Consumers' rapid adoption of broadband cable and DSL Internet access will prove to be the single biggest bandwidth driver yet. Though DSL and cable modem shipments will still pale in comparison to analog modem shipments for the next several years, shipments of broadband equipment are already having a sizable impact on potential bandwidth demands. Potential new consumer Internet bandwidth is expected to grow at a 27 percent compound annual rate. Growth between 1999 and 200 will be 100 percent, slowing after that.

Therein lies the root of the market's unhappiness with the communications IC segment. But the slowing growth should come as no surprise, given that it is easier to grow small numbers than large ones.

Since consumer markets tend to be viral in nature, an intense positive feedback process should kick in when broadband penetration reaches around 10 percent. Not only will perpetually hyped services like video-on-demand and consumer videoconferencing take off, but new services will arrive to further drive demand.

As a result, the communications semiconductor market still has legs. High revenue growth should shift over time from DSL and cable modem chip suppliers to ATM and packet-over-Sonet suppliers. (Not only is ATM the technology underpinning for DSL, but the massive installed base is unlikely to disappear.)

It is true that growth in the broad communications semiconductor market is slowing. It is also true that the financial markets put the cart ahead of the horse from time to time. That was certainly the case with fiber-optic components manufacturers, but they will have another day in the sun when enterprise bandwidth demands escalate. Companies are only now building data centers that unite far-flung operations. Today, only a fraction of businesses replicate databases across various regions because pipes have been too thin, bandwidth too expensive and security too inadequate. With the availability of low-cost fiber-optic connections and high-speed encryption hardware, that is about to change, and there will be an explosion in the amount of storage-related bandwidth traversing public networks.

The sky is not falling. In fact, this analyst sees clear skies ahead.

Jeremey Donovan is a Principal Analyst with Gartner Dataquest.