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Turning Corners

Unlike last year, there are now signs surfacing that the chronic slowdown in the structured cabling industry is about to end. Cat 6 is certainly helping to stem the bleeding.


June 1, 2003  


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Many industry experts agree Canada’s structured cabling sector has started to turn a corner in 2003, and some even see signs of a surge in investment and activity.

The industry is just beginning to see a slow upturn in business, says John Bakowski, LAN OSP product manager for Bell Canada. “The reason I say that is due to increased demand today, versus even six or seven months ago, for Cat 6. “

While fiber-to-the-desktop still remains “on the horizon,” people are beginning to appreciate what speed can do for them, he says – which means manufacturers are stepping up with product that provides more speed to the desktop. That in turn, adds up to increased Cat 6 demand and eventual installations.

The Siemon Company, is predicting a gradual upturn in market conditions in 2003 in light of increased activity in key sectors and greater clarity on performance standards. The key word in that assessment, says Bakowski, is “gradual.”

While the U.S. market has “bottomed out” as far as inactivity” is concerned, he predicts that Canada “is not going to see an upsurge, so much as a gradual demand, for business.”

Consultant Dunn Harvey says the domestic market is at the “watch what is going on and be ready -when, and if, it comes” stage. Translation: The situation is going to improve. It’s a question of when.

Canada’s cabling industry, he says, is still in a state of rationalization.

“We have seen providers trying to expand in other areas of the country to survive. A comment I heard from one designer was ‘my company has had four different owners within the last year alone.’ With so many changes taking place, nobody knows exactly where they will be in the near future.

“There are still a lot of uncertainties out there,” says Harvey, “2003 is looking up, but it is a very careful move upwards.”

A Yankee Group study released two years ago predicted that any enterprise that had not recently redesigned its communications infrastructure would be soon compelled to do so. Nine out of ten companies may need to overhaul their corporate communications infrastructure in the next five years, it found.

Robert Kostash, Avaya Canada’s sales director, connectivity solutions, says while that was not an inaccurate assessment of how many companies should upgrade, it was an “optimistic” reading of how quickly those upgrades would occur.

The reality, he says, is that the economy has been “really tough” on organizations. As a result, cabling investments have focused less on upgrades to improve existing facilities and more on essential cabling for new buildings.

However, within two years, Kostash predicts an increase in deployment of Gigabit Ethernet and, subsequently, more installation of higher performance cabling systems. ” I think we’ll not only see an increase, but an explosion in (cabling upgrades),” he says.

While predictions vary, most agree that what’s been happening to Canada’s structured cabling industry is a cycle. It’s the kind that “affects every industry, from commodity-based industries to hog futures,” says Kostash. “We’re due (for a turnaround). Oh, are we due.”

Many agree ratification of Category 6 last June has contributed to an upturn in business for manufacturers.

Bakowski says it put the confidence of the customer back in the hands of the people designing structured cabling. “No one is dealing with smoke and mirrors any more. They have a stake in the ground and the standard is there. Now, we know what we’re doing and we’re all working toward it.”

Cost, coupled with uncertainty, are the catchwords for Dunn. Corporations have legacy equipment in place, he says, and no budget to replace old equipment. Also, their need for higher performance is not identifiable right now, he says, adding that many have had to reduce their staff over the last few years, and “don’t really know where the future will take them.”

Consequently, Dunn believes most new cabling installations will eventually revolve around Cat 6, but he does not expect corporations “to jump on the bandwagon and immediately ‘replace’ existing Cat. 5 cabling.

“After all, most Cat 5 cabling will support upwards of 1000 Mbps. I’ve seen some 1000 Mbps installations in the backbone, but I have yet to see many going to the workstations. Let’s face it, even 100 Mbps is a lot of capacity at the workstation.

As for other technologies requiring upgrades in cabling, Harvey says the need will not be generated by VoIP.

Even when they move to a new location, most corporations do not have the budget for changing the PCs and NIC cards for fiber NIC cards, Harvey says. The result: Copper still has the top rating for new installations and this will be the status quo for quite a while yet.

Still, a recent study from FTM Consulting Inc. based in Hummelstown, Pa. predicts that the worldwide cabling market will grow significantly over the next five years and fiber’s share of the market will soar to 75.8 per cent, from 59.4 per cent.

The report says the worldwide cabling market decreased by 10.5 per cent last year. It sees “modest” six per cent growth this year and predicts the global market will reach US$18 billion by 2008, at a rate of 16.8 per cent growth, bolstered by two key developments: The emergence of new broadband applications in developed regions (and subsequent demand for new technology fiber cabling to replace existing copper cabling), and installation of initial LANs in less developed regions such as China.

The report sees fibre cable growing at a rate of 23 per cent — far exceeding copper cable growth of only 6.5 per cent — between now and 2008. The global economic downturn has hurt everybody, according to FTM president Frank Murawski. He says what’s has been holding back growth in North America — aside from the economy — has been the saturation level:

“We don’t have that in other parts of the undeveloped world,” he said, in the report’s executive summary. “Many countries are just putting their initial networks in and they have a long way to go.” Murawski notes that chip manufacturers are anticipating a good year – “and they generally are a good leading indicator of what will happen in the cable industry…Everything has been down, down, down. All of a sudden, there is a comfortable feeling that things are improving,”

Another good indicator: BISCI’s mid-year conferences tend to be populated more by people companies send to keep current and up to date. They’re a good barometer for what’s happening in the industry, some say.

Within a one-week period, conference registration at the BICSI conference in Denver in May more than doubled to 1,500 attendees.

Many industry players and observers see a significant shift taking place in the relationship between companies and cabling partners, with the emergence of the integrated cabling supplier as a partner who will be both financially and physically responsible for a project.

The only wedge that’s being driven into that relationship, says Bakowski, is people who try to provide alternate solutions: “There are a lot of people in this business still in it for their self interests,” he says.

Tom Murray, general manager of HellermannTyton Canada, forecasts commercial structured cabling will remain flat through mid 2004, while Canada’s residential will grow at better than 40 per cent for the next two years. He describes the structured cabling industry in general as being in a state of disarray.

“On the commercial side, business is at historically low levels and no significant change is on the near horizon.” Is the worst over? “Well that is anyone’s guess but I suppose it is,” he says. “Unfortunately, the magnitude of the available market today is significantly less than a few short years ago and there is insufficient impetus to drive growth in the near-term.”

He adds that despite a sluggish economy, residential will continue to grow “due to the fact there exists very little deployment in the market to date” and that quality affordable systems with many options” are commercially available today.

“While the adoption of structured cabling systems is more common in the higher priced reside
ntial environments – home’s at $200,000 and up – there exist product choices that would allow a homeowner to ‘gear up’ for under $1,000 to a basic level,” he says. Murray adds that unless subdivision or high-rise developers are offering systems as a package, when homes and condos are initially built and sold, the wide-scale deployment of structured cabling in the residential environment will be slow.

This, he says, is due to significantly lower installed costs at the construction phase, and the ability of the homeowner to absorb the small incremental cost in their mortgage. “The long-term utility and comparatively low cost of today’s structured cabling systems for the home make the deployment decision simple.”

As for the future, observers point to recent shakeups and mergers and say a ‘survival of the fittest’ is evolving.

A lot of people have come to realize the structured cabling world is more prone to flux than the telco world, they say, which is why the little guys don’t make it. That, combined with downturn in some business, is going to cause an additional shakeout.

The competitors left standing, predicts Bakowski, will be those who are truly in the business to support the customer.

A former executive member of the international telecommunications association BICSI who’s now running for president of the organization, Bakowski issues this industry challenge: “The weakness in the structured cabling system today continues to be the patch cord. We’ve got cabling, the connectivity and the jacks all down to a real fine science. The patchcord continues to be the weak link in the system. The first manufacturer to come up with a cordless patch panel – a fully digital-switched patch panel without the cords… whoever makes that, well, they’ll be the big industry winner.”

JoAnn Napier-Chiasson is a business-communications consultant and technology author based in Halifax. She can be reached via e-mail at jnc@ns.sympatico.ca.