High Demand Creates Fiber Shortage in US

Suppliers of fiber optic cabling increasingly find it difficult to keep up with the seemingly endless demand for this hot commodity. That's leading to shortages and price increases in some regions, including the United States.

"The demand for fiber optic cabling on the global market is outpacing supply; this is mainly a result of the constantly increasing demand being seen from China," Andrey Bushmelev, an IndexBox analyst, told UBB2020. "China accounts for approximately 52% (or 185 million kilometers in 2015) of global fiber optic cable consumption: most of the demand for fiber optic cable here stems from the major telecommunication service providers (China Mobile, China Unicom and China Telecom)."

Chinese exports of fiber optic cable jumped to $21.4 billion from $7.24 billion a decade ago, growing at an average rate of 12.8% between 2006 and 2015, IndexBox found. The US is the largest importer of cabling products, spending almost $20 billion on fiber in 2015, the research firm said.

And broadband providers are not the sole users of fiber optic cables, said Grand View Research, which found growing demand for this technology from military and defense, healthcare and aerospace verticals, for example.

The breakdown
Fabricated parts -- or preforms -- make up a critical raw material in the production of fiber optic cabling; China, the US and Japan represent about 80% of preform production, according to IndexBox. But while China accounts for 56% of preform consumption, it only creates about one third of these parts, forcing it to rely on imports for the remaining fourth, said Bushmelev.

Simultaneously, China – like many other countries -- is pursuing multiple ultra-broadband initiatives to strategically position itself for support of 5G, FTTx, LTE, 4G, Internet of Things and other current and future technologies, he said.

There's also a worldwide shortage of single-mode fibers. Because multi-mode fibers are encountering bandwidth-related problems on local area networks (LANs) and in data centers that operate at speeds of more than 10 Gbit/s, there's more demand for single-mode fibers, said Bushmelev. The US has only three fiber-optic cabling manufacturers of single-mode fibers compared with 26 in China, he said. Although Chinese factories are increasing their production, imports aren't growing proportionally due to internal demand, said Bushmelev.

"The constant increase in traffic and Internet speed is resulting in the use of fiber optic cabling with increased bandwidth; single-mode fiber optic cabling is equipped with this capacity. The global market, however, is facing a shortage of single-mode cabling; this implies that the major telecommunications companies and wholesale suppliers need to restructure their logistics strategy and to pre-contract the required volume of fiber optic cabling," said Bushmelev. "This would result in the long-term freezing of funds and an increase in costs. In the long run, this would shift to the end consumer, causing the price of infrastructure and communication services to rise."

Everstream, which deploys fiber to enterprise and wholesale customers, already takes this approach, ordering fiber-optic cable based on future needs about a year in advance, said Brett Lindsey, Everstream president and CEO, in an interview. (See Everstream CEO: The One With the Most Fiber Wins)

"We try to buy our cable based upon a forecast for the year and lock it in. Every quarter it's almost like an auto-shipment of fiber that comes in from our partners because we know how much fiber we're going to build and then we know how much we're going to need," Lindsey said. "But if you were going to try and go and build a brand new network from scratch and were going to need hundreds of miles of fiber, I would think that could be complicated right now. If you were doing a greenfield build, I would think you might have some challenges getting access to large quantities of fiber."

Other providers are investing in less fiber-intensive solutions, such as GPON and NG-PON2, said Ronan Kelly, chief technology officer of EMEA/APAC at ADTRAN, told UBB2020.

"Frequently we're hearing of impending shortages coming up in the next few years because the demand for fiber has risen to such a level now that there's insufficient capacity within the industry to address all that demand. The challenge they face is that it can take anything up to 18 months to turn on new capacity, i.e., to build a production facility," he said. "So PON architectures are becoming more attractive because... they consume less fiber."

Pricing pressure
Fiber-optic cabling prices vary widely by region, according to IndexBox. China currently faces no increase, but the situation in the US supports higher prices, said Bushmelev. As the ability to import cheaper cables from China decreases, pricing could grow, he added.

"In the medium term, when the market appears balanced, moderate price increases are projected to continue," said Bushmelev. "However, increasing demand in China could cause some shortage in supply over the rest of the world, thereby pushing prices outside China upward."

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— Alison Diana, Editor, UBB2020. Follow us on Twitter @UBB2020 or @alisoncdiana.