LAN expansion and growing bandwidth are driving the North American premises wiring market.
Mark A. DeSorbo
There`s no where to go but up. That`s one way to sum up recent reports from Frost & Sullivan (New York City) on the North American premises wiring market.
According to the executive summaries, the total market for connecting hardware markets in 1997 was $1.93 billion, while the wiring media market was $1.62 billion, for a total of $3.55 billion. The connecting-hardware market is growing steadily at a compound annual growth rate (cagr) of 13.1% from 1997 to 2004. The wiring media market is expected to grow at a cagr of 10.8% over the next five years.
Frost & Sullivan says the growth of the hardware market is fueled by the expansion of local area networks (lans) as electronic data transmission becomes a critical workplace application. Growing bandwidth, the strong U.S. economy, and expanding Mexican, small-business, and education markets have also helped the market flourish. "Lastly, customers are realizing the importance of wiring and installing better-designed systems, which use more hardware products," the report says.
Demand for unshielded twisted-pair (utp) and fiber-optic cables for lans, rising Internet use, and high-speed access to multimedia applications are factors driving the wiring media market. Depressing the market, however, is the price of cable, which frequently dominates the cost of replacing premises wiring, and the shortage of raw materials, which affects some vendors. And as the battle between fiber and copper forges on, the coaxial and shielded twisted-pair (stp) cable markets are petering out, says Frost & Sullivan.
Slowly but surely, fiber in horizontal and riser space is increasing, creating a demand for fiber-optic connecting-hardware products. "Prices are falling as low U.S. inflation, inexpensive components, and greater competition push prices downward," the report says. "The introduction of new features, including cable-management functions, modularity, and high density, coupled with more flexible and simplified installation functions, has attracted end-users."
In its reports, Frost & Sullivan also analyzes major segments of each market. Topping the connecting-hardware market was the patch-panel segment, which totaled $485.1 million in 1997, with a cagr of 11.7% projected from 1997 to 2004. While the market is in the development stage, the report indicates that there is an increasing demand for connection-management products. Some of the major drivers in this market include increasing network expansion; Category 5 and 6 upgrades; and the continuing needs for moves, adds, and changes. Restraining the market, Frost & Sullivan says, is the lack of familiarity with panels by installers, which hinders sales growth.
Coming in at $387 million in 1997, with a cagr of 13.7% from 1997 to 2004, were outlets, a growing segment of the total market, Frost & Sullivan reports. Major factors in the growth of this market sector include increasing lan use, better wiring design, and expanding Mexican, small-business, and education markets. Hindering the market, however, is growing concern surrounding the Year 2000 problem and the resources diverted from wiring projects to resolve Y2K issues.
Connectors made up a large portion of the total connecting-hardware market. The connector segment, according to Frost & Sullivan`s report, totaled $315.4 million in 1997, with a cagr of 16.2% from 1997 to 2004. For the premises wiring market, more than $1.2 billion is accounted for by the utp and fiber-optic cable segment, according to Frost & Sullivan. The report indicates that there continues to be improvement in utp technology, reflected by the move to Category 6.
Looking at the big picture, Frost & Sullivan says the premises wiring market faces a high degree of technical change, a large number of standards with which to comply, and the price sensitivity of the marketplace.
The threat of fiber
It could become the fight of the 21st century. Jabs and uppercuts are continuously exchanged between the unshielded twisted-pair (utp) cable and fiber corners. And just as Mike Tyson took a chunk out of Evander Holyfield`s ear in their last bout, fiber will take a bite out of its opponent. Instead of zeroing in on an ear, however, fiber will lunge for the horizontal, utp`s jugular.
"When fiber moves to the horizontal, there will be a major impact to the utp market," says Boryana Marova, a research analyst for Frost & Sullivan (New York City). In a presentation she gave at the Structured Cabling Marketplace seminar, held last October during Cabling Installation Expo `98, in Atlanta, GA, Marova showed how fiber has the potential to knock out utp. Copper, she explains, has limited bandwidth capacity, which is expected to top out at 1 gigabit per second. Fiber, on the other hand, theoretically has unlimited bandwidth capacity. Unlike copper, it has low attenuation levels and long transmission distances. Fiber is also immune to piracy, crosstalk, and electromagnetic and radio-frequency interference.
"Beyond the year 2000, we believe the growth of utp cables will decline," she says, adding, however, that the demand will not cease to exist. "We do not expect an annual growth rate of more than 5% to 7%, and the major reason for that is the fiber challenge."
Demand for greater bandwidth and emerging standards, such as Gigabit Ethernet, as well as the desire to bring fiber to the desk, are factors that will also contribute to the demand for optical fiber. Marova reports that fiber-optic market revenues will increase significantly over the next five years. Revenues in the utp market will continue to grow as well but not as significantly because fiber will begin to take away some utp sales. "The market as a whole is growing. Fiber is growing faster than utp. The price of fiber is higher per 1000 feet, so as a result, the revenues of utp are maintained," she adds.
Despite the threat of fiber, Marova says copper cable will continue to pack a mean punch for the industry, with several market drivers helping to maintain its niche. The drivers include local area network growth in size and number; dominance of utp in the horizontal space; cable replacement and new construction wiring projects; and installation improvements.