A career in technology market analysis
John Lively reflects on a 30-year career.
It was a typical workday in 1989, sitting through a meeting announcing the restructuring of Corning’s planar coupler business.
The speaker’s final words were, “Lively, you’ll be doing forecasting.” It changed my life and set my career path for the next 30-plus years.
No one grows up with a desire to be a market analyst. Indeed, I didn’t ask for the job. What made it possible was an IBM PC and LOTUS 1-2-3 in my marine biology lab in the early 1980s (a story for another time).
After a stop at MIT for an MBA, this led to a job in Corning’s fledgling PC support team in 1985. Then it was Corning’s optical fibre business cost-modelling fibre-to-the-home networks on a PC, working with Bellcore and General Instrument engineers. From there, it was to forecast market demand for planar couplers in the FTTH market.
In the following decade, I had various market forecasting roles within Corning’s optical fibre and photonics businesses.
Each time I tried to put forecasting behind me by taking a marketing or product management job, management said they needed me to return to forecasting due to some crisis or another (thank you, Bernie Ebbers).
In 1999, I had an epiphany. If Corning thinks I’m better at forecasting than anything else, perhaps I should become a professional forecaster in a company whose product is forecasts.
Just then, through fate or coincidence, I received a call from fellow MIT alum Dana Cooperson who said her firm, RHK, was desperate for people and did I know anyone who might be interested?
For the uninitiated, that’s code for ‘would you be interested in joining us?’.
I joined just in time to enjoy the remaining months of the boom, followed by a bust in 2001. But all the while learning to be a market analyst in a new context. While at Corning, I had been both a producer and procurer of market research. At RHK, I was strictly a producer.
More importantly, there was a direct link between my words and spreadsheets and money coming in. It was exhilarating.
Working remotely
Thanks to the newly deployed cable modem/ HFC technology that I had been cost-modelling a decade earlier, I was working from home.
I have worked from home ever since, and I can say that remote working does work well for some people and jobs.
Some lessons I’ve learned include:
- Working from home works best if the entire firm, not just a few people, are doing it.
- Home working doesn’t mean you can’t travel, pandemics notwithstanding.
- Home workers need to have clear deliverables that they can be judged against. Give them responsibility for something tangible, with an unambiguous deadline.
- Requiring time-tracking sheets or online monitoring of home workers is insulting and demotivating.
- Companies must support home workers by investing in quality internet services and conferencing software/ equipment on both sides of the link
Required skills
By joining RHK, I had moved from a Fortune 500 company to one of 100 employees. Over the next two decades, I would move between large and small companies. I prefer small companies because it’s clear who contributes to their success and who doesn’t. Poor performers have nowhere to hide in a company of six people.
After more than 30 years in the market research arena, I have views on the role of a market analyst and the talents necessary to be a good one.
The goal of market analysis is to find information, analyse it, draw conclusions, then package and communicate it.
Doing market research is like assembling a jigsaw puzzle, from which several pieces are missing. Or, like a chef who must create a healthy, enjoyable meal from an assortment of good and bad raw ingredients.
A technology market analyst should be intellectually curious, have a solid background in sciences and technology, and have broad industry knowledge, i.e., understand the jargon, the tech, and the companies.
The analyst also needs to write concisely and quickly, is fluent in Excel, PowerPoint, and Word, is a great communicator and is approachable, likeable, and outgoing.
Of course, finding all the requisite skills in one person is rare, and larger companies commonly divide duties into specialities like data collection, analysis, and communication.
In small companies, this may not be overt but happens to a degree just the same.
Most importantly, a market analyst must be comfortable with uncertainty.
One never has all the pieces, and you must be OK filling in missing data points via extrapolation, intuition, historical parallels, or other means. And be comfortable admitting your mistakes and adjusting your findings when new data surfaces.
I believe this is why those with a scientific background are better suited to market research than engineers. Scientists are taught scepticism and revision as a way of life, while engineers seek the certainty of the ‘right’ answer.
Periods of note
Throughout my career, I’ve lived through interesting times.
Starting in 1985, it was the introduction of the first PCs into Corning and establishing their first email system, electronic newsletter, word processing, and expert-learning systems.
Then, in the mid-1990s working in the early days of amplified DWDM systems and when the EDFA business doubled its output yearly.
Then came the Internet bubble and optical industry boom/bust of 1999-2001, when dozens of companies were founded by a couple of PhDs with a PowerPoint presentation. At one point in 2000, my optical components practice at RHK had over 100 subscribing companies.
It was weird living through an episode that we knew would someday be written about, like the Dutch tulip mania of 1634.
More recently, and I believe, with a more positive outcome, it is/ has been fascinating to watch companies like Alphabet, Amazon, and Meta utilise a globally connected internet to become the first truly global communications, media, and retail companies.
Moreover, these companies transcend national, cultural, and language boundaries, connecting a billion or more users. And in the process, inventing hyperscale data centres, which in turn allow hundreds and thousands of other companies to ‘cloudify’ as well, extending their global reach.
Of all the innovations and changes taking place today, this is one I will continue to follow with wonder and amazement.
The promise of these companies is so great that I’m hopeful they will become beacons of positive change around the world in the 21st century.
Innovation has been breathtaking in optics. For example, coherent transport, the far-out science stuff of technical talks at my first OFC in 1988, is in commercial use.
We blithely speak of optical transceivers capable of Terabit-per-second speeds without stopping to think how amazing it is that anything, anywhere, could be made to turn off and on again, one TRILLION times a second!
It simply defies human understanding, and yet we make it easy.
A view of now
Today, it’s easy to be convinced that things are falling apart, between Russia’s war against Ukraine, COVID, economic turmoil, screwed-up supply chains, and populist politicians.
But I take solace that I’ve seen things like this before and lived through them. As a child, scenes of the Vietnam war were on the news every evening. But finally, there was peace in Vietnam.
In the 1970s, we had an oil embargo and sky-high gas prices. It also ended.
In the 1980s, inflation ran hot, pushing my student loan interest rate to 13%. But I paid it off, and rates came down.
AIDS struck fear and stoked prejudice for years, claiming my aunt and uncle before scientists uncovered its secrets and developed effective treatments.
So it will be with COVID. History shows that humans tire of strife and disease and will work to conquer our worst problems eventually.
Surprises
Two things come to mind regarding industry surprises over the last 30 years.
One is that optical technology keeps advancing. Despite how challenging each new generation seems, bit by bit and idea by idea, the industry collectively comes up with a solution, and the subsequent speed hike is commercialised.
Another is how people find ways to use it no matter how much bandwidth is created. RHK founder, John Ryan, was fond of telling us, “Bandwidth is like cupboard space; it’s never left empty for long.”
Another surprising thing is how long the interpersonal bonds formed at RHK have lasted.
Though it was just a flash in time, many of those who were there in 2000 remain connected as friends and colleagues more than 20 years later.
Several such alumni work at LightCounting now.
Climate Change
While doing all this, looking backwards and reflecting on change, I couldn’t help dwelling on another major problem we face today: climate change.
Forestalling climate change is the one thing I believe where humans are failing. But unfortunately, the causes are so rooted in our global socio-economic systems that citizens and governments are not capable of inflicting the necessary sacrifices on themselves.
I fear the worst-case scenarios are coming soon, with shifting temperature zones and rising seas. In response, many people, plants, and animals will migrate, following favourable conditions north or south or inland as the case may be, significantly increasing competition for resources of all kinds.
I also fear authoritarian governments may prove more effective at providing protection for some, and avoiding utter chaos, than our precious but fragile democracies.
A role for tech giants
I think the internet and companies with global reach can play a role in combatting the worst impacts of climate change.
Some of the hyperscalers, telecom operators, and equipment companies have been leaders in reducing carbon emissions.
I hope the interconnectedness and massive computing power of companies like Meta and Alphabet can be used to solve these large-scale problems.
My last thought is the realisation that when I eventually ease into retirement and cut back on travel, I may never get a chance to personally thank all the friends and colleagues I have made along the way.
People who have assisted my career, believed in me, educated me, and made me think differently, smile, and laugh.
So, just in case, I’ll say it here – thank you one and all – you made a difference to me.
It’s also been fun.
ADTRAN-ADVA's metro-access play
ADTRAN and ADVA have agreed to merge after a long courtship.
The two CEOs have spoken regularly over the years but several developments spurred them to act.
The merger combines ADTRAN’s expertise in access technologies with ADVA’s metro wavelength-division multiplexing (WDM) know-how to create a ‘metro-core-to-door’ company with revenues of $1.2 billion.
ADTRAN and ADVA a better path forward together than separately
As such, the merger promises to double their size and networking skills. Yet the stock market appeared underwhelmed by the announcement, with ADTRAN’s shares down 16% for the rest of the week after the deal was announced.
Market research analysts, however, are more upbeat.
“ADTRAN and ADVA have a better path forward together than separately,” said John Lively, principal analyst at LightCounting Market Research, in a research note.
The deal is expected to close in the second or third quarter of 2022 but only after several hurdles are overcome in what is described as a complex deal.
Motivation
The two companies describe the merger as a logical outcome given recent developments in the marketplace.
“Our combination will make us one of the largest Western suppliers for the markets we serve,” said Tom Stanton, CEO and chairman of ADTRAN, on the call announcing the deal. The word “Western” is noteworthy, reflecting how geopolitics is one catalyst motivating the merger.
The deal will also reposition the two companies with their rivals. ADTRAN will distance itself from broadband competitors such as Calix while ADVA will diversify its business from its current larger competitors, Ciena and Infinera. The new company’s revenues will also approach those of the two players.
The product portfolios of ADTRAN and ADVA have almost no overlap. ADTRAN offers fibre access and connectivity solutions while ADVA addresses metro WDM, data centre interconnect, business Ethernet, network synchronisation and network functions virtualisation (NFV) expertise.
Once combined, each company will seek to expand its sales in the other’s main market.
The US accounts for 74 per cent of ADTRAN’s revenues, while Europe accounts for 21 per cent. Meanwhile, Europe accounts for 62 per cent of ADVA’s business while the US is 29 per cent. The remaining revenues come from the Asia Pacific: ADTRAN, 5 per cent, and ADVA, 9 per cent.
Also cited as a factor is the wave of investment in fibre, not just by communications service providers (CSPs) and public utilities but also government-backed stimulus plans in the US and Europe.
In the US, $66 billion in investment was mentioned spread across programmes such as the infrastructure bill, the second phase of the Rural Digital Opportunity Fund (RDOF), and state-level funding for high-speed broadband.
In Europe, the sum is similar: $35 billion in government funding for high-speed broadband in the European Union, and $30 billion in public and private funding for fibre builds in the UK alone.
“There is an ongoing global fibre investment opportunity that we believe will create sustained momentum for years to come,” said Stanton.
Moreover, having access and second-mile technologies, the new company can better win business. “There is not a customer that we sell to today that, when they are upgrading their access infrastructure, is not also upgrading their middle-mile,” said Stanton.
Becoming a larger player will help, he said: “We see our customers making a significant capital investment to transition their supply chain to trusted vendors.”
Another merger catalyst is the opportunity created by US and European service providers that no longer use Chinese vendors and in some cases are replacing equipment already deployed.
In the US, this is less of an issue due to the fewer deployments while in Europe the process started 18 months ago. Stanton expects Latin America to follow.
“The market opportunity is not just created by all the stimulus but it is also because of the displacement of Eastern vendors,” said Stanton.
There is a land grab going on, he says, and the company that gets there first wins.
“Once you get entrenched in a carrier, regardless of size – the larger ones tend to have two [vendors] and the smaller ones, one – once you are entrenched, it is very difficult to get pulled out,” said Stanton.
Analysis
LightCounting’s view of the merger is positive.
Lively says the merger will not reshape the optical networking industry but it will be attractive to Tier 2 and Tier 3 CSPs that want to buy access and aggregation equipment from a single supplier.
LightCounting notes that the deal values ADVA at $931 million, 1.3x its most recent four quarters of sales.
This is a relatively low valuation: the 2015 Infinera-Transmode merger was 2.6x while the Cisco-Acacia Communications deal, which closed earlier this year, was 7.7x. Of recent deals, only the 2020 Ribbon-ECI Telecom deal was lower, at 1.2x.
LightCounting says one reason for the lower valuation could be ADVA’s port shipments; the vendor is one of the smallest dense WDM suppliers.
The merger’s impact will mostly be felt by the competitors of the existing two companies, says Lively. The new ADTRAN’s sales will be 20 per cent greater than Infinera but still a third of the size of Fiberhome and Ciena.
The importance of size is something both companies stress.
“Our industry has been consolidating and there is an underlying notion that scale matters,” says Stephan Rettenberger, senior vice president, marketing and investor relations at ADVA.
Doubling in size, the new company will be in the same bracket as Infinera while Ciena will be about 3x its size, notes Rettenberger: “The companies that we used to worry about the most are not as distant as before.”
At first glance, the merger between a US and an European company raises questions about the integration challenge. But both firms have American CEOs and both have operations in the US and Germany.
ADTRAN acquired Nokia Siemens Networks’ fixed-line broadband access unit in 2011 while ADVA more recently acquired US firms, MRV Communications and Overture.
Brian Protiva, CEO of ADVA and a co-founder of the company in 1994, is the longest-serving CEO in the optical industry. As such he will have thought long and hard about the deal.
“This business combination is not only about growing the business,” says Protiva. “These two businesses fit perfectly together to address existing market and technology requirements, and we are well-positioned to lead the transition to access and edge convergence.”
Service providers do not need separate infrastructure for business services, residential broadband, and/ or 5G xHauling, he says.
Mechanics
The proposed deal is an all-stock one with ADTRAN and ADVA combining to form ADTRAN Holdings.
Each ADVA share will be swapped for 0.8244 shares of the new company while ADTRAN shares will be exchanged on a one-for-one basis. ADTRAN shareholders will own 54 per cent of the combined company while ADVA shareholders will own 46 per cent, assuming all of the ADVA shares are swapped.
But the new holding company must first be approved by German regulators, expected to occur by November. A three-month offer period then starts during which a minimum of 70 per cent of ADVA shares must be surrendered.
Stanton will continue as CEO and chairman at the new company while ADVA’s Protiva will join as executive vice chairman.
“I’m convinced that Tom is the right person to run the combined company,” says Protiva. “He executes to plan, is well-liked by customers, and thinks very similarly to our ADVA leadership around people first and the customer experience.” Stanton is also a long-serving CEO, heading ADTRAN since 2005.
Protiva will support Stanton during the integration period and then be involved in the corporate strategic direction of ADTRAN, as a board member, using his many long-term relationships in the combined markets.
After that, Protiva says he may return to Egora, a holding company out of which ADVA was born.
ADVA’s CTO, Christoph Glingener, will retain his role with the new company. ADTRAN and ADVA will have a combined annual R&D budget of $250 million.
”The stock exchange offer needs to pass all types of regulatory groups and needs to be accepted by the ADTRAN and ADVA shareholders,” stresses Rettenberger. “There is still a long path to closing.”
Optical supply chain set to withstand the COVID-19 crisis
The optical supply chain will not experience any lasting damage as a result of the COVID-19 pandemic. So argues LightCounting in a research note.
The market research company notes how the experience of the Coronavirus pandemic has highlighted the many benefits of the digital economy.
And the jolt the world is experiencing will if anything, strengthen it.
“All kind of things are happening as a result of the pandemic,” says John Lively, principal analyst at LightCounting and author of the research note. “Telecommuting, telelearning and telemedicine have all been used before, but never on a scale like this.”
Pandemic toll
Given how governments have shut down activities to contain the spread of the virus, it comes as no surprise the severity with which the world’s economy has been hit during the first quarter of 2020.
LightCounting cites startling figures concerning the world’s two largest economies.
Some 6.6 million Americans filed unemployment claims in the week ending April 1st, double the previous record that was set just a week earlier. And up to 47 million jobs could be lost, a third of the total US workforce, according to the US Federal Reserve Bank.
Meanwhile, in China, the gross domestic product (GDP) in the first quarter is expected to plummet 9 per cent, the first decline in three decades.
Looking more closely at the telecom and datacom industries, LightCounting highlights four developments that overall give cause for optimism.
Returning to work
First, China is returning to work. LightCounting cites figures from China that claim that factories are now staffed at 80-90 per cent of their full production levels. However, figures published by the American Chamber of Commerce in China are less rosy. Of the 120 member companies it surveyed, a quarter said all their staff continued to work from home (as of March 13th).
Talking to Chinese optical component companies, LightCounting says each firm has gone through a process with their local governments to reopen such as meeting the various hygiene protocols and ensuring a suitable distance between staff.
The second development is notable growth in network traffic as a result of people working from home and families being in lockdown.
The growth in the use of the videoconferencing tool, Zoom, is well documented, but strong growth has been witnessed elsewhere. Microsoft’s Teams collaboration application reached 44 million daily users, up 12 million in a week, while the use of its Windows Virtual Desktop has tripled.
In turn, AT&T and Verizon have reported double-digit growth in viewers of their TV and streaming demand content, while Netflix, YouTube and Disney have cut by a quarter their streaming video quality in Europe to lessen the network burden.
Spending on infrastructure by the operators, the third pointer highlighted by LightCounting, promises encouraging growth. The main three Chinese operators plan to increase their 5G spending in 2020. China Mobile, for example, is spending 100 billion yuan on 5G infrastructure, 4x what it spent on 5G in 2019.
Lastly, telecom equipment and component sales are expected to be down in the first quarter, with five companies – Ciena, Infinera, Lumentum, II-VI and NeoPhotonics – issuing guidance warnings.
These range from Ciena which lowered its previous guidance by 3 per cent to NeoPhotonics which expects a 10 per cent drop in the first quarter.
The responses of Chinese optical component players range from not expecting sales to be hit at all to a 15 per cent decline in 2020. LightCounting also noted that companies with sales predominantly outside China were more worried about demand in the coming two quarters.
Punctuated Equilibrium
LightCounting cites a concept coined by Stephen J. Gould, the late evolutionary biologist, of punctuated equilibrium which argues that species do not evolve at a constant rate. Rather, they experience long periods of stability followed by rapid bursts of change due to significant disturbances in their environment.
“The same applies to societies and economies,” says Lively.
This explains why LightCounting believes the coronavirus of 2020-21 will accelerate trends that promote the digital economy.
Lively cites the tens of millions of US students and adult workers now operating from home. “Once the genie is out of the bottle it may prove difficult to put back,” says Lively who, as an analyst, has worked from home for over two decades.
In turn, the need for social hygiene and new habits such as touch-free shopping will boost adoption of digital wallet technology.
Current events also highlight the importance of broadband and the disparity in the quality of service being delivered, especially in rural areas. This too will cause change.
The hyperscalers – Alphabet (Google), Amazon, Apple, Facebook and Microsoft – are well-positioned to weather the storm, being providers of the hubs of the digital economy and having deep pockets. Malls and other brick-and-mortar retailers, in contrast, will suffer greatly.
Lively stresses that it is early days and that the analysis is speculative. It also assumes that massive damage won’t be done to huge swathes of the global economy.
But he is confident that the optical industry will not be badly damaged, and nowhere near the scale of the bursting of the dotcom bubble in 2000 that then crashed the optical industry.
“The oversupply of bandwidth [which developed during the dotcom boom] resulted in a drastic cutback in demand, and that hit our industry directly,” he says. Revenues shrank 30 per cent in 2001 and 30 per cent again in 2002.
“It took years to recover and many companies went out of business including hundreds of start-ups,” says Lively. “But the big players remain, even if some have changed their names.”
Current events will not be as severe as two decades ago since the epic oversupply of bandwidth directly impacted the optical industry, says Lively.
He also ends on a positive note: “It is difficult to think of another industry we would rather be in as we ride this storm.”
Mobile fronthaul: A Q&A with LightCounting's John Lively
LightCounting Market Research' s report finds that mobile fronthaul networks will use over 14 million optical transceivers in 2014, resulting in a market valued at US $530 million. This is roughly the size to the FTTX market. However, unlike FTTX, sales of fronthaul transceivers will nearly double in the next five years, to exceed $900 million. A Q&A with LightCounting's principal analyst, John Lively.
Q. What is mobile fronthaul?
There is a simple explanation for mobile front-haul but that belies how complicated it is.
The equipment manufacturers got together about 10 years ago and came up with the idea to separate the functionality within a base station. The idea is that if you separate the functionality into two parts, you can move some of it to the tower and thereby reduce the equipment, power and space needed in the hut below. That is the distributed base station.
So instead of a large chassis base station, the current equipment is in two: a baseband unit or BBU which is a smaller rack-mounted unit, and the remote radio unit (RRU) or sometimes the remote radio head, mounted at the top of the tower, next to the antennas. The link between the two units is defined as fronthaul.
Q. What role does optics have in mobile fronthaul?
In the old monolithic base station, the connection between the two parts was an inch or two of copper. Once you have half the equipment up on the tower, obviously a few inches of copper is not going to suffice.
They found that copper is a poor choice even if the BBU is at the bottom of the tower. Because the signal between the two is a radio frequency analogue one, the signal is not compressed and so has a fairly high bandwidth.
One statistic I saw is that if you use copper cable instead of fibre, the difference between the two just in terms of weight is 13x. And there are things to consider like the wind load and ice load on these towers. So you want small diameter, lightweight cables. So even if there were no considerations of distance, there are basic physical factors that favour fibre for this link. That is the genesis of fronthaul.
But then people realised: We have a fibre connection, we can move the BBU; now we can go tens of kilometers if we want to. Operators can then consider aggregating BBUs in central locations that serve multiple radio macrocells. This is called centralised RAN.
Centralised RAN reduces cost simply by saving real-estate, space and power. With the right equipment, you can also allocate processing capacity dynamically among multiple cells and realise greater efficiencies.
So there are layers of benefits to fronthaul. It starts with simple things like weight and the inability to shed ice, getting down to annual operating costs and the investment needed in future wireless capacity. Fronthaul is a concept with much to offer.
Q. What is driving mobile fronthaul adoption?
What has brought fronthaul to the fore has been the global deployment of LTE. Fronthaul is not LTE-specific; distributed base station equipment has been available for HSPA and other 3G equipment. But in the last 3-4 years, we have had a massive upgrade in global infrastructure with many operators installing LTE. It is that that has driven the growth in fronthaul, taking it from a niche to become a mainstream part of the network.
Q. What are the approaches for mobile fronthaul?
The fronthaul that we have heard about from component vendors is simple point-to-point grey optics links. But let me start by defining CPRI. As part of the development of distributed base stations, a bunch of equipment vendors defined a way the signals would be transmitted between the BBU and the RRU, and it is called the Common Public Radio Interface or CPRI. As part of the specification, they define minimum requirements from the optical links, and they go so far as to say that these can be met with existing optics including several Fibre Channel devices.
As part of LightCounting's vendor surveys, we know that the predominant mode of implementation of fronthaul today is grey optics. That paints one picture: fronthaul is simple point-to-point grey optics. Some of the largest deployments recently have been of that mode, with China Mobile being the flagship example.
However, grey optics is not the only scheme, and some mobile operators have opted to do it differently.
A competing scheme is simple wavelength-division multiplexing (WDM) - a coarse WDM multi-channel coloured optical system. It is obviously simpler than long-haul: not 80 channels of closely spaced lambdas but systems more like first-generation WDM long-haul of 10 or 15 years ago, using 16 channels.
At first glance, it appears that the WDM approach is a next-generation scheme. But that is not the case; it has been deployed. South Korea's SK Telecom has used a WDM fronthaul solution when building their LTE network.
Q. Is it clear what operators prefer?
Both schemes have pros and cons. If there is a scarcity of fibre, you are leasing fibre from a third party for example, every additional fibre you use costs money. Or you have to deploy new fibre which is super expensive. Then a WDM solution looks attractive.
Another benefit, which is interesting, is that if you are a third-party provider of fronthaul, such as a tower company or a cable operator that wants to provide fronthaul just as it provides mobile backhaul, you need a demarcation point so that when there is a problem, you can say where your responsibility begins and ends.
There is no demarcation point with point-to-point links, it is just fibre running directly from operator equipment from Point A to Point B. With WDM systems, you have a natural demarcation point: the add/ drop nodes where the signals get onto the WDM wavelengths.
For example, a tower may serve three operators. Each operator would then used short-reach grey optics from their RRU to connect to the add/ drop node that may be at the bottom or on the tower. Otherwise, when there is a fault, who is responsible? That is another advantage of the WDM scheme.
It is not unlike the situation with fibre-to-the-x: some places have fibre-to-the-home, some fibre-to-the-curb, some fibre-to-the basement. There are different scenarios having to do with density, operator environment or regulation that create different optimal solutions for each scenario. There is no one-size-fits-all.
Q. What optical modules are used for mobile fronthaul and how will this change over the next five years?
The RRHs typically require 3 or 6 Gigabit-per-second (Gbps). These are CPRI standard rates that are multiples of a basic base rate. In some cases when they are loaded up with multiple channels - daisy chaining the RRUs - you may require 10Gbps.
From our survey data, in 2013 the mix was 3 and 6Gbps devices primarily, and this year we saw a shift away from 3 and more towards 6 and 10 Gbps. We believe that was skewed to some degree by China Mobile, which in many areas is putting up high capacity LTE systems with multiple channels, unlike many other operators that are doing a LTE multi-phase deployment, lighting one channel to start with and adding capacity as needed.
There is also some demand for 12.5Gbps but nothing beyond that, and 12.5Gbps demand is rather small and unlikely to grow quickly. That is because the individual RRHs are not going up in capacity. Rather, the way that capacity keeps up with bandwidth is that the number of RRHs multiplies. The way fronthaul keeps up with bandwidth demand is mainly by the proliferation of links rather than increasing the speed of individual links.
Q. A market nearly doubling in five years, that is a healthy optical component segment?
The growth is good. But like everything in optical components, it is questionable whether vendors will find a way to make it profitable. The technology specifications are not particularly challenging, so you can expect competition to be pretty severe for this market.
We are already seeing several Chinese makers with low manufacturing costs establishing themselves among the top suppliers in this market.
Q. Besides market size, what were other findings of the report?
I do expect WDM systems to become more widespread over the next five years. It makes sense that not everyone will want to do the brute force method of a link for every RRU out there. This is probably the biggest area of uncertainty, too: to what extent will WDM catch up or displace first generation grey optics?
The other thing to think about is what happens next? LTE deployments are well underway, a bit more than half way done worldwide. And it will be at least 5 years before the next big cycle: people are only just starting to talk about 5G. What is fonthaul going to look like in a 5G system?
It is hard to answer that in any clarity because 5G systems are not yet defined. What I find fascinating is that they are talking about multi-service access networks instead of fixed and mobile broadband being separate.
With WDM-PON and other advanced access networks, there is a growing belief that fronthaul could be carried over existing networks rather than having purpose-built fronthaul and backhaul networks. Fronthaul may thus go away and just be a service that tags onto some other networking equipment in the 5-10 year timeframe.
Q. Did any of the findings surprise you?
One is the fact that WDM is being deployed today.
Another is the size of the market: the component revenues are as big as FTTx. If you think about it, it makes sense: they are both serving consumers and are similar types of applications in terms of what they are doing: one is fixed broadband and one is mobile broadband.
Q. What are the developments to watch in the next few years regarding mobile fronthaul?
The next five years, the key thing to watch is the adoption of WDM in lieu of point-to-point grey optics. Beyond that, for the next generation, what fronthaul will be needed in 5G networks?