Optical Communication
Systems and Networking Market
Copyright 2022, Faulkner Information Services. All
Rights Reserved.
Docid: 00017736
Publication Date: 2212
Report Type: MARKET
Preview
Originally designed for voice networks, the optical networking market is
thriving with increased data traffic as people are using the Internet to
transfer huge files, attend video conferences, watch movies, and more. The
demand for more bandwidth has major telecom carriers investing heavily in
their networks to increase capacity to 100Gbps systems, and some companies
are already flirting with systems capable of 400G, 800G, and beyond. This
marks a huge increase from the first fiber-optic systems that ran at
45Mbps when they debuted in 1980. This report discusses the optical
communications systems and networking market, its major providers, and its
current trends.
Report Contents:
- Executive Summary
- Market Dynamics
- Market Leaders
- Market Trends
- Strategic Planning
Implications - Web Links
- Related Faulkner Reports
Executive Summary
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We are using more and more bandwidth every day. Businesses and consumers
are creating exponentially increasing amounts of data, and they want to be
able to send, store, access, and analyze that data faster. Technologies
like big data analytics, fiber-to-the-home (FTTH), cloud-based systems,
and wireless broadband networks are putting an even greater strain on
telecommunications networks. Carriers and enterprises are responding by
rolling out 10G, 40G, and even 100-Gigabit networking equipment right now,
with plans to exceed these speeds in the near future. These technologies
do represent quite an upgrade over the 45Mbps that the first fiber-optic
networks delivered in the 1980s, but all of this and more will be required
to meet the massively expanding global need for high-speed data. Drivers
such as high-definition and ultra high-definition video, as well as the
incoming wave of Internet of Things devices all promise a massive
expansion in the data requirements for private and business concerns
alike. With optical networking still serving as one of the driving forces
behind the terrestrial telecom infrastructure around the world, it will
bear a significant portion of the burden this growth represents.
Related Faulkner Reports |
Ciena Company Brief |
Cisco Systems Company |
Fujitsu Company Brief |
Huawei Technologies Company Brief |
Given the capacity, range, and speed of optical networking solutions,
market analysts are generally bullish on the prospects of optical networks
to handle the:
- Expanding data communications universe, including VoIP, LTE, and 5G
networks; and the - Impending explosion of communications-reliant Internet of Things (IoT)
systems and devices.
For example:
As predicted by Fortune Business Insights,
the optical communication systems and networking market, which the firm
valued at $20.39 billion in 2022, will reach 32.94 billion by 2029,
expanding at a regular, if relatively modest, compound annual growth rate
(CAGR) of 7.09 percent during the 2022-2029 forecast period.1
As projected by Research and Markets, the
optical communication systems and networking market, which the firm valued
at an estimated $24.2 billion in 2022, will reach $36.6 billion by 2027,
expanding at a CAGR of 8.6 percent during the 2022-2027 forecast period.2
Among the market’s major providers are data comm leaders like:
- Adtran
- Ciena
- Cisco
- Fujitsu
- Huawei
- Nokia
Market Dynamics
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As surveyed by Nokia, there are “three [primary] physical media used for
transmitting network information today:
“Copper cabling, first used
for the telegraph in the 1820s and still the most prevalent cabled medium;
“Radio spectrum, first used
by Marconi in 1901, and the fastest growing medium today; and
“Fiber optic cables, used
since 1977 when General Telephone and Electronics sent the first live
telephone traffic through fiber optics in Long Beach, California.”3
An optical network transmits voice, data, and video traffic over fiber-optic
cables using light stream technology with lasers lighting the fiber strands.
Essentially, traffic is transmitted over the light waves, including separate
channels for each strand of fiber and, increasingly, for each color over a
fiber strand. Because of this design, optical networks are capable of
carrying large traffic loads and minimizing delays. Most optical networks in
operation today are actually electro-optical networks and translate the
optical signals to electrical signals somewhere in transit, usually at the
traffic terminals.
The replacement of copper cables with fiber-optic cabling in the core of
the public network allowed large amounts of data to be transported at
increasing speeds. In 1980, the first long-distance, fiber-optic systems
could transmit at 45 Mbps. Now optical systems are available
commercially that can reach 100 Gbps+ per single-fiber link. Because of
this, it has become something of a race between optical networking and
wireless networking to see which technology can replace legacy copper
networks in the role of providing terrestrial telecom. In many cases,
wireless has an advantage, due to its inherent versatility, lack of
significant hardware installation, and ubiquitous coverage. However,
wireless networking has still not met or exceeded the speeds which optical
networking can reach. Moreover, the type of data proliferation already
mentioned multiple times in this report represents a huge obstacle for
wireless networking due to its susceptibility to congestion. Modern
wireless technologies can only operate within certain frequency bands,
meaning that, even if they match optical networking for pure speed, they
may reach a point where there is simply no more airspace in a given area
to provide the necessary bandwidth.
Already, the demand for bandwidth seems to have no limits, and service
providers are scrambling worldwide to relieve the pressure on their
networks as increasing numbers of business and personal Internet users
take advantage of social networking, video communications, streaming
video, Voice over Internet Protocol (VoIP), conferencing and document
sharing, and a host of other data-intensive applications. Developing
nations are also joining the optical networking trend for the first time,
as they delve into their first telecommunications buildouts.
Market Leaders
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The consensus leaders in the optical communication systems and networking
market include:
Adtran (US)
ADVA Optical Networking (Germany)
Arista Networks (US)
Broadcom (US)
Ciena Corporation (US)
Cisco (US)
Fujitsu Limited (Japan)
Huawei Technologies Co., Ltd. (China)
Nokia Corporation (Finland)
Market Entrenchment
As a confidence-booster for prospective customers, many of the leading
optical networking vendors are already well established in the data
communications space.
In a September 2022 article, analyst Kihara Kimachia offered an
assessment of the “market entrenchment” of several prominent optical
providers, as detailed in Table 1.
Company | Market Entrenchment |
---|---|
Adtran | “Adtran has been in the market for over 35 years and is a trusted provider of full fiber solutions. It services five main industry segments: altnets, cable multiple-system operators (MSOs), telcos, utilities, and municipalities.” |
ADVA Optical Networking | “ADVA has been in the market since 1996 and has a global workforce of over 1,900 staff. It has a strong customer base with over 900 service providers, enterprises, and web-scale companies worldwide.” |
Ciena Corporation | “Ciena has been in the market for over 30 years and is a trusted name in the industry. It has over 1,700 enterprise customers (comprising 85% of the world’s service providers) globally and more than 8,000 staff.” |
Cisco | “Cisco has been in the market for over 35 years and is a trusted name in the industry. It has many customers, including small businesses, enterprise organizations, and service providers.” |
Fujitsu Limited | “Fujitsu has been in the market since 1935 and has, over the last five decades, grown into a trusted name in the telecom industry with a worldwide presence.” |
Huawei Technologies Co., Ltd. | “Founded in 1987, Huawei employs over 195,000 employees in more than 170 countries worldwide.” |
Nokia Corporation | “Nokia has been in the market since 1865 and has grown into a trusted name in the telecom industry over the last five decades with a presence in over 100 countries. The company has a solid customer base. In 2007, over one billion people used its products and services daily.” |
Market Trends
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Market Growth
The optical communication systems and networking market is showing
steady, if presently unspectacular, growth. For example:
As predicted by Fortune Business Insights,
the optical communication systems and networking market, which the firm
valued at $20.39 billion in 2022, will reach 32.94 billion by 2029,
expanding at a compound annual growth rate (CAGR) of 7.09 percent during
the 2022-2029 forecast period.5
As projected by Research and Markets, the
optical communication systems and networking market, which the firm valued
at an estimated $24.2 billion in 2022, will reach $36.6 billion by 2027,
expanding at a CAGR of 8.6 percent during the 2022-2027 forecast period.6
Market Drivers
At present, the optical communication systems and networking market is
being propelled by several factors:
Telecom Vendors – The big
providers largely prefer optical technology for their backbone
infrastructure.7
National Defense – The rising
demand for military communication equipment, supported by an
ever-escalating defense budget, is accelerating optical spending.8
Optical Commitment – The
combination of “consistent R&D spending, a strong focus on product
innovation, and long-term contracts with government and [other] entities”
is helping ensure that Cisco, Ciena, and other prominent players maintain
their optical focus.9
40 Gbps and Up – “Optical
communication and networking equipment with up to 40 Gbps data rate
accounted for the largest market share … in 2021. The data rate of up to
40 Gbps provides reliable monitoring technology for large-capacity
networks. Moreover, the market for optical communication and networking
equipment with greater than 100 Gbps data rate is projected to grow with
the highest CAGR. With the rapid development of 5G and high-performance
services brought by cloud networks, the demand for higher bandwidth
devices with a data rate of greater than 100 Gbps is expected to grow in
the near future.”10
Over-The-Top Services –
Over-the-top (OTT) services are media services delivered directly to
consumers via the Internet. “The rise in the number of OTT platforms
([like] Netflix, HBO, Disney, and Amazon Prime) … [is] expected to
propel the data center [optical] market in the future.”11
Cloud Computing – “The
ever-growing clout of digital devices increases the demand for data
storage space, transmission speed, and flexibility. These factors are
fueling the adoption of optical communication and networking equipment in
cloud computing, which supports high data transmission and offers high
switching speed and large data storage.”12
Market Inhibitors
The growth of the optical communication systems and networking market may
be slowed by two common concerns:
- The cost of installation and maintenance, and
- Any uncertainties surrounding the provision of cybersecurity.
In particular, small-to-medium-sized enterprises (SMEs) may be slow to
adopt optical.
Strategic Planning Implications
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The Fiber Optics Vs. Copper Debate Is Evolving
According to Nokia, “The decision whether to use copper or fiber [optics]
comes down to a trade-off between the expense of the technology versus the
amount of information it can carry and the energy it saves. This
calculation has traditionally meant that fiber optics were used for
long-haul transmission networks (sub-sea and terrestrial), and more
recently, for metropolitan area networks. However, innovations
and refinements to optical technology mean that the trend is toward the
use of fiber optics in more and more local applications: to the home,
and to interconnect data centers.”13
Be On the Lookout For Intelligent Optical Networks
Not surprisingly, artificial intelligence is the future of optical
networking. Importantly, AI can be employed to
“Identify and correct problems in the network
automatically” and
“Predict future traffic patterns and demand.
This information can be used to provision capacity in advance, ensuring
the network can meet future demands.”14
Select Optical Communication Systems and Networking Partners With Care
Analyst Kihara Kimachia suggests three critical criteria:
“Market Entrenchment –
Determining how long the company has been in the market will offer an idea
of its stability and reputation. It’s also important to find out who the
company’s customers are, which will reflect the type of businesses they
typically work with and whether they are a good fit for your needs.
“Technology – Research
whether the company uses the latest optical networking technology and
equipment. This will ensure you get the most out of your investment.
“Service and Support –
Finding out what kind of service and support the company offers is
important in case you run into any problems down the road.”15
Web Links
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- Adtran: http://www.adtran.com/
- ADVA Optical Networking: http://www.adva.com/
- Ciena: http://www.ciena.com/
- Cisco: http://www.cisco.com/
- Fujitsu: http://www.fujitsu.com/
- Huawei: http://www.huawei.com/
- Nokia: http://www.nokia.com/
References
1 “Optical Communication Systems and Networking, 2022-2029.”
Fortune Business Insights. April 26, 2022.
2 “Optical Communication and Networking Equipment Market by
Component (Fiber, Transceiver, and Switch), Technology (WDM, Fiber
Channel), Application (Telecom, Data Center, and Enterprise), Data Rate,
Vertical and Region (2022-2027).” Research and Markets. June 9, 2022.
3 “Optical Networks Explained.” Nokia Corporation. July 25,
2022.
4 Kihara Kimachia. “Top Optical Networking Companies.”
TechnologyAdvice. September 21, 2022.
5 “Optical Communication Systems and Networking, 2022-2029.”
Fortune Business Insights. April 26, 2022.
6 “Optical Communication and Networking Equipment Market by
Component (Fiber, Transceiver, and Switch), Technology (WDM, Fiber
Channel), Application (Telecom, Data Center, and Enterprise), Data Rate,
Vertical and Region (2022-2027).” Research and Markets. June 9, 2022.
7-9 “Optical Communication Systems and Networking, 2022-2029.”
Fortune Business Insights. April 26, 2022.
10-12 “Optical Communication and Networking Equipment Market
by Component (Fiber, Transceiver, and Switch), Technology (WDM, Fiber
Channel), Application (Telecom, Data Center, and Enterprise), Data Rate,
Vertical and Region (2022-2027).” Research and Markets. June 9, 2022.
13 “Optical Networks Explained.” Nokia Corporation. July 25,
2022.
14 Kihara Kimachia. “What Is Optical Networking?”
TechnologyAdvice. August 23, 2022.
15 Kihara Kimachia. “Top Optical Networking Companies.”
TechnologyAdvice. September 21, 2022.
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