LightCounting: Operators must catch up on bandwidth investment

Created November 15, 2013
News and Business

The market for 100G optical transport equipment has been growing slightly faster than Internet bandwidth. Optical equipment vendors should continue to overinvest, however, because the industry should expect another downturn.

That’s the conclusion of the latest update from market research firm LightCounting.

According to the firm’s quarterly sales database released along with its Market Update Report, shipments of 100G DWDM ports reached 15,000 in first half of 2013 and are projected to reach 40,000 for the full year. While the numbers remain modest compared to shipments of 10G and even 40G DWDM ports so far, the contribution of 100G ports to network bandwidth is already significant, the company said.

In an ideal scenario, the growth rate in optical investments and internet bandwidth should be well correlated. Historically, the reality has been rather different. During the telecom bubble of 1999–2001, growth in network bandwidth was off the chart. Following the crash, investment in telecom infrastructure remained depressed in for a long period. Although things improved in 2007–2008, the financial crisis in late 2008 led to a decline in network upgrades. LightCounting’s analysis of port shipments indicates that network bandwidth is currently growing faster than internet traffic in 2013, driven by deployments of 100G ports.

“An increased level of investments in 2012-2013 seems to be well justified,” the company said in a statement. “In fact, in order to catch up on underinvestment in 2009-2011, network operators will have to keep the rate of network bandwidth growth above the traffic growth until 2018.”

Will this actually happen?  Another downturn is a distinct possibility, according to LightCounting. “Where the crisis will come from and how it will look like is anybody’s guess,” the company wrote. “Given the increasing influence of China on the world economy, one scenario leading to a slowdown in 2016, is related to the completion of the current five-year economic plan in that country. Many projects in China may be acceleratedin 2014-2015 to meet the plan’s targets and 2016 may be a perfect time to take a pause.”
 
At some point in the future, the ability of network operators to finance infrastructure investment will become limited and they  should continueto overinvest, while the global economy is growing.

By Pauline Rigby

See Also: 
Press release: Are Network Operators Overinvesting In 100G Networks?

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This article was written
by Pauline Rigby