Optical Trends to Watch in 2009

WDM continues to overtake sonet/sdh

WDM will continue to overtake SONET/SDH in optical spending this year. WDM has grown from 42% of optical spending in 3Q07, to 49% in 3Q08, and should cross the 50% mark when full year 2008 results are in.

Early market Adoption starts for wdm-pon

WDM-PON today takes two forms: FTTH (fiber to the home) and FTTB (fiber to the building).

Of course, most of the large buildings are fiber fed, but a myriad of medium and small buildings can use WDM-PON, which uses a single long fiber, with passive splitters to connect a wavelength to each of 16-32 endpoints. We expect to see growing deployments of both types throughout 2009.

2009: Breakout year for 40G?

2009 will not be a breakout year for 40G. Small deployments will be made to be sure, yet the focus will be investigation and preparedness testing. Nortel has announced 41 customers for its 40G equipment, but this economic climate does not provide the setting of a breakout year for 40G or any new technology. And with 10G prices continuing to fall, providers see more economic sense in multiple 10G deployments.

Conclusions

The primary concern for 2009 is the effect of the downturn on telecommunications in general and the optical segment in particular. In November, we predicted a very slow increase of carrier spending on optical network hardware in 2009, and we will revisit those forecasts shortly, as 4Q results and 2009 capex guidelines are being announced at this writing. In any case, we expect WDM spending to continue increasing as compared to SONET/SDH. Telecom M&A will be on hold in 2009; on the other hand, we’ll still see progress in aggregation of optical equipment manufacturers. Several technologies will continue to emerge or progress, including WDM-PON, yet it will not be a breakout year for 40G.

Michael Howard co-founded market research firm Infonetics Research (www.infonetics.com) in 1990, and today is recognized worldwide as one of the industry’s leading experts in emerging markets, service provider trends, and user buying patterns. He developed the industry’s first carrier Ethernet switch forecast per Metro Ethernet Forum specs, was the first to track packet optical transport system equipment, and was the first to forecast the decline of SONET/SDH against the rise of WDM optical equipment – one measure of the move toward packet transport networks. Michael leverages 40 years of communications industry and market research experience to author numerous works year-round, including regular Optical and Carrier Routing, Switching, and Ethernet client columns, and 7 quarterly, biannual, and annual market share and forecast reports.