60-second interview with Infonetics' Andrew Schmitt

Market research firm Infonetics Research, now part of IHS Inc., has issued its 2014 summary of the global wavelength-division multiplexing (WDM) equipment market. Andrew Schmitt, research director for carrier transport networking, in a Q&A with Gazettabyte.

Andrew Schmitt

Q: Infonetics claims the global WDM market grew 6% in 2014, to total US $10 billion. What accounted for such impressive growth in 2014?

AS: Primarily North American strength from data centre-related spending and growth in China.

Q: In North America, the optical vendors' fortunes were mixed: ADVA Optical Networking, Infinera and Ciena had strong results, balanced by major weakness at Alcatel-Lucent, Fujitsu and Coriant. You say those companies whose fortunes are tied to traditional carriers under-performed. What are the other markets that caused those vendors' strong results?

These three vendors are leading the charge into the data centre market. ADVA had flat revenue, North America saved their bacon in 2014. Ciena is also there because they are the ones who have suffered the least with the ongoing changes at AT&T and Verizon. And Infinera has just been killing it as they haven’t been exposed to legacy tier-1 spending and, despite the naysayers, has the platform the new customers want.

"People don’t take big risks and do interesting things to attack flat or contracting markets"

Q: Is this mainly a North American phenomenon, because many of the leading internet content providers are US firms?

Yes, but spending from Baidu, Alibaba, and Tencent in China is starting to scale. They are running the same playbook as the western data centre guys, with some interesting twists.

Q. You say the press and investors are unduly fascinated with AT&T's and Verizon's spending. Yet they are the two largest US operators, their sum capex was $39 billion in 2014, and their revenues grew. Are these other markets becoming so significant that this focus is misplaced?  

Growth is what matters.

People don’t take big risks and do interesting things to attack flat or contracting markets. Sure, it is a lot of spend, but the decisions are made and that data is seen - incorporated into people’s thought-process and market opinion. What matters is what changes. And all signs are that these incumbents are trying to become more like the data centre folks.

Q. What will be the most significant optical networking trend in 2015?

Cheaper 100 gigabit, which lights up the metro 100 gigabit market for real in 2016.