LightCounting’s newly released report. “State of the Optical Communications Industry: On a Path to Sustainable Profitability,” contains both good news and bad news for the optical communications industry. The good news is that optical communications technology vendors improved their financial footing between 2007 and 2010. The bad news is that their primary customers -- mainline communications service providers -- have not.
The report notes that service and content providers who meet their customers’ needs over the top of traditional carriers’ IP networks have been very successful. “Average profitability of content providers such as Amazon, eBay, and Google doubled in 2010 compared to 2007,” commented Vladimir Kozlov, founder and CEO of LightCounting. “Profitability of optical component and equipment suppliers has also improved during the same period, but telecom service providers are yet to find a path to improve profitability, while increasing investments into networking infrastructure.”
This circumstance would appear to put the continued profitability of technology suppliers in question unless telecom service providers find new ways to make money. LightCounting points out in the report that consolidation remains a proven approach to profitability, but suggests that carriers must find other means as well. The market research and analysis firm points to the suggestions European carriers recently made to the European Commission that they be allowed to charge over-the-top (OTT) service providers as a potential example of such an alternative.
Elsewhere, the report cites the changing datacom equipment market landscape as a positive trend. The weakening of Cisco’s dominant market leadership position “should have a longer term positive effect on profitability of the whole supply chain,” LightCounting surmises. The report also notes the emergence of super datacenters and flat networking architecture, which should drive demand for 10-, 40-, and 100-Gbps optical modules and related interconnect technology.
The report also examines the changing landscape of the optical component and module industry in such segments as SONET/SDH, Ethernet, Fibre Channel, WDM, and FTTx. It discusses the increasing influence of Chinese optical component and equipment suppliers. Data on revenues of the Chinese optical communication market used in the report were provided by Infostone Communications Consultant Co., a research partner of LightCounting based in China.