Growing at the speed of light, No end in sight for fiber optic cable demand

A significant portion of Lucent Technologies' $350 million in new contracts with AT&T Submarine Systems Inc. is indicative of a trend that's expected to continue for at least the next five years: rising demand for fiber optic cable.

The folks at Lucent thought the issue important enough to host a teleconference last week for analysts and media-no news, just facts and figures.

"We've had so many questions recently about the global shortage of fiber," said Bob Mohalley, vice president for Lucent's fiber and copper business who conducted the teleconference. "Lucent is putting a lot of money into new production.

Lucent isn't the only player boosting production to address the fiber shortage. All the major players are doing so, said Jerry Garrett, marketing and strategic planning director for Alcatel Telecommunications Cable, Clairmont, N.C.

"We're still seeing the effects of some shortages in the marketplace," Garrett said.

The shortages were the result of a sudden, unexpected leap in demand. Several factors, especially telecom reform and global competition, contributed to the surge, he said.

But now that fiber and cable producers are boosting production, is there the threat of a flooded marketplace? Not likely, the vendors said.

Lucent projects that the demand for fiber will increase at a 20% cumulative annual growth rate over the next five years. "And that assumes no major new uses for fiber," Mohalley said. Furthermore, when cable systems convert to high-definition TV, they will have to replace their copper with fiber. "And that's just a relatively small application," he said.

As for how the playing field will shape up as the market grows, Mohalley predicted that the field will shrink a bit, as vendors able to offer better quality and prices squeeze out some smaller players. He doesn't see opportunity for new entrants, other than by acquisition, but he said players could gain market share.

The company to watch is Pirelli Cable because it has grabbed a large piece of the market without significant manufacturing capability, according to Mohalley. If Pirelli increases its own production, it would take business away from vendors that it currently buys from and increase its market share.