Position:Home > News > Industry News
Internet traffic growth is necessary, but not sufficient for sustaining the optical networking markets in 2015 and beyond.

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 data on Internet traffic growth. A preview of a new forecast database will be available to clients in late January and the final version will be released along with a new forecast report in February 2015.

Sales of optical components and modules were growing steadily in 2011-2014, supported by demand for 100G and wireless fronthaul optics for telecom applications and 10/40GbE transceivers for use in datacenters. While products used in telecom applications account for more than 50% of the total market, it is the use of optics in datacenters that kept this market growing in the last several years. Initial deployments of 100GbE optics in datacenters planned for 2015 should give another boost to the market.

Demand for high-bandwidth connectivity in datacenters is booming. It is directly related to rapid growth in the amount of data generated and stored by consumers and businesses. Most of this data is accessed by applications such as Facebook, Google search or YouTube. Changes in datacenter architectures required to support these applications also need a lot more connectivity.

However, the growth rate of Internet traffic (outside of datacenters) is easing. Let us emphasize that the traffic is growing, but it is the annual growth rate that is declining. Not all the data generated by consumers and businesses has to be transmitted across the globe or even across one metro area, at least not more than once (to store it and then forget about it).

The latest data on network traffic growth confirms that these projected declines in the growth rate are well justified. LightCounting’s 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 (2009) and recoveries (2014), but should follow the same trend in the long run. Detailed analysis of the correlation between the growth of Internet traffic and sales of optical components and modules for telecom applications is available in the latest research note issued by LightCounting on January 12th, 2015.

Can the ’Internet of Things’ change this reality and reverse the decline in the annual growth rate of Internet traffic? Most of these ‘things’ don’t have much to say and cannot recognize images not to mention videos, which is the most bandwidth-consuming application. Wider use of video and particularly high-definition video would certainly boost the traffic. Progress in image and video recognition technologies could have an even more dramatic impact by extending growth in video traffic beyond its current limit loosely defined by the number of humans on the planet with some kind of video screen and the number of hours per day allocated to consuming videos.

Ultra High Definition (UHD) TVs were lighting up the floor at the Consumer Electronics Show (CES) in Las Vegas last week, led by Samsung’s 82-inch sculptural masterpiece.based on a proprietary nano-crystal technology for filtering colors. A new “Quantum Dot TV” unveiled by TCL illustrates the ambitions of Chinese manufacturers in improving color quality.All these improvements in the number of pixels and quality of colors require more bandwidth, but they are becoming more and more incremental, as display technologies mature. Innovations in video-compression algorithms are likely to keep pace with progress in video quality.

Sony, unveiled a new UHD video camera among many other products at CES, boosting the capabilities of consumers to create multi-gigabyte videos.However, 99.99% of amateur videos are never watched more than once, and the most popular ones get stored in the cache memory of access routers to ease the load on the core network.Image recognition technologies are a critical element of the driverless car boom, which was the main focus of CES 2015, but the progress is slow. Google’s self-driving cars generate even more skepticism than Google’s Fiber project.

No matter what new bandwidth-hungry applications will be developed, none of them are likely to have an impact comparable to innovations from the early days of the Internet, such as Netscape’s browser or Apple’s iPhone. Growth in a more mature Internet ecosystem is less likely to be disrupted by new innovations, no matter how good they are (excluding potential discovery of super-humans capable of consuming videos in many parallel dimensions, proven to exist by the String theory, but hidden from the rest of us).

The future is inherently unpredictable and we all may be surprised by new inventions requiring more network bandwidth. Regardless of what they are, it is logical to assume that the annual growth rate of global Internet traffic will continue to decline gradually (in terms of percentage of the total, not the absolute bytes transmitted value).

This will translate to lower growth in annual sales of networking equipment, components and modules even if suppliers manage to reduce price declines. Gains in market share may boost the performance of selected vendors in the short term, but discipline in price reduction has to balance ambitions for gaining market share in order for the industry prosper in 2015 and beyond.


News from Lightcounting...


About Us
Company Profile
Company Culture
Product Certificate
Company Certificate
Product Center
400G Transceiver
100G Transceiver
40G Transceiver
25G SFP28 Transceiver
xPON Transceiver
10G SFP+ Transceiver
10G XFP Transceiver
SFP Transceiver
GBIC Transceiver
Active Optic Cable
Direct Attach Cable
Company Events
Industry News
Customer Center
Service Promise
Why choose us
Product Naming Rules
Customer Message
Talents Concept
Join Us
Contact Us
Contact Us