OSP Central - Research Report

Ovum is projecting an upbeat long-term forecast for sales of optical networking (ON) equipment, driven by brand new data center demands. The global analysts expect the ON market to reach US$20 billion by 2017 with a 5 percent compound annual growth rate (CAGR).

The latest Ovum forecasts show the highest growth region will be Latin America, driven by network modernization efforts to enhance regional connectivity in support of mobile and broadband access network buildouts. North America is expected to exhibit solid growth as tier-1 network operators embrace new 100G technology to meet growing data center needs. Growth in Asia-Pacific is expected to continue but will cool a bit after 5 years of torrid growth, while the EMEA market is expected to expand, despite the current macro-economic malaise, due to deployment activity in Russia, the U.K., Eastern Europe and Africa.

"The new bandwidth driver is data centers. Large-scale data centers continue to be built out -- both the multi-tenant, carrier-neutral variety and private data centers," says Ian Redpath, principal analyst in Ovum's Network Infrastructure practice. "The data centers are being placed in brand new locations, creating brand new optical networking demands. For example, the new Facebook data center at Lulea, Sweden, near the Arctic Circle, will require terabits of bandwidth. These new demands are not unique to Lapland – they are emblematic of a trend unfolding in multiple European and North American locations."

In North America, the "perfect deployment storm" has arrived, according to Ovum: a ridge of high-bandwidth pressure is approaching, networks based on the last generation of technology and 10G have filled up, and the next generation of network technology -- 100G -- is ready.

In EMEA, Russian network operators have visions of supplying pan-Asian capacity interconnecting the Far East to Europe overland. The southeast U.K. is another hotspot, with over 150 data centers outside of central London that require high-bandwidth interconnection.

"In China, the optical network market has trebled in size over the past 5 years and continues to grow. Much of the core backbone was built in support of early generations of mobile technology, but there is still a wave of high-speed fixed broadband and next-generation mobile to come," predicts Redpath.

The ON market in Latin America is in great shape as incomes have been rising, enabling network operator revenue growth. Broadband is recognized as an essential service, and inter- and intra-continental connectivity is undergoing an upgrade.

"All told, the global optical network market is at a very interesting point in its evolution. New demands are arising just as the industry's latest technology offering is coming to fruition," concludes Redpath.