Optical networks up 23 per cent

The global market for optical networking is now worth more than $3 billion (1.55 billion) based on equipment sales.

But analysis house Ovum found that although spending has increased by 23 per cent in the last 12 months, the market cooled significantly in the first quarter of 2008.

After a very active end to 2007, sales of optical networking hardware fell back 12 per cent, researchers found. However, underlying demand for optical networking remains strong, driven by the growth in metro-area applications, network consolidation by enterprises and both consumer and business broadband services.

Individual vendors' results were more mixed, however. Ciena, Fujitsu, NEC, and Tellabs all managed to grow their sales both year on year and quarter on quarter. Alcatel-Lucent and Huawei both enjoyed strong growth towards the end of 2007 but saw sales drop back this year. Of the top 10 vendors, only Nortel saw sales in the sector fall both year on year and quarter on quarter.

Regionally, growth was strongest in North America, with Japan also seeing high levels of demand. However, according to Ovum's vice president for optical networking, Dana Cooperson, all regions, including Europe, spent more on the technology in the first quarter of 2008 than they did in Q1 2007.

Vendors also expect businesses to continue to invest in optical networking. "We are clearly in a period of bandwidth expansion driven by new applications such as video, data, and mobile, and many of these applications are still in their infancy with the real growth yet to come," said Vincent Morin, director of systems engineering in EMEA at Ciena."This is causing carriers to move towards Ethernet-based IP networks to carry traffic more efficiently, which is driving investment in optical infrastructure."

He added that Europe, rather than lagging behind the US, has a different infrastructure. Here, there are fewer cable companies to drive innovation, but former public telcos are catching up.

"In Europe the majority of investment is coming from the traditional carriers and PTTs," he said. "But we continue to see strong growth."