Internet Traffic Growth Is Necessary, but Not Sufficient for Sustaining the Optical Networking Markets in 2015 and Beyond

EUGENE, OR--(Marketwired - January 13, 2015) - Setting realistic expectations of the future market's size is critical for business planning. The main challenge is to navigate the huge amount of information available in the media and filter facts from opinions, separating serious analysis from wild speculations.

A research note issued by LightCounting to clients offers such analysis, using data from its Market Forecast report published in July 2014 and the latest information on Internet traffic growth.

"The latest data from one of the leading service providers confirms our projections for a gradual decline in the annual growth rate of Internet traffic" -- commented Dr. Vladimir Kozlov, founder and CEO of LightCounting Market Research. "Let me emphasize that the traffic will continue to grow, but it is the annual growth rate that will moderate. This gradual decline will translate into lower growth in annual sales of telecom optical components and modules, even if suppliers manage to mitigate current price declines. Gains in market share may boost the performance of selected vendors in the short term, but discipline in price reductions has to balance ambitions for gaining market share in order for the industry develop and prosper." 

LightCounting market forecast methodology is based on an assumption that growth in network bandwidth is correlated with growth in network traffic over the long term. The two growth rates may diverge during economic downturns and recoveries, but should follow the same trend in the long run.

Projections for growth in network bandwidth are directly related to the bandwidth (and therefore the number) of components and modules to be sold in the future. Future sales of these products can also be calculated from the network's bandwidth growth by making assumptions on price declines.

This analysis suggests that component sales are effectively a derivative of the network bandwidth (in mathematical terms, not Wall Street jargon). A small decline in the annual growth of network bandwidth will be magnified in the annual sales of components. For example, a 3-5% reduction in annual growth of DWDM network bandwidth projected for 2016-2017 can shave off more than 10% from annual market growth. Annual sales of DWDM components and modules increased by 15-20% per year in 2013-2014, but it is likely to be just 5% per year in 2016-2018 even if price declines moderate.

For more information, please read the newsletter here: http://www.lightcounting.com/News_011315.cfm

About LightCounting Market Research
LightCounting is a leading optical communications market research company, offering semiannual market updates, forecasts, and state-of-the-industry reports based on its analysis of primary research with dozens of leading module, component, and system vendors as well as service providers and other users. LightCounting is the optical communications market's first choice source for the accurate, detailed, and relevant information necessary for doing business in today's highly competitive environment. Privately held, LightCounting is headquartered in Eugene, Oregon. For more information, go to http://www.LightCounting.com, or follow us on Twitter at http://www.twitter.com/lightcounting.