The globalization of the telecommunications industry is a given. Original national network operators such as AT&T, BT, Deutsche Telekom, NTT, Orange, Tata, Telefonica and Verizon are now global network providers. Network systems vendors, in turn, also come from all regions, such as Alcatel-Lucent and Ericsson from Europe, Ciena and Cisco from North America, Huawei and ZTE from China, and NEC and Fujitsu from Japan.
This globalization permeates the individual segments of the telecommunications industry, including optical networking, where market share is assigned by global share. A recent report by a quantitative analyst firm found that Huawei had the highest share of the optical network hardware market, followed by Alcatel-Lucent, Ciena, ZTE and Fujitsu. These results absolutely indicate the scale at which these companies operate; leading firms can leverage larger sales to lower their unit costs via economies of scale. The results could also imply that, for most optical networking opportunities, Huawei would be the most potent competitor. However, this implication would be false; the optical networking market is highly segmented based on geographic regions. For instance:
- Fujitsu’s sales are overwhelmingly in North America;
- Ciena does not even attempt to sell in China;
- The winners of the upcoming massive 100G DWDM build-out by China Mobile are Huawei, ZTE, FiberHome and Alcatel Shanghai Bell, all Chinese firms; and
- Huawei and ZTE are effectively excluded from the North American Tier 1 operator market.
Therefore, the competitive strengths of these optical networking vendors can only be truly judged with respect to individual geographic regions. At first glance, this conclusion would appear to be at odds with the globalization of the service providers. However, the largest providers still generally operate their local and inter-regional networks separately, or at least they make metro and long-haul purchases separately. Examples of optical networking infrastructure differences based on metro versus long-haul are AT&T (Fujitsu and Tellabs metro vs. Ciena and Coriant long-haul), XO Communications (Ciena metro vs. Infinera long-haul) and Verizon (Fujitsu and Tellabs metro vs. Ciena long-haul). Another example of an international service provider that purchases separate optical platforms based on the deployment region is TeliaSonera, which deploys Coriant platforms (and, lately, some Infinera) in Europe and Infinera in North America.
Thus, optical sales to Tier 1 operators are largely based on region, with Ciena and Fujitsu dominant in North America, Alcatel-Lucent and Ciena in Europe, Huawei and ZTE in China, and NEC and Fujitsu in Japan. Intercontinental optical networking is a separate market segment, with sales dominated by submarine systems vendors such as Alcatel-Lucent, Ciena, Infinera and Xtera. The emerging regions of the world are up for grabs, but do not currently generate substantial optical networking sales.
So, the next time you read a listing of the top global optical networking vendors, remember that, from a competitive standpoint, the region dictates the true leaders.