Global Optical Transport Network Market Size and Share Analysis 2023-2028
An optical transport network (OTN) is a high-capacity network used for transmitting optical signals across multiple locations. It is particularly suitable for handling large volumes of data, making it ideal for transporting video, audio, and other types of traffic. Many establishments, such as airports, hospitals, and commercial buildings, rely on OTN networks to connect different regions worldwide.
The Optical Transport Network Market is projected to grow from USD 22.98 billion in 2023 to USD 34.41 billion by 2028, at a CAGR of 8.41% during the forecast period (2023-2028).
USD 20.7 billion in 2021
Technology, Offering, End User, Region
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The surge in internet users at home and work has created a significant demand for network bandwidth. The growing popularity of online gaming, social networking, video conferencing, and real-time streaming activities is expected to drive the market. One of the key reasons for the growth of the optical transport network market is its ability to provide seamless data transfer with minimal latency.
Additionally, the expansion of cloud services, the increasing capacity of data centers, and the rapid deployment of 5G technology are driving network traffic and creating a higher demand for network capacity. This presents a significant opportunity for the market to grow. For example, Ericsson predicts that global 5G subscriptions will rise from over 12 million to over 3 billion between 2021 and 2025, with the highest number of subscriptions expected in Northeast Asia, Southeast Asia, India, Nepal, and Bhutan.
As cities become smarter and more digital, communication infrastructure has become the fifth essential network after water, electricity, gas, and transportation. The development of digital technologies and industries determines the level of smartness a city can achieve. Communication networks play a vital role in enabling cities to function and provide services. Over 150 governments worldwide have announced fiber policies or internet initiatives, aiming to make network infrastructure freely accessible to the public. Governments are offering tax breaks or subsidies to accelerate the construction of backbone networks, improve network coverage, bridge the digital divide, and stimulate national economic development. For example, government spending on smart city initiatives in China is expected to reach USD 38.92 billion in 2023, according to the US-China Economic and Security Review Commission. These advancements in smart cities will drive the demand for optical transport network solutions.
However, the high initial investment required for network equipment installation and maintenance poses a challenge to the global OTN market. Furthermore, modern technologies such as 40G to 100G can enhance data traffic handling and transfer capabilities, but they come with high costs. The significant capital investment leads to a prolonged payback period, as customers often negotiate low prices for these projects even though implementation may take years, especially in the telecom industry. Consequently, the substantial upfront expenditure necessary for implementing OTN equipment is expected to hinder the global market growth.
During the COVID-19 pandemic, mobility restrictions were imposed to control the spread of the virus, resulting in a growing number of people working and learning from home among the estimated 1.3 billion citizens in the OECD countries. Critical international policy coordination through platforms like the G7 and G20 occurred online. Fixed and mobile broadband operators, content and cloud providers, and Internet exchange points (IXPs) experienced up to a 60% increase in internet traffic compared to pre-pandemic levels. These factors influenced the optical transport network market during and after the pandemic.
The market is segmented based on various factors, including technology, offering, end user, and region.
Segmentation by Technology
Segmentation by Offering
Service – Network Maintenance and Support and Network Design
Component – Optical Transport, Optical Switch, and Optical Platform
Segmentation by End User
IT and Telecom
Other End-user Verticals
Segmentation by Region
Rest of the World
The WDM segment held the largest market share of 48.08% in 2022 and is projected to witness the highest compound annual growth rate (CAGR) of 10.68% during the forecast period (2023-2028). Wavelength Division Multiplexing (WDM) is a fiber-optic transmission method that enables data to be transmitted through different light wavelengths or colors. It allows multiple signals to be sent at various optical frequencies or wavelengths using one fiber. By using a multiplexer, distinct signals can be multiplexed at the transmitter end. Wavelength division multiplexers are electronic devices that combine light signals from different optical fibers onto a single cable. This is achieved by using a coupler at the input of a wavelength division multiplexer to split white light into different colors with varying wavelengths. This ensures interference-free transmissions and consistent power. WDMs are widely employed in various applications such as access, enterprise communication, backhaul, long-haul, and metro networks to enhance communication capacity. The main advantage of employing WDM in optical fiber communication is its low cost per bit of transfer. It enables data transfer rates of several terabits per second over long distances, which motivates network service providers to deploy WDMs in their fiber optic networks. With the increasing demand for high-speed and high-capacity networks, the use of WDMs in optical fiber communication is expected to grow rapidly.
In 2022, the component segment accounted for the largest market share of 58.03%, and it is projected to experience a CAGR of 9.57% during the forecast period (2023-2028). Optical Transport Network (OTN) is an industry-standard protocol that allows the multiplexing of different services onto optical light pathways. OTN preserves the native structure, timing, and management information while transparently encapsulating the payload for transmission across optical networks. Although a significant portion of optical transport investments has been allocated to core and backbone networks, service providers need to establish metro networks to fully leverage the capabilities of the optical core and backbone. This presents opportunities for equipment manufacturers to provide high-volume and cost-effective components and systems.
The IT and telecom segment held the largest market share of 60.14% in 2022, and it is expected to witness the highest CAGR of 9.23% during the forecast period (2022-2028). The increasing demand for bandwidth from residential and commercial consumers is the primary driver for OTN. Factors such as the need for cloud storage of personal information, online gaming, online shopping, long-distance communication, social networking, and video conferencing have contributed to the growing use of residential internet services. According to DataReportal, there were 4.95 billion global internet users at the beginning of 2022, representing a penetration rate of 62.5% of the world’s population. Additionally, approximately 1.134 trillion MB of data is generated daily, indicating a substantial increase in global data usage. These figures highlight the need for fast and reliable data networks like OTN. Moreover, the rise of e-commerce, mobile and internet banking, online government services, industrial automation, Internet of Things (IoT), and utility networking further drive the demand for high-capacity OTN solutions from commercial customers.
In terms of regional markets, North America accounted for the largest market share of 35.14% in 2022, while the Asia-Pacific region is predicted to experience the highest CAGR of 9.73% during the forecast period (2023-2028). According to Internet World Stats, the Asia-Pacific region represents 54.94% of the global population, with an average internet penetration rate of 64.1% as of June 2021. China and India are the two significant contributors to internet usage in Asia, with 35.7% and 27.3% of the total internet users, respectively. These countries hold immense potential as market leaders in the industry. China has already surpassed 2 billion IoT devices in 2021 and has ambitious plans for robotics and smart manufacturing by 2025. The country aims to digitalize over 70% of large-scale enterprises and construct more than 500 demonstration manufacturing facilities by then. These strategic initiatives are expected to further drive the demand and growth of OTN solutions in the region. Additionally, the rapid development and commercial applications of AI, 5G, IoT, and virtual reality are fueling the demand for data processing and information interaction. This will accelerate the construction of data centers and contribute to the industry’s explosive growth in markets such as China, Japan, Australia, India, and Singapore. Mitsubishi Electric Corporation’s recent announcement about its 50Gbps distributed-feedback (DFB) laser diode for 5G mobile base stations also highlights the ongoing technological advancements in the region and the growing need for OTN solutions to support high-speed and large-capacity data transmission.
The optical transport network market exhibits a fragmented competitive landscape, primarily due to the substantial presence of numerous companies operating in the industry. Key market players such as Fujitsu, Huawei, Cisco, and ZTE Corporation, among others, contribute significantly to this sector. These industry participants remain committed to enhancing their product portfolios through continuous innovation, strategic partnerships, and mergers and acquisitions. By leveraging these strategies, they aim to gain a competitive edge and strengthen their positions within the market.
Key Companies Profiled in this report include Ciena Corporation, Cisco Systems Inc., Ericsson AB, Fujitsu Ltd., Huawei Technologies Co., Ltd., Infinera Corporation, NEC Corporation, Nokia Corporation, Yokogawa Electric Corporation, ZTE Corporation.
Recent Industry Developments
In December 2022, Huawei unveiled a range of advanced all-optical solutions for rail transportation networks, including the next-generation urban rail bearer network, urban rail cloud optical network, and railway all-optical backbone network solutions. These solutions address the specific network requirements and challenges of the urban rail cloud era. One such solution is the urban rail cloud optical network, which utilizes cloud-based services and employs 10G single-wavelength transmission to deliver data directly to the control center in a single hop. This eliminates transmission latency caused by intermediate nodes, ensuring an end-to-end latency of less than 1 millisecond and delivering a high-quality service experience.
In September 2022, NEC Corporation showcased its commitment to expanding All-Optical Networks by introducing the “SpectralWave WX Series,” a lineup of optical transport products that comply with open specifications. These products are based on open Reconfigurable Optical Add-Drop Multiplexer (ROADM) technology and conform to the standards set forth by the Telecom Infra Project’s (TIP) Phoenix initiative.
In June 2022, Infinera and NEC Corporation jointly announced the successful deployment of Infinera’s ICE6 technology in Neutral Networks’ new international neutral fiber optic network NEXT. The collaboration between the two companies resulted in the largest optical network upgrade project in the region over the past two decades. The NEXT network, equipped with Infinera’s ICE6 800G coherent technology, will provide high-capacity services and create a solid foundation for future expansion in the area. This partnership signifies a significant milestone in designing an extensive and state-of-the-art optical network connecting Mexico and the United States.
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