Small Network Operators to Shift Optical Deployment Strategies, Heavy Reading Finds

Tier 2 and 3 network operators will rapidly move spending from multiservice Sonet and long-haul DWDM to emerging packet-optical transport systems, new report finds

Nov 25, 2008

NEW YORK, Nov. 25 /PRNewswire/ -- Tier 2 and Tier 3 network operators in North America will quickly abandon further investment on Sonet-based optical transport products in favor of emerging packet optical transport systems, and investment in optical transport gear by smaller operators will peak over the next two years, according to a major new report from Heavy Reading (, the research unit of TechWeb's Light Reading (

Optical Networking for Tier 2/3 Operators in North America provides a focused and in-depth analysis of the Tier 2/3 optical networking market in North America. The report includes Heavy Reading's first-ever forecast for optical transport spending among Tier 2/3 operators in North America, as well as a complete five-year forecast for optical transport spending across all operators in the region. The forecasts include a breakout of spending projections by product type in the four major optical transport categories:

  --  Multiservice Sonet
  --  Long-haul DWDM
  --  Metro/regional WDM
  --  Packet-optical transport systems (P-OTS)

Optical Networking for Tier 2/3 Operators in North America provides market-share information for optical transport suppliers in the Tier 2/3 North American market in terms of both total market share and market share by the four major optical transport product categories. The 42-page report features in-depth optical deployment profiles for three Tier 2 operators, and includes a detailed competitive analysis of product line offerings from 10 major optical transport technology suppliers.

  For the full list of technology suppliers analyzed in this report, see:

"Over the next five years, multiservice Sonet and long-haul DWDM will lose considerable market share to P-OTS and metro/regional WDM systems," says Sterling Perrin, senior analyst with Heavy Reading and author of the report. "Multiservice Sonet is expected to drop precipitously over the next five years as Tier 2/3 operators shift their spending to P-OTS, driving significant growth in P-OTS over the forecast period."

Spending by North American Tier 2/3 network operators on optical transport gear will peak at just over $1.3 billion in 2010, before leveling off and declining over the next two years, Perrin predicts. "The projected decline in revenues for 2011-2012 reflects the maturity of the North American transport market, particularly the multiservice Sonet equipment category, which is set to decline sharply in the latter forecast years," he explains.

Other key findings of Optical Networking for Tier 2/3 Operators in North America include the following:

Total North American optical transport equipment revenue was $3.3 billion in 2007 and will increase at a very modest 1.3 percent compound annual growth rate to reach $3.5 billion by the end of 2012. The modest growth reflects a mature market segment. Of that total, Tier 2/3 optical transport accounts for roughly 36 percent of revenue today and is expected to essentially hold steady over the next five years.

Infinera is now the North American leader in optical transport for Tier 2/3 network operators. Infinera is a relative newcomer as a vendor, and it competes only in a single transport category -- long-haul dense wavelength division multiplexing (DWDM). But long-haul DWDM is a large market, and Infinera is the dominant supplier in that sector.

Huawei is emerging as a force in the North American optical market. Huawei has been quietly gaining traction within the Tier 2/3 markets in North America and is now ranked seventh in overall market share for sales of optical transport gear to this market. This is certain to strike some fear in competing optical suppliers, which have been highly skeptical of Huawei's ability to compete in North America.

Cisco remains the leading metro/regional WDM supplier in the Tier 2/3 sector, holding steady at 22 percent market share. Ciena placed second, but rose a bit from 17 percent share in 2007 to 21 percent share during the first half of 2008. Both Cisco and Ciena are strong suppliers to the cable market, and cable MSOs are big buyers of metro/regional WDM equipment to support their video-on-demand (VOD) initiatives.

Optical Networking for Tier 2/3 Operators in North America is essential reading for a wide range of industry participants, including the following:

  --  Telecom service providers: What level of investment will smaller
      network operators make in optical transport technology, and how will
      Tier 2 and Tier 3 optical transport deployments affect the overall
      market? What kinds of factors are most likely to drive -- or stall --
      the continued development of optical transport systems? Which
      suppliers and product types are emerging as the leaders in this
      important technology sector?
  --  Telecom equipment manufacturers: What are the likely demand trends
      among Tier 2/3 network operators for optical transport? How does your
      product portfolio match up to expected demand? Which technology
      suppliers are emerging as the market leaders? Is your company "timing
      the market" correctly?
  --  Component and subsystem suppliers: What is the most likely demand
      curve scenario for optical transport products? Which equipment
      suppliers are likely to emerge as the demand leaders in this sector?
      Where are the market opportunities for your components and subsystems?
  --  Investors: How will the current economic climate affect the optical
      networking sector? Which technology providers are likely to emerge as
      the main suppliers of next-gen optical transport products, and when
      are they most likely to reap those benefits?

Optical Networking for Tier 2/3 Operators in North America costs $3,995 and is published in PDF format. The price includes an enterprise license covering all of the employees at the purchaser's company.

  For more information, or to request a free executive summary, contact:

  Dave Williams
  Sales Director, Heavy Reading

  Press/analyst contact:
  Dennis Mendyk
  Managing Director, Heavy Reading

  About Heavy Reading

Heavy Reading is an independent market research organization offering quantitative analysis of telecom technology to service providers, vendors, and investors. Its mandate is to provide the comprehensive competitive analysis needed today for the deployment of profitable networks based on next-generation hardware and software.

About TechWeb

TechWeb (, the global leader in business technology media, is an innovative business focused on serving the needs of technology decision-makers and marketers worldwide. TechWeb produces the most respected and consumed media brands in the business technology market. Today, more than 13.3 million* business technology professionals actively engage in our communities created around our global face-to-face events Interop, Web 2.0, Black Hat and VoiceCon; online resources such as the TechWeb Network, Light Reading, Intelligent Enterprise,,, and The Financial Technology Network; and the market leading, award-winning InformationWeek, TechNet Magazine, MSDN Magazine, Wall Street & Technology magazines. TechWeb also provides end-to-end services ranging from next-generation performance marketing, integrated media, research, and analyst services. TechWeb is a division of United Business Media, a global provider of news distribution and specialist information services with a market capitalization of more than $1.6 billion.

  * 13.3 million business decision-makers: based on # of monthly connections

  About United Business Media Limited (

United Business Media Limited (UBM) is a global media and marketing services company that informs markets and brings the world's buyers and sellers together at events, online, in print, and with the information they need to do business successfully. UBM serves professional and commercial communities, from IT professionals to doctors, from journalists to jewelry dealers, from farmers to pharmacists around the world. UBM employs more than 6,500 people in more than 30 countries. UBM's businesses operating in the US include CMPMedica, Commonwealth Business Media, Everything Channel, PR Newswire, RISI, TechInsights, TechWeb and Think Services. UBM is listed on the London Stock Exchange (UBM.L) and has a market capitalization of $1.6 billion.

SOURCE: Heavy Reading

CONTACT: Dave Williams, Sales Director, +1-858-485-8870,, or Media, Dennis Mendyk, Managing Director,
+1-201-587-2154,, both of Heavy Reading

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