Andrew Schmitt, Infonetics Research
The attention of market participants up and down the supply chain is now focused on 100G transport, and 2012 is shaping up to be a point of inflection in the development and deployment of the technology. It is worth reviewing the key trends that are unfolding as we head into this pivotal year.
The Optical Reboot: Service providers view the transition to coherent technology as an opportunity to 'reboot' their network architecture.
These new coherent networks will be devoid of dispersion compensating fiber modules and rely instead on electronic dispersion compensation (EDC), simplifying optical planning and making all-optical networks more feasible. New ROADM architectures with more flexible configurations (colorless, directionless, contentionless) will interconnect these new spans, allowing for the construction of optically switched networks. Meanwhile, G-MPLS will also power the new control plane running the network, allowing wavelength provisioning and restoration to take place.
Taken together, coherent transmission, ROADMs, and G-MPLS will fundamentally change the way core optical networks are built.
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More Suppliers: Today, Ciena (Nasdaq: CIEN) and Alcatel-Lucent (NYSE: ALU) are the only suppliers of production-grade 100G transport equipment. By the fall of 2012, we expect the list of vendors to expand from two to at least seven, as solutions from Cisco (Nasdaq: CSCO), Fujitsu, Huawei, Infinera (Nasdaq: INFN), and Nokia Siemens Networks are well underway. This does not include other equipment vendors that will benefit from the efforts of third-party component companies such as Acacia, Clariphy, and NTT Electronics--the three companies that provide the crucial DSP silicon that powers the coherent optical links.
Twelve months from now, 100G will transition from a market with limited suppliers to one with a robust selection of alternative approaches.
The Rise of OTN: Virtually all 100G networks will use OTN as the transport protocol, as it is ideally suited for transparently carrying bundles of 10G traffic whether it is Ethernet, SONET/SDH, or MPLS. Ongoing deployments of 40G and 100G today use OTN in a simple muxponder configuration, an architecture that becomes inefficient once large capacity is deployed. Similar to how large SDH crossconnects like the Ciena Coredirector underpinned 10G deployments, new large OTN crossconnects from Alcatel-Lucent, Ciena, Huawei, Infinera, and NSN will interconnect these new 100G links. Some carriers, including China Mobile, Verizon (NYSE: VZ), and Telefónica (NYSE: TEF), are planning to extend OTN switching into the metro, even in the absence of 100G links.
No Modulation Wars: Unlike 40G, which traversed an alphabet soup of various coherent and noncoherent modulation schemes, 100G service providers and vendors rallied behind the 100G PM-QPSK Coherent format, allowing component suppliers to move forward with more certainty of demand and increased competition. Even better, the high shipment volume of 40G DQPSK and PM-QPSK has primed the pump for 100G component shipments as some of the 40G technology easily transfers.
The Right Price: Each year Infonetics Research surveys service providers about their plans to deploy 40G and 100G. Recent results show 85 percent of carriers will choose 100G when the price of 100G reaches 2x (double) the price of 40G. We believe that this will take place in 2013, as the many vendors jockey to secure the crucial domain wins in the early years of 100G deployment. This is backed up by our analysis of the 100G bill of materials, which indicates the cost of a coherent 100G solution is approximately 50 percent more than 40G coherent.
The economics of 100G should lead to carriers preferring 100G as the speed of choice when building new networks, while 40G will be used mostly for low capacity routes and retrofitting existing networks when incremental 10G cannot be used.
2014 Will Be a Pivotal Year: 100G deployment revenue should outstrip that of 40G within three years, as the larger service providers, which account for the majority of telecom capex, embrace the superior cost-per-bit performance offered by 100G coherent transmission. This will be coupled by a move towards 100GbE (Ethernet) router interfaces, as service providers other than AT&T (NYSE: T) and those in China have largely delayed adopting 40GbE technology while waiting for 100GbE.
Andrew Schmitt is Directing Analyst, Optical for market research and consulting firm Infonetics Research. You can follow his lively and colorful commentary via Twitter at @aschmitt.