In optical, glass is definitely half-full

By Loring Wirbel
EE Times
(03/20/01, 5:17 p.m. EST)

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ANAHEIM, Calif. — When the general economy contracts double pneumonia, the optical-components industry might get a sniffle or two. But sneezes and coughs were nowhere to be heard at the opening of the Optical Fiber Communication (OFC) conference in Anaheim, Calif., where the number of vendors exceeded 970 and attendees were capped at somewhere north of 35,000. The show was so well-attended, organizers temporarily cut off new registration.

The component vendors and the optical-transmission equipment OEMs they serve are showing definite caution in 2001, as carrier end customers are drying up without warning. Yet OFC unquestionably was larger and packed with more startups than ever before — though there were fewer venture capitalists hanging on every word of the technical presentations compared with the 2000 show.

'We remain bullish'

In its annual review of markets, Corning Inc. predicted compound annual growth rates (CAGRs) for most markets in the neighborhood of 20 to 40 percent, down by half from similar projections a year ago but still showing the kind of growth that developers in other electronics markets could only dream of. "We remain bullish on long-term bandwidth demand, and we expect a quick return to growth in demand of more than 100 percent per year," said Gerry Fine, executive vice president and general manager of Corning's photonics technology group. "By 2010, bandwidth demand will be 1,000 times what it is today."

The problem, Fine said, is that investors in optical companies got used to hearing of CAGRs in excess of 50 percent for the period 2000 to 2004, while the likely true growth rate in 2001 will be 10 to 30 percent, depending on market segment.

In fiber cabling itself, the strongest market will be in last-mile access, which Corning now separates from metropolitan fiber, said Alan Eusden, senior vice president and general manager of Corning's optical-fiber group. Access markets showed 40 percent growth last year and will decline only slightly from that peak, while metro markets will go from 50 percent growth to 25 percent and long-haul will decline from 60 percent to 10 percent, he said. Eusden said that regional projections suggest North America will continue to exceed 25 percent growth, beaten only by China and Korea, both at around 35 percent.

In the opening plenary session of OFC, Telcordia executive vice president Bob Lucky said that telecom stocks actually led the U.S. economy into its downturn, since the collapse of inflated stock prices was clear early in the fourth quarter of 2000. Much of the damage was self-inflicted, Lucky said, citing the example of British Telecom, which paid $32 billion for third-generation licenses, when it could have laid fiber to virtually every European home it serves for less than $21 billion.

"Why does something like this happen?" he asked. "It makes no sense at all, and it seems to guarantee the financial collapse we saw in telecom last year."

Lucky said the advent of new Internet applications has led to an insatiable demand for bandwidth, and predicted that demand will be a factor leading the United States out of the downturn. Though many pundits have predicted that bandwidth saturation will strike soon, Lucky said the popularity of Napster has convinced him that unpredicted applications will drive broadband demand in ways hardware developers do not fully understand.

Indeed, "There is still ample capital to fuel an optical revolution, and the overwhelmingly abundant bandwidth we see changes the rules for everything," analyst and author George Gilder said in an evening speech for Altamar Networks. "The mood at OFC a year ago was a thrilling time in a way, but what has really changed?" Gilder asked. "What is interesting is not the scarcities but the abundances, and that is what makes abundant bandwidth so important in the present economy."

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