Overview
The industry is rapidly moving from wireline based to wireless. However, wireline continues to provide the infrastructure for the entirety. Wireline revenue, which supports wireline investment, which is the infrastructure for wireless, is falling substantially. The new Advanced Architecture services (FiOS and Uverse) are great successes, in terms of total impact, but they are not enough to stop the erosion of wireline revenues. What’s more, it appears that these services are growing at a much slower rate, and in fact are in decline.
In the late 1990s and early 2000s telecoms all over the world were building network capacity to meet a traffic growth that didn’t materialize (at least not until a decade later.) Normally responsible executives were proclaiming that the network was growing at 400% a year (!) and capacity was being built to that projection. Nothing grows at 400% for long, and the network certainly didn’t.
The telecoms borrowed money to build for income that never came; they used fraudulent accounting schemes to hide the true costs of their mis-endeavors; equipment vendors loaned telecoms more than the value of their purchases in order to get business. These abuses led to many bankruptcies and great losses on the stock market. World-leading vendors and telecoms went down – either in bankruptcy or by being sold to other companies at pennies on the dollar. In addition, a large over-capacity position was created in the network market place. The telecom bust was said to be ten times more painful than the dot.com bust that occurred more for less simultaneously.
Perhaps George Gilder, the renowned futurist and technologist, was partially responsible for this Telecom Bust. He predicted in 2001 that there would be a trillion dollar telecom market. He was partially right, because there were extensive drivers of added traffic on the network. However, there was one problem, the telecoms couldn’t devise a way to charge for the traffic being generated on the network, and that same problem persists today.
Now, over a decade later, that excess capacity has been abandoned, obsoleted, or more than used up. Telecoms have long since begun building new capacity – much more cautiously this time, using new technology – DWDM and ROADMs largely. Traffic now is growing continuously (at 40%, not 400% a year) but capacity is growing much slower due to the caution from the bitter 2000 experience, and due to the worldwide recession. This combination could be leading to a reversal of the 2000 situation, but potentially just as dangerous – a new telecom BUST created by poor service on what are now very critical telecom links resulting from under capacity.
In this day of everything going wireless, it is important to separate access from network. Wireless is an access service, as is FiOS, Uverse, POTS, etc. They all use the wireline network to interconnect. Investment in wireline supports the network carriage of all access traffic, including wireless. Therefore, when we say that the traffic on the network is increasing by 40% a year, we are talking about traffic on the wireline network, regardless of its access point.
Capital investment (a redundant phrase) is the “Supply” side of the demand – supply relationship in network economics. Actually, the supply side is cumulative investment plus ongoing capital investment, but we are only going to deal with the going forward issues. If capital investment is not keeping up with growth as in the introductory chart of this section, then the ongoing traffic growth will overtake the capacity and all of the disastrous things previously delineated will happen to the network – slow responses, server shutdowns, etc. So, the question is, given the traffic increases we have already described on the demand side of the equation, are the major telcos investing enough to keep the network capacity ahead of demand? The short answer would appear to be – “No!”
This report will investigate the parameters of this situation –
- supply and demand
- wire-line income
- optical network innovation
- and telecoms’ investment
After reviewing the market situation of traffic demand versus supply capacity, we will provide forecasts for various classes (ROADMs, DWDM, Switches and Routers) of optical network equipment in this environment.
Table of Contents
Table of Contents
Table of Figures
The Lightwave Network Series of Reports
The Lightwave Network
The Lightwave Series of Reports
General Reports on the Network
General Market Reports
Specific Systems Reports
INTRODUCTION
DEMAND - OPTICAL NETWORK TRAFFIC
Major Traffic Sources
Four Major Sources of Traffic
AAA Access Lines
Mobile Devices
International Traffic
H-S Access Lines
Demand Growth - Summary
SUPPLY – NETWORK INVESTMENT
Carrier’s Investments
IMPACT ON WIRELINE REVENUES -RBOCS ARE BECOMING WIRELESS ACCESS COMPANIES
The Wireless Access Landscape Forecast for Wireline to Wireless
RBOC Loss of Main Lines
It’s a Wireless Access Industry!
Can Advanced Architecture Services Make-Up the Revenue Gap?
Summary of Revenue Issues
SUPPLY - CAPITAL INVESTMENT BY THE RBOCS
Importance of Wireline
Figure 19, Network Showing Wireless Access
RBOC Investment Plans
Verizon Investment Plans
Summary Thoughts on Investment
INNOVATION
Network Innovations in the last 20-30 Years
EQUIPMENT FORECASTS
ROADM Forecast
ROADM Systems — US Forecast
US Edge ROADMs
US Market Forecast
World Market Forecast
DWDM Forecast
North American Forecast
World DWDM Forecast
Switch Forecast
North American Switch Forecast
World Switch Forecast
Router Forecast
North American Forecast
World Router Forecast
Vendors
System Vendor Listing
Adva Optical Networking
Alcatel-Lucent
Avvio Networks
Ciena
Cisco
ECI
Ericsson
Fujitsu
Infinera
Huawei Technologies
Mahi Networks (formerly Photuris) — Meriton – Now Xtera
Marconi Corporation plc (Ericsson)
Meriton Networks
Movaz Networks (ADVA)
NEC America Inc.
Nistica
Nokia Siemens (NSN)
Nortel (Now dissolved)
OpVista Inc
Tellabs
Tropic Networks (Alcatel-Lucent)
ZTE
APPENDIX I - OVERBUILD
Overbuild – How?
Overbuild - Significance
A New Type of Competition
Summary of Overbuild Forecasts
APPENDIX II, TRAFFIC STATISTICS RELATIONSHIPS
APPENDIX III, DATA TRAFFIC FUNDAMENTALS
Internet Traffic Calculations
Bits and Bytes
Bits and Bytes
Busy Hour Traffic
Protocol Efficiencies
Peaking
Table of Figures
Figure 1, Lightwave Network
Figure 2, Mobile Traffic Forecast
Figure 3, Data Traffic from Major Sources
Figure 4, Comparison of Four Major Sources to Total Traffic
Figure 5: Internet Growth Rate — New Forecast
Figure 6, Summary Points on Demand
Figure 7, Supply Demand Relationship
Figure 8, Mobile Network Access
Figure 9, Dilemma of Wireline vs. Wireless
Figure 10, Wireless Competition
Figure 11, Summary for Wireline to Wireless Migration
Figure 12, Verizon Wireline vs. Wireless Revenues
Figure 13, Verizon Loss of Main Lines vs. Wireline Revenue
Figure 14, Wireline Customers vs. Wireline Total Revenue
Figure 15, Alternatives for Making AAA Lines More Important
Figure 16, FiOS vs. Uverse Services
Figure 17, FiOS vs. Uverse Quarterly Additions
Figure 18, Revenue Issues
Figure 19, Network Showing Wireless Access
Figure 20, Wireless Data Forecast
Figure 21, AT&T Capital Investment 2009-2012
Figure 22, Verizon Wireline Capital Expenditures 2009-2012
Figure 23, Verizon Wireline Negative Growth
Figure 24, Verizon Wireline Revenue Negative Growth
Figure 25, Verizon Wireline as a Portion of Total Revenues
Figure 26, Network Innovations
Figure 27, ROADM System Unit Forecast — US
Figure 28, US Market — Change in Predominant Type of ROADM over Time
Figure 29, US Edge ROADMs Systems
Figure 30, Price Forecast for ROADMs
Figure 31, ROADMs Market Forecast — US
Figure 32, ROADM Market — US – By Technology
Figure 33, World ROADM Systems by Type
Figure 34, World ROADM Market
Figure 35, World ROADM Market by Types
Figure 36, North American DWM System Ends
Figure 37, North American DWDM Market
Figure 38, US DWDM Forecast by Channel Speed
Figure 39, DWDM - World Forecast - System Ends
Figure 40, DWDM World Market Forecast
Figure 41, DWDM World Forecast by Speed
Figure 42, North American Switch Market Forecast
Figure 43, North American Switches - Units Forecast
Figure 44, World Switch Market
Figure 45, World Switches – Units
Figure 46, North American Routers - Total – Units
Figure 47, North American Routers Total Market
Figure 48, North American Router Market - By Types
Figure 49, World Router Forecast – Units
Figure 50, World Router Market – Total
Figure 51, World Router Market - By Types
Figure 52, Verizon's NOOF Arrangement
Figure 53, Overbuild Forecasts
Figure 54: Traffic/Speed Relationships
Figure 55: Example of Various Traffic Sizes
Figure 56, Multiples of Byte
Figure 57: New Transfer Rate Forecast
Figure 58: Summary of Concepts
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