'Surprising' growth expected for retail wavelength services, say Yankee Group analysts

7 April 2003 Boston, MA Lightwave--Wavelength services will change the wholesale network services market, contends a new Yankee Group report, "Wavelength Services Gaining Traction Despite Growing Pains." Wavelength services--carried on fast, flexible, fat pipes--allow carriers to quickly enter a market with the same level of network control as with their own facilities but without the capital costs and risks. The number of multi-city networks provisioned by new long-haul entrants that want to avoid the expense of building their own national network will continue to rise.

Retail demand is also rising as more enterprise customers outsource their optical networking requirements and purchase Lambdas instead of dark fiber, say analysts. Carriers need to make Lambdas easy to buy, integrate, and use for retail customers, who typically lack the in-house expertise to run a network. Bundled service packages and integrated metro-backbone Lambdas will be key drivers of retail revenue.

"The U.S. wavelength market will enjoy continued expansion, but as with any new service, we expect growing pains," asserts Nicholas Maynard, Yankee Group Telecommunications Strategies senior analyst. "Carriers will find it difficult to sell wavelengths until customers clearly understand the advantages and ROI [return on investment] they will receive from choosing this service."

"Wavelength sales will not defy the gravity of the telecom slump," he continues. "Revenue growth will be stunted as customers delay network expansions. This will not hurt the prospects for wavelength services over the next 3 to 5 years, but it will limit their uptake in the next 12 to 18 months. In the short term," he cautions, "carriers need to deploy their wavelength services carefully to avoid overcapacity."