The ever-rising costs of petroleum-based raw materials, steel and energy are straining budgets throughout the country, leaving no one unaffected, including the fiber-optics industry.
Draka Comteq, a fiber and cabling supplier that is a joint venture between Draka Holding N.V. and equipment maker Alcatel in early January said it was elevating fiber cabling prices, but would not return multiple calls from xchange seeking further comment.
One industry source, speaking on condition of anonymity, says cabling companies do not like to talk about price fluctuations because to do so would tip their hands to competitors. Yet, everyone is experiencing the same woes since the increases stem from the same places: the higher costs of producing stainless steel, copper shielding and plastic — all used to house the fiber — and of distributing those commodities.
In a Jan. 3 news release, Allen Griser, director of marketing at Draka Comteq, explained the company has fallen victim to the “unavoidable increase” in commodity material figures. “We continue to actively manage material costs and volatility to ensure a steady reliable supply of quality fiber cabling,” he said in that statement. “An updated price structure will go into effect during the first quarter of 2006.”
Similarly, Corning Cable Systems, part of Corning Inc., announced in December 2005 it was forced to raise cabling prices, but did not say by how much. Like Draka Comteq, Corning cited hikes in the value of plastics, metals, energy, transportation and manufacturing. The company, however, would not talk about how it planned to pass on those increases to its customers, which include Verizon Communications Inc.
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Corning Cable Systems has aimed to provide its customers “with the highest-quality products and services available, and we will continue to meet that commitment,” said Larry Aiello, the company’s president and CEO, in a press release. “However, with our supply chain costs continuing to rise, we have been left with no choice but to selectively raise prices.”
Bernard Deutsch, director of marketing and market development for Corning Cable Systems, says the company’s price increases apply to certain products where material costs have “substantially impacted our overall cost structure. In cases where raw material content is a high percentage of the total solution cost, we will work with our customers to find alternative solutions that meet their requirements,” he explains. “Such solutions may include higher prices, alternate products or a mix.”
The quandary for suppliers is that many of their clients are locked into long-term contracts. Verizon, for instance, has secured pricing with its suppliers for the “foreseeable future,” said spokesman Mark Marchand, so there will be no change in what the company pays. Marchand also stated that any variation in fiber cabling prices will not hamper Verizon’s FiOS Internet and TV deployments.
Verizon competitor BellSouth Corp. is in the midst of negotiations with suppliers for its fiber-optic network and would not comment on whether it will have to pay more for cabling.
Even though prices are on the march, content aggregator Research and Markets last year predicted the fiber-optic cabling market will experience a major shift by 2008, when fiber cabling shipments will surpass copper UTP cabling shipments. The firm forecasts fiber cabling shipments will grow from $1.2 billion in 2005 to $4 billion by 2010, with most growth coming from demand for data centers. Few analysts cover fiber-optic cabling, but KMI Research Senior Analyst Patrick Fay was able to tell xchange, “Revenue growth for the U.S. market will be due to incremental demand for fiber-optic cable rather than due to increased pricing.”
| Links |
| BellSouth Corp. www.bellsouth.com Corning Cable Systems www.corningablesystems.com Draka Comteq www.drakacomteq.us KMI Research http://kmi.pennnet.com Research and Markets www.researchandmarkets.com Verizon Communications Inc. www.verizon.com |
