Over the past couple of quarters, this column has been pushing a consistent, guardedly optimistic line on the prospects for an upturn in the optical communications industry during 2004. It's a view that's gathering momentum as the weeks go by, and one that's been reinforced by soundings taken at last month's ECOC conference and trade show in Italy. At the same time, market indicators are also looking better outside the rarefied confines of the fibre-optics and photonics sector. Take a look at one of the telecoms industry's fundamental drivers - the roll-out of broadband access networks and services - and it's clear that there are credible reasons to be cheerful (or at least one step on from downright miserable).
For starters, the number of broadband subscribers worldwide grew 72% in 2002 to 63 million - with home users driving the bulk of demand across all regions, according to a new study from the International Telecommunication Union (ITU). The Republic of Korea leads the way in broadband penetration, with about 21 broadband subscribers for every 100 inhabitants. Hong Kong (China) ranks second, with nearly 15 broadband subscribers per 100 inhabitants, while Canada, in third spot, has just over 11 broadband subscribers per 100 inhabitants. Here in Europe, Iceland and the Nordic countries figure prominently in the leading pack of broadband adopters worldwide.
So far, so encouraging. More significant, however, are the headline figures from the ITU. Its report estimates that only one in every 10 Internet subscribers worldwide, or just over 5% of the total installed base of fixed lines, has a dedicated broadband connection - which confirms that's there's still an awful lot of growth potential out there for revenue-hungry service providers.
One reason for the steep rise in broadband subscribers is the growing demand for faster Internet speeds. Between them, broadband access technologies - Digital Subscriber Line (DSL), cable modem, fixed wireless, and fibre to the customer - can support "always on" Internet connections that are between five and 2000 times as fast as earlier dial-up technologies. For businesses, meanwhile, the latest broadband services can be less than 1% of the cost, per megabit per second, of today's leased-line and private-network options, says the ITU. And with its increased speed and lower cost, broadband also provides a scalable infrastructure for e-government and e-education services, such as online driver's licence renewals, electronic tax filing, and online library and learning resources.
In spite of all this, there's still plenty that needs to happen if broadband is to become the engine room of that elusive telecoms recovery. A level playing field in the local loop would be a start - 70% of all broadband connections in the European Union are still based on the incumbents' DSL networks, a statistic that suggests that true price competition is still some way off. Of equal, if not greater, importance is creative thinking when it comes to new applications capable of soaking up all that bandwidth headroom. Video on demand - a capex- and opex-intensive scenario - is surely the end-game for many telecoms service providers, though the long payback time makes anything but small-scale deployments unlikely in the current risk-averse financial climate. As always in telecoms, timing and good fortune will go a long way to determining which companies secure a dominant position in the broadband arena.