RHK's Updated North American Optical Transport Forecast Shows Market to Decline 36% by Year End.

Business Editors/High-Tech Writers

SOUTH SAN FRANCISCO, Calif.--(BUSINESS WIRE)--Sept. 4, 2001

Revised market figures from telecom research firm RHK show the North American optical transport market will decline 36% from 2000 levels. New research states that optical transport equipment sales, including DWDM, SONET and Cross-connects, is expected to end the year at $12.5 billion, down from $19.6 billion for 2000. RHK projects spending on equipment will remain flat well into 2002 as inventory is consumed and service providers lease capacity from wholesale carriers as a common practice.

"Since our last forecast, we completed another round of interviews with carriers, who account for 95% of carrier spending," said Dr. John Ryan, RHK founder, principal and chief analyst. "We found that carriers dramatically shifted their purchasing and operational behavior to match the unprecedented changes in competition and economics experienced in this market."

The updated RHK forecast points to several factors influencing the market segment:

-- A significant shift in carrier spending behavior from purchases of new
equipment to leasing capacity from other carriers;

-- Redeployment of in-service equipment to new routes better to match traffic
demand;

-- A more conservative and disciplined approach by carriers focused on
improving ROI (return on investment) that stresses "build to order" rather than
"build to plan";

-- A dramatic decline in prices as vendors struggle to sell new equipment; and,


-- A significant amount of capacity returned to incumbent carrier's networks as
a result of circuits de-commissioned from failed competitive carriers.

While telecom is currently in a downturn, optical transport is not a simple monolithic market. RHK maintains that particular market sectors, including metro transport, ultra-long-haul systems and optical core switches, will experience substantial growth for several years.

The data cited in the updated forecast stems from new, primary research, conducted by RHK analysts since June 2001. RHK analysts spoke directly with network planners and individuals responsible for capital spending for carriers, representing more than 95% of related capital spending in North American telecom, as well as marketing executives and others at vendors representing more than 98% of optical systems sales. Complete forecast data is provided from RHK's North America Long Haul and Metro Transport services. For more information about these findings, please contact Mike Mahan, vice president Sales at 650/737-9600 or [e-mail].

RHK Inc. is a leading global industry market research and consulting firm specializing in the analysis of advanced technologies for the public telecommunications network. The company provides subscription services and custom consulting to technology vendors, service providers, and the investment community covering North America, the Asia-Pacific, and Europe. RHK's areas of expertise include: optical access, broadband access, and new voice infrastructure; core and edge switching and routing; optical transport and undersea; optical components and communications semiconductors; operations support systems; and newly emerging technologies. RHK is based in South San Francisco, Calif. For more information, visit the company's web site at www.rhk.com.