lightreading.com
JUNE 08, 2000 Fiber Queues Put Cablers in Control
ATLANTA, GA--Forget cash flow. The biggest challenge to CLECs looking to build out next-gen
networks is getting their hands on cold, hard cable, attendees at the Supercomm trade show
say.
"I just can't get enough of the stuff," says the general manager of a midwestern CLEC, who
spoke anonymously on a shuttle bus on the way to the show. "I recently had a $20 million order
for cable that no one could fill. All the cable suppliers told us they had a two-year backlog."
Corning finally came through with a contract, he says.
He's not alone. Many CLECs are finding themselves in a waiting line for fiber--and at the mercy of
the cable contractors, who have the power to determine who gets the fiber goods first.
The reason is a worldwide fiber shortage, caused by explosive demand driven by the growth of
the Internet and developments in optical networking.
Making fiber is a painstaking process that can't be rushed. And despite massive efforts to
expand manufacturing capacity, suppliers such as Corning Inc. corning.com (NYSE:
GLW), Lucent Technologies Inc. lucent.com (NYSE: LU), and Pirelli SPA
pirelli.com (IT: PC) say they can't keep up.
Lucent, for example, announced in March that it plans to increase fiber production by 60 percent
this year and spend more than $1 billion on plant expansion over the next two years. But
spokespeople in Lucent's booth said that "it's not nearly enough."
Others agree. "We're investing three-quarters of a billion dollars to expand our plants, making
fiber as fast as we can, and we still can't keep up," says Barry A. Linchuck, commercial
manager of high data rate fiber for Corning. The shortage, he says, is expected to last well into
2001.
That's their story. Others claim manufacturers are using burgeoning demand as a reason to hike
prices. Depending on whom you ask, fiber prices have gone up anywhere from 4 to 18 percent
since the shortage began.
"Customers without long-term contracts are probably going to pay more on the spot market,"
says Tim Cahall, vice president of sales and marketing for Lucent's cabling division.
There's no doubt fiber business is booming: Last year, Corning says it made 60 percent of its
$4.7 billion overall revenue on fiber and accompanying photonic components. And the vendor
expects that figure to grow to 70 percent this year.
Meanwhile, the waiting lines at the cable contractors get longer. "It's a seller's market, and that's
tough on CLECs," says Lee Bussell, a spokeperson for Pirelli Cables and Systems
us.pirelli.com.
Cable makers can, for instance, shunt CLECs to the end of the queue in favor of incumbent
carriers with long-term contracts. They also can give a startup CLEC a break, based on hopes of
lucrative future orders.
Determining who gets the cable can make suppliers more like investment bankers than
contractors. "We look at long-term strategic value, vision, viable business plans, and customer
base," says Bussell. CLECs must show they're worth moving up in the line.
According to cablers polled at the show, CLECs can increase their chances of success by taking
time to assess their future requirements as closely as possible, then proving their viability. Not
surprisingly, cable makers also say CLECs should establish long-term contracts to keep the flow
of fiber coming. "Two to three years is good," says Bussell.
-- Mary Jander, Senior Editor, Light Reading (http://www.lightreading.com) |
