OT: The Darkness in Fiber Optics - This debate about how much trouble companies like Corning (GLW) are in due to unlit fiber optic cable is sort of mind boggling.
The article in todays New York Times says that only 5% of the fiber in the ground is lit. That sounds real bad. I have heard this type of statement before a couple of months ago, so it should not be a big surprise at this point to anyone who has been following this industry.
At least at one point in time, the data traffic growth on the internet was apparently such that traffic was doubling every 3 months (per Nortel traffic apparently declining now - hard to believe). At that rate traffic increases by 16 times every year. Using that rate and the fact that only 5% is used now, it would take about 13 months to use up all the capacity, if I did my math correctly. When the trenches are dug for fiber, extra "unlit" fiber is placed in the ground so they don't have to add more in the near future. That effect helps though when companies are purchasing new fiber, they will do the same thing, buy more than they need. The new fiber sales in the USA will tend to be more in metropolitan areas due to the long-haul overcapacity, and the fact that the opposite situation exists in metro ares - bottlenecks in fact. So, Corning should be getting sales to metro areas. In addition, they can sell to other countries. Recently sales were announced to China and Russia.
Regarding Corning, there are other business units other than fiber optics, and those should be worth something. I really don't know how this all adds up. Maybe I will get hammered from this point on by holding shares of GLW. The stock was pounded in the last few days, and was almost twice as high a little over a month ago. It was over 5 times higher in January. Efficient market? Sure... If anyone knows what the big picture is here, please clue me in. I am still trying to figure all this out.
FWIW, below is an article that argues the fiber demand will not be so bad.
John
Despite fears, fiber-optic deployment continues to increase
Lightwave June, 2001
lw.pennnet.com
The number of fiber miles deployed by carriers grew 68.7% in 2000, which followed a 55.7% growth in 1999, claims a new report from the Telecommunications Industry Association (TIA-Arlington, VA). While some analysts claim the advent of DWDM has created a fiber glut, TIA asserts that fiber sales will continue to soar.
Incumbent local-exchange carriers (ILECs) generated a good portion of the growth in fiber-optic deployments in 2000, driven by the increased use of Internet protocol (IP) applications, the expansion of integrated IP networks, and increased competition from competitive local-exchange carriers (CLECs). The ILEC market grew 97.7% in 2000 and is expected to grow 29.6% this year.
Deployment of fiber by CLECs increased 23.2% in 2000 and is projected to grow another 28.2% this year. While CLECs represent a relatively small segment of the market, they are expected to see the fastest growth over the 2000 to 2004 period.
According to the report, fiber deployment among CLECs will experience a 17.1% compound annual growth rate over the forecast period, compared to 13.2% for interexchange carriers and 12.5% for ILECs.
The report, "2001 Multimedia Telecommunications Market Review and Forecast," includes both an historical and forecasted segment-by-segment statistical breakdown of the communications industry. It also examines application/product migration from the enterprise to network services; data for spending on professional services in international markets; distribution of call-center spending by application; the market outlook for unified messaging; and more. For more information, call 703-907-7714 or visit TIA online at www.tiaonline.org.
NY Times Article:
June 18, 2001
Once-Bright Future of Optical Fiber Dims
By SIMON ROMERO
nytimes.com |
