Corning is seeing the fruits of its service provider customer network expansion projects, reporting that first-quarter 2021 optical sales rose 18 percent year-over-year to $937 million.
Corning’s Optical Communications unit reported year-over-year gains in the Carrier Network and Enterprise segments. Carrier Network sales were $665 million and $227 million, up 17 and 22 percent, respectively.
Tony Tripeny, CFO of Corning, told investors during its first-quarter earnings call that the company’s broad portfolio puts it in a position to better pursue opportunities in 5G wireless, data centers and fiber to the home (FTTH).
“Corning is the industry leader and the only large-scale end-to-end manufacturer of optical solutions, which allows us to innovate on important dimensions not available to competitors,” he said. “This puts us squarely at the center of growth trajectories in fiber to the home, 5G and hyperscale data centers. We’ve returned to growth in optical communications, and we remain confident that we will continue to grow.”
A key growth segment for Corning’s Optical Communications unit is FTTH. The U.S. FTTH market segment will be driven by large players, such as AT&T, Lumen and a growing host of smaller players, such as independent telcos and electric cooperatives now offering broadband services.
AT&T CEO John Stankey recently told investors during its first-quarter earnings call that it is on track to connect more homes with FTTH throughout 2021 – a promise that could be a boon for Corning and competitors including CommScope and Prysmian.
“There’s good news on fiber to the home,” said Wendell Weeks, CEO of Corning. “AT&T’s CEO, John Stankey recently said that fiber underpins the connectivity we deliver, serving both wired and wireless. His company announced plans to increase its fiber-to-the-home footprint by an additional 3 million customer locations across more than 90 metro areas in 2021.”
Government-Driven Policies Show Promise
As it meets to fulfill the demands of its customers’ FTTH buildouts, Corning is seeing an increase in sales and customer orders. It also wants to be part of the group of service providers that will benefit from government-based broadband policies.
“We’re seeing orders and sales increase,” he said. “And we’re also seeing multiple governments starting to shape policy that asserts broadband is a basic right.”
The U.K. unveiled its Project Gigabit initiative, which plans to bring next-generation broadband to more than 1 million hard-to-reach homes and businesses. Also, the European Commission is calling for 135 billion euros to support the rollout of rapid broadband services to all regions and households starting in 2021.
Likewise, in the U.S., there are two key government initiatives to spur more broadband expansion: President Joe Biden’s $120 billion proposal to connect every American with high-speed broadband and the FCC’s $20.4 billion Rural Opportunity Development Fund (RDOF), a program to bring high-speed fixed broadband service to rural homes and small businesses that lack it.
Broadband is also part of President Joe Biden’s broad infrastructure plan. A key element of Biden’s broadband plan, which is part of a broader $2.3 trillion infrastructure package, focuses on spending dollars for government-run or nonprofit networks. According to a White House fact sheet, those providers have “less pressure to turn profits” and “a commitment to serving entire communities.”
“They’re developing action plans to take optical solutions to many more homes,” Weeks said. “Just looking at the two biggest efforts, the Rural Opportunity Development Fund and the President’s infrastructure plan, we see a multibillion-dollar opportunity for Corning.”
Corning hopes to make a bigger impact is the wireless industry’s migration to 5G, which will require a larger investment in fiber to support the small cell nodes that will distribute signals to consumers and businesses.
AT&T and Verizon – winners in the recent $81 billion 5G spectrum auction – are collaborating with Corning and investing in their fiber networks to meet growing customer demand.
Verizon recently named Corning a network partner for 5G radio nodes in retail and other venue deployments of millimeter-wavelength (mmWave) systems. Following trials last September, Verizon Business and Corning have begun commercial installations of in-building cell sites for enterprise customers.
Corning’s indoor cell site can provide Verizon’s 5G mmWave service inside facilities such as hospitals, manufacturing facilities, warehouses, schools, ports, commercial office space, retail stores and any indoor environment in which large amounts of data traffic must be managed and optimized.
Earlier, the telco named Corning and Prysmian as its two main fiber suppliers to support its 5G wireless buildout. In 2017, Verizon signed a deal with Corning to purchase up to 20 million kilometers (12.4 million miles) of optical fiber each year from 2018 through 2020, with a minimum purchase commitment of $1.05 billion.
Under Verizon’s One Fiber initiative, the telco has deployed more than 42,000 route miles of fiber. This fiber network forms the backbone of the provider’s Intelligent Edge Network.
Weeks sees great potential for fiber to be an enabler for the wireless industry. Traditionally, wireless operators relied on low-speed copper-based T-1 circuits.
“We see the entry of fiber optics as a significant entry into wireless,” Weeks said. “Historically in 4G systems or 3G, [wireless operators] have been relatively fiber poor. They haven’t been big consumers of fiber. But with 5G, those cells need to be so much closer to the consumer, to their customers.”
Corning also wants to be able to pursue converged network opportunities. Large service providers like AT&T and Verizon, which run wireline and wireless networks, are moving to multitask their fiber networks to serve consumer wireline, business and wireless.
“Operators are building more converged networks,” Weeks said. “They’re realizing that their very best returns were by putting in fixed glass networks and then being able to serve as many different offerings as possible off the tip of that fiber.”
Overcoming Supply Chain Challenges
Although Corning’s optical group saw growth in the first quarter, the fiber supplier wasn’t immune to the impact of how the COVID-19 pandemic slowed its global supply chains.
“During the quarter, multiple events disrupted global supply chains,” Tripeny said. “Like many other companies, we experienced elevated freight and logistics costs across our businesses, and we expedited shipments to meet our customers’ expanding demand.”
He added that this “ultimately reduced profits by approximately $50 million,” which “was most pronounced in our environmental technologies, optical communications and display businesses.”
However, Corning is taking steps to mitigate supply chain costs. Tripeny said Corning expects to see these costs “begin to decline in the second quarter and normalize longer term.”