Increases in Demand for Online Video, Stabilize Prices for Fiber-Optics Lines

FiberOpticPricing.gif Source of graphic:  online version of WSJ article cited below.


(p. B1)  At long last, the pipes are starting to fill up.

For years, the fiber-optic communications industry has been awash in spare capacity that sent prices for data transmission plunging.  Now, thanks to continued growth in Internet traffic, demand is beginning to catch up with supply in many areas of the active global network.

Still, plenty of inactive fiber-optic lines remain — the majority of the lines put into the ground or underwater have gone unused for years and can be activated on short notice and relatively inexpensively.  That means the glut has not come to a definitive end and consumer prices are unlikely to rise.  But at the moment, prices for sending data traffic at least appear to be stabilizing, providing a welcome reprieve for companies that operate the so-called backbone of the world’s telecommunications infrastructure.

. . .

What’s behind the increased demand for network capacity?  Industry executives and Prof. Odlyzko say video sent via the Internet is a key driver.  That includes the increasing distribution of movies online, many sent illegally.  On local (p. B4) phone networks that reach into most homes and offices there has never been excess capacity, and carriers like Verizon Communications Inc. are spending billions to beef up local connections to handle tasks like video.

. . .

Level 3 Chief Executive James Crowe admits "our crystal ball got cracked pretty badly there" during the tech boom, but says on Level 3’s network now "there’s every sign that inventory that was up on the shelf is being drawn down and in some areas even exhausted."



For the full story, see:

MARK HEINZL and SHAWN YOUNG.  "With Rising Internet Traffic, Spare Fiber-Optic Lines Fill Up."   The Wall Street Journal  (Thurs., April 27, 2006):  B1 & B4. 

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