Slowing Orders Curb Fiber Growth Plans
By Evan Blackwell
from the June 18, 2001 issue of Broadband Week
If ever there was a sign of how the pace of growth in the communications industry has turned, it was optical fiber giant Corning's recent decision to throttle back plans for adding new fiber manufacturing capacity.
The company still plans to build a new manufacturing plant in Oklahoma City, Okla., but the slowdown in demand for optical fiber has put the project on hold for at least a year. That means the plant won't be producing new fiber before late 2004.
Corning also is slowing the expansion of a plant in Concord, N.C.--which it expects to eventually be the world's biggest fiber making facility--so additional capacity there won't be realized until late 2002.
The latest moves came after Corning already reduced its revenue and earnings forecasts for 2001, cut 2,500 jobs in the spring and restructured many of its manufacturing schedules.
Carriers that once created a fiber shortage with demand for optical cable and components have significantly slowed their capital spending, forcing Corning and others to put the brakes on expansion plans triggered by the previous fiber appetite.
Corning continues to be the dominant market leader in fiber manufacturing, with more than double the market share of number two provider Lucent Technologies.
Jay Patel, a senior analyst with the Yankee Group, says Corning, Lucent, Alcatel and other major fiber manufacturers are simply playing a waiting game while service providers largely are making do with the extensive amount of long-haul fiber that's already been laid in the ground.
As soon as the market turns up, the demand for new fiber and capacity once again should accelerate, he says.
"There was almost an artificial situation out there. There was a panic about fiber shortage out there, and now they'll all have to hold on through the correction process," Patel says. "Things have come to a screeching halt for service providers and network builders, but they will eventually be opening their checkbooks again."
At the same time, demand continues apace for fiber aimed at metro networks, where building activity has grown steadily even during the current capital crunch, analysts say.
At SUPERCOMM earlier this month Lucent's Janice Haber, the optical fiber vice president of the company's systems engineering unit, trotted out a new metro solution design that uses two fiber types specifically designed for that business segment. Theorizing that metro networks are a combination of several other networks, Lucent plans on selling its customers a product that combines its AllWave and TrueWave fibers in the same cable. AllWave handles the metro access and applications, while TrueWave optimizes the cable for long distance and high speeds.
"There are major metro carriers already using these solutions," Haber said of the Lucent fiber customer base that includes Qwest Communications and Global Crossing.
Patel says that, despite the recent break-off of merger negotiations between Alcatel and Lucent, the latter still will sell its fiber business soon and the most likely buyer continues to be Alcatel.
"It's only a matter of time," Patel says. "Lucent needs the cash, and Alcatel still seems the most interested."
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