OTN switching to grow 13% through 2016, says Infonetics

Firm expects 2012 optical transport network vendor revenue to total $7 billion
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Optical transport network (OTN) switching may be a minority part of the overall OTN market, but a new Infonetics report forecasts that the OTN market, including both transport and switching, will grow at a 13 percent compound annual growth rate (CAGR) through 2016.

While it's still compiling numbers for the full year 2012 as many of the vendors have not yet announced their year-end financial results, the research firm expects OTN vendor revenue to total $7 billion, or 65 percent of all optical equipment spending.

"Though OTN switching currently makes up only a small portion of the overall OTN market and deployments have been centered mostly in China, we anticipate breakout growth for this segment as operators in EMEA and North America adopt integrated WDM+OTN switching as part of the roll out of 100G coherent technology in regional and core networks," said Andrew Schmitt, principal analyst for optical at Infonetics Research, in a release announcing the study.

Schmitt added that Infonetics is "forecasting the OTN switching segment to grow at a 5-year compound annual growth rate of 28% from 2012 to 2016."

Packet Optical Transport Systems (P-OTS) equipment revenues are forecast to be $1.26 billion in 2012, with 55 percent of revenue coming from metro edge P-OTS and 45 percent from metro regional P-OTS.

The P-OTS segment has been traditionally dominated by five main incumbent vendors: Tellabs (Nasdaq: TLAB), Alcatel-Lucent (NYSE: ALU), Cisco (Nasdaq: CSCO), Fujitsu, and Ciena (Nasdaq: CIEN). Each of these vendors continued to gain traction in large telecom provider networks such as AT&T (NYSE: T), CenturyLink (NYSE: CTL), Verizon (NYSE: VZ) and XO Communications.

A number of these vendors, however, were impacted by slower carrier spending during the last quarter. Ciena, for instance, reported that P-OTS revenues dropped almost by 2 percent to $289.4 million, while POS declined from $37.8 million to $20.5 million in their fiscal Q4 2012 earnings report. 

However, those companies' rein in the P-OTS market will be challenged by a host of new pure-play P-OTS platform vendors including BTI, Cyan, Transmode and Ericsson. BTI, which secured $8.5 million in new funding in January, won major optical contracts with both Consolidated Communications and Frontier Communications, two of the largest independent telcos.

For more:
- see the release

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