the market. An expected growth
rate of over 200 percent annually is forecasted to bring that market to $2 billion in 2004.
Another trend is the acceleration of deployment in Europe and Asia. North American
consumers accounted for 86 percent of the global market in 1997 but only 80 percent in 1998,
and the North American share is expected to fall to 61 percent by 2004.
"Europe's really growing quickly right now. Asia is still small, but it should grow fairly fast. China
is being really aggressive in deployment," Dunay noted.
Currently Europe accounts for 14% of the global market while the Asia-Pacific region covers
5.5%. Other regions only account for 0.5% of the global market.
Ironically two of the five major vendors are headquartered in Europe. Pirelli is headquartered in
Italy while Alcatel is based in France. Nortel is headquartered in Canada while Ciena and
Lucent are based in the United States.
The five main vendors are complemented by about a dozen smaller vendors.
Although AT&T used DWDM as early as 1994, 1996 was the first big year for the technology.
Dense wavelength-division multiplexing usually carries eight or more channels. The typical
maximum wavelength, based on an ITU grid, is 3.2 nanometers but usually DWDM
transmission carries 1.6 nm or 0.8 nm bands. Vendors are currently trying to provide 0.4 nm
bands, reducing the cost even further.
LUMM is an advance ( 3 years ) on competition
call Steve Litwin or sed an e-mail to him for details
You can reach Steve by phone at 514-631-0023 and by email at steveli@interax.net.
That Lumenon email address does not work yet!
"The smaller you go the more channels you can put on the system," noted Dunay.
Although some carriers and vendors are discussing the eventual all-optical layer, over the next
five years DWDM and SONET are likely to be deployed in tandem.
KMI compiled the report during March and conducted research between September 1998 and
February 1999.
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