While at Supercomm, I discovered a great source for fiber optics information:
light-wave.com
One article that caught my eye looks at the undersea market:
Market Watch, May 1999
Report analyzes worldwide submarine fiber-optic systems
Pioneer Consulting, a Cambridge, MA-based analysis and consultant firm, uses a three-pronged bandwidth demand analysis to forecast submarine cable deployment throughout the world in its new 1999 Worldwide Submarine Systems Report.
Last November, Pioneer reported on the transatlantic submarine cable market, projecting substantial growth for the next five years. In fact, it was determined that the cumulative investment in fiber-optic transoceanic systems between North America and Europe would be more than $4 billion by the end of 1998, representing a compound annual growth rate of 20% from 1992. It was projected that investment in transatlantic systems, including wavelength-division multiplexing (WDM) upgrades, will be $694 million in 1999 and $1.5 billion in 2000.
Meanwhile, on the transpacific side, Pioneer stated opportunities for system developers were at an all-time high in a December issue of The Pioneer Report on International Telecom Networks. The report said the demand for transpacific capacity, fueled by Internet and data growth, is increasing at rates exceeding 100% per year.
Existing transpacific cables are unable to meet demand, even with WDM upgrades, driving new construction of undersea systems. Investment in new systems for 1999 and 2000 are expected to be almost as much as the total investment in transpacific systems over the last 10 years combined. For the next two years, investment in new transpacific cables will be $2.2 billion each year, for a total new investment of $4.4 billion.
In the latest report, Pioneer provides information and projections for all submarine systems, both planned and existing, as well as snapshots of each regional market. Business cases on major systems, including Global Crossing and Project oxygen, are also presented.
Other highlights include: Pioneer's international demand model to calculate demand generated by Internet, corporate data, and voice traffic; factors that are driving demand, including an analysis of new terrestrial fiber-optic networks and the creation of new customer groups like Internet service providers, competitive local-exchange carriers (CLECs), and data CLECs; market analysis of price and revenue and whether major systems are satisfying supply and demand; pros and cons of different financing structures, such as consortium, sponsored, and independent; competition from satellite technology; and advancements in the construction, maintenance, and repair of undersea fiber-optic cables.
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Light-wave also publishes a supplement called "Fiber Exchange," in hard-copy only.
This month's editorial is entitled, "Undersea but not Undervalued."
The battle between Global Crossing and Project Oxygen, which provides the subject for this month's cover story, is merely one of the most visible aspects of a worldwide phenomenon: the exponential growth of the undersea fiber-optic network market.
Market research shows that the quest to provide undersea bandwidth won't slow soon. For example, a new report from Pioneer Consulting reveals that the price tag for submarine fiber-optic networks entering service worldwide in 1999 will total $6.9 billion. This represents a record amount -- a record that will be broken next year, when Pioneer expects the money spent on the undersea links entering service in 2000 to hit $8.3 billion. While spending in 2001 is predicted to fall to $2.8 billion --- a total considered healthy before the recent feeding frenzy --- Pioneer sees carriers sending $5 billion in each of the following two years to the ocean floor. Overall, the market for undersea networks in the six years between 1999 and 2004 will be $31.8 billion, a whopping 169% increase over the previous six-year period. Not surprisingly, most of the action will occur across the Atlantic and the Pacific, with the latter predicted to prove slightly more popular.
The $64,000 question, of course, is whether anyone will get rich off of these networks besides Tyco, Alcatal, KDD, and the hardware manufacturers that will supply these network installers with equipment to fill their orders. As with fiber network build outs everywhere, the bet is that bandwidth demand will continue to follow those hockey stick curves that are now almost mandatory accessories to any presentation on the telecommunications marketplace. However, Pioneer predicts that spending on undersea systems in 2004 will level off again to $3.4 billion --- hardly a trickle, but still significantly less than the spikes expected this year and next. Is this a sign that capacity once again will begin to catch up with demand early in the next century --- and that undersea bandwidth won't be quite as much a seller's market as it is today?
As one analyst says in our cover story, bandwidth demand tends to rise on a smooth curve, while capacity tends to rise concurrently with demand, then plateau as new systems come online and capacity becomes more plentiful. It appears the key to maintaining a steady profit for undersea bandwidth is to look beyond the hockey sticks and examine whether the race for undersea terabit networks will create a capacity plateau in the next decade that even the Internet can't scale.
Certainly the current rate of demand growth makes it easy to dismiss the idea of caution. The optical networking gold rush presently appears to have enough room for any prospector who can gather the wherewithal to plant his stake in the ground --- or the ocean. But there's one thing that these optical 49ers should keep in mind: While every gold rush has made someone rich, each bonanza eventually came to an end. Let's hope that the next century doesn't find a host of carriers kneeling at the water's edge with nothing in their prospecting pans but brine.
Stephen Hardy
Editor in Chief and Associate publisher
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