The Global Optical Transport Network Market is expected to grow at a compound annual growth rate of 17.77% to reach a market size worth US$75.937 billion by 2027. This market was valued at US$24.161 billion in 2020. The advancing multimedia services, social networking, mobile applications, VoIP, and cloud computing are bound to increase digital traffic exponentially. To keep up with the demand, there is a strong necessity for the telecommunications sector, and network service providers must adapt swiftly. Besides, the number of bandwidth-hungry applications is continuing to expand. Earlier, voice calls used to be the only type of network traffic conveyed across circuit-based networks in a predictable network connection between two destinations. But the majority of network traffic today is packet-based, generated by a variety of services and applications in bursty, unpredictable traffic, with widely changing and more rigorous bandwidth and data transmission performance demands. The optical transport network is a digital wrapper that offers a network-wide framework and can encapsulate data frames, enabling various sources of data to be delivered on the same channel, thereby establishing a virtual optical private network for every client signal.
Analysts anticipate that the rapid internet penetration and technological advancements are expected to drive the Optical Transport Network Market onward.
The rapid penetration of smartphones, computers, and tablets has exponentially propelled the consumption of the internet. Other factors such as the current trend of digitalization, emergence of 5G, increasing adoption of industry 4.0, IoT and IIoTs are visibly bringing positive growth in the telecom industry and optical transport network industry. According to the Cisco Annual Internet Report, by 2023, about 5.3 about 66% of the global population, i.e., 5.3 billion people with be using the internet, and about 70% of people will have mobile connectivity. At the same time, the fixed broadband speed with reach 110.4 Mbps by 2023, from 45.9 Mbps in 2018. Furthermore, about 300 mobile apps would be installed.
Furthermore, the emergence of 5G is expected to change the information and communications technologies ecosystem for the better. Unlike previous networks, 5G possesses the ability to take mobile communications technology to the next level and offer a completely connected digital world while providing an adequate network for IoT. Thus, 5G services offer low latency, high bandwidth, and a large number of connections, which creates demand for bandwidth with high requirements, latency, capacity, and flexibility in networks. To carry 5G networks efficiently and maintain sustainable competitiveness, there is a strong necessity and demand for a well-developed and optimized OTN. Thus, the ONT's component, the optical switch, is expected to be in high demand in the market. The optical switch licks the various optic fibers to each other and controls the data packet routing among inputs and outputs. These optical modules are capable of generating high bandwidths and extended reach. The Wavelength Division Multiplexer (WDM) based OTN can offer innumerable connections over fiber, creating a high demand for it.
The aforementioned attributes are adding impetus to the growth of the optical network market. Exploiting this, several major key players like CISCO, Huawei, Fujitsu, and Adva are investing in the developments of the OTN and actively launching new products in the market to enhance their brand presence and footprint. For instance, in March 2022, Nokia launched a wide range of upgrades for its P-OTN (packet OTN) solutions. The new upgraded solutions can now offer a doubling of switching capacity up to 48 terabytes per second, new WDM (Wavelength-division multiplexing) uplinks, and an extensive range of soft and hard isolation features for network slicing, among many others. Nevertheless, the high initial costs associated with the deployment of an optical transport network are expected to slow down the growth of the market in a global landscape.
By type, WDM Technology is expected to hold a major share in the optical transport network market, according to analysts.
Wavelength-division Multiplexing, WDM in short, is a technology that facilitates the transmission of multiple optical signals over a single cable. Its working principle is similar to that of the Frequency Division Multiplexing (FDM), wherein multiple signals are sent over several carriers, occupying non-overlapping components of the frequency spectrum. The spectral band employed in WDM is between 1300 and 1550 nm, the two-wavelength windows where optical fibers have a relatively minimal signal loss. WDM offers a wide range of advantages, including easier reconfiguration, high security, higher bandwidth, user-friendly, duplex transmission, and many more. Such appealing features, coupled with the need for the higher bandwidth in the advancing OTN segment and the emergence of 5G, are expected to drive the market growth onward.
According to regional analysis, the optical transport network market in the Asia Pacific is expected to hold a significant share during the projected period.
By geography, the optical transport network is segmented into five regions: Asia Pacific, Europe, North America, South America, and the Middle East and Africa. The dominant growth in the Asia Pacific region could be attributed to the increased smartphone penetration, increased internet consumption, and enhanced fixed broadband speed. For instance, according to the Cisco Annual Internet Report, Pacific Asia is estimated to have the highest internet consumption with 3.1 billion Internet users, accounting for 72% of the regional population by 2023. Moreover, the average fixed broadband speed is estimated to reach 157.1 Mbps by 2023, from 14.3 Mbps in 2018. The increasing strategic developments deployed by the regional key players are further expected to boost the market. For instance, in February 2022, Chinese-based Huawei won Bharat Airtel, India's second-largest telecom operator's contract for telecom infrastructure expansion worth Rs. 150 crores. The deal was a part of an expansion and upgrade of the National Long Distance OTD network.
The global pandemic had a positive impact on the optical transport network market. The mandated lockdown and quarantine amid the pandemic forced firms to adapt the work-from-home model and digitalize the operations by adopting integrated cloud-based platforms to enable remote access to all employees. At the same time, schools and universities too adopted a distance learning online teaching system. Subsequently, the need for better digital connectivity and higher bandwidth arose, increasing the pressure on the telecommunications industry. Owing to an increase in investments in research and development and technological innovations, the optical transport network market expanded significantly.