Global optical networking market set for solid growth

Source: Ovum

The global optical networking market will grow at a year-over-year rate of 5 percent through 2019. So claims market research firm, Ovum, in its optical networking forecast for 2013 to 2019. North America will lead the market growth, with data centre deployments and demand for 100 Gigabit being the main drivers.

The building of data centres drives demand for optical interconnect. "It [data centre operators] is almost a new category of buyer," says Ian Redpath, principal analyst, network infrastructure at Ovum. The segment is growing faster than telco spending on fixed and mobile networks.

"This whole phenomenon of the large data centre operators is more pronounced in North America, and we think that will continue throughout the forecast period," says Redpath.

Demand for 100 Gigabit is coming from several segments: large incumbent operators, cable operators and internet content service providers. "All these entities are buying a technology [100 Gig] that is prime time," says Redpath.

Asia Pacific will be the region with the second largest growth for the forecast period, at 4.4 percent compound annual growth rate (CAGR).

The deployment of optical equipment in China and Japan was down in 2013: China dipped 6 percent while Japan was down a huge 23 percent compared to 2012 market demand.

The underlying trend in China is one of growth, with the optical market valued at US $3 billion. "They just had to have a pause," says Redpath, who points out that the Chinese market has tripled in a relatively short period. "They are now retooling for the next big thing: LTE; it it just a matter of time," he says. The deployment of 100 Gig, by the large three domestic operators, may start by the year end or spill into 2015.

Optics is the foundation of an industry that is growing

Japan's sharp decline in 2013 follows massive growth in 2012, the result of replacing networks lost following the 2011 earthquake and tsunami. "That was a one-time bump followed by a one-time reset, with the market now back to normal," says Redpath.     

Meanwhile, the EMEA optical networking market will growth at 4.1 percent. "This is a pretty modest growth rate, with more upside coming in the latter period," says Redpath. "The operators have been neglecting their core for so long, they are going to have to come back and reinvest."

Ovum says the weakness of the European market will run its course during the forecast period and expects Europe's northern countries - the UK and Germany - to lead the recovery, followed by the likes of Spain, Italy and Greece.

The market research firm singles out the UK market as being particularly dynamic, and an economy that will lead Europe out of recession. "It is probably closer to the North America market than any other country in terms of competitors and non-carrier spending," says Redpath. "The UK is also one of the leading data centre markets in the world."

Ovum remains upbeat about the long-term prospects of the global optical networking market. "Optics is the foundation of an industry that is growing," says Redpath.

He also points to recent developments in the net neutrality debate, and cites how over-the-top TV and film player, Netflix, has signed agreements with telecom and cable operators. "If over-the-top players realise that they can't keep free-riding on these networks, and to get performance they give a little money to the telcos, then that is a good thing for the ultimate food chain," says Redpath.        

Further reading:

Global market soft in 1Q14; North America bucks trend, click here