Optical Communications Industry Supply Chain Depends on Infrastructure Investments; Investors Wary

Aug. 2, 2011 - PRLog -- Global Information Inc. presents a new market research report, “The State of the Optical Communications Industry: On a Path to Sustainable Profitability” by LightCounting. (For more information: http://www.giiresearch.com/report/lc205313-state-optical-communications-industry-on-path.html)

Nearly a decade later, reverberations from the 1999-2000 dot-com bubble continue to impact the global communication industry’s wireless segment. The optical communications market is volatile as company stock valuations remain vulnerable to the slightest fluctuations in quarterly earnings. Investors are wary of committing to this market despite strong recoveries in demand for communications components and equipment leading to improved valuations between late 2010 and early 2011.

“Profitability across the whole supply chain of the communications industry improved substantially,” reports LightCounting. However, the majority of service providers are struggling to maximize their revenues while making the necessary upgrades to their networking infrastructure to keep up with the rapidly growing Internet traffic. Insufficient investments in infrastructure will without a doubt create inadequate network capacity, which will negatively affect the supply chain as a whole including both end users and providers.

The steep installation cost of Fiber-To-The-x (FTTx) broadband networks is only one of the problems underlying the infrastructure issue. According to LightCounting, “analysis of the global market for optical components in 2001-2011 suggests that upgrades to network bandwidth lagged behind growth in Internet traffic for most of the decade.” The excess capacity created during the bubble years was sufficient to avoid substantial investments in infrastructures for several years, but this excess is now completely used or no longer applicable to modern day traffic patterns.

LightCounting’s new report outlines the major technological transitions impacting the evolution of optical communication networks and the global communication industry. This includes cloud computing, over-the-top (OTT) services, super datacenters and flat networking architecture. The report also examines the dynamics of the optical component and module industry in several market segments including Ethernet, Fibre Channel, WDM, FTTx, and SONET/SDH.

Key Company Findings:
•   AT&T and Verizon both report continued growth in broadband customers, including FiOS and U-verse TV subscribers
•   Netflix accounts for 30% of peak downstream traffic in North America. Netflix has a service contract with Layer 3 Communications that is merging with Global Crossing.
•   Wireless networking equipment leader, Ericsson reported solid performance in Q2 2011 and is on track for 20% growth in revenues for 2011.
•   Huawei, dominant provider of optical networking gear, anticipates 10% growth in revenues for 2011.
•   Tellabs saw significant decline in business during early 2011, while Alcatel-Lucent reported modest single digit increase in sales of both wireless and optical networking equipment in Q2 2011 versus the same quarter in the previous year.
For more information, please visit: http://www.giiresearch.com/report/lc205313-state-optical-... or e-mail Press@gii.co.jp

About Global Information, Inc. (GII):
Global Information Inc. has been in the business of distributing technical and market research for more than 25 years.  Expanded from its original headquarters in Japan, GII now has offices in Korea, Taiwan, Singapore, Europe and the United States.

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