60-second interview with .... Dell'Oro's Jimmy Yu
"For the year, it is going to be a fivefold growth rate [for 100 Gig transport]."
Jimmy Yu, Dell'Oro
Q: That fact that the market is down 5 percent on a year ago. Why is this?
A: There are a few factors. First, the macro-economy in Europe continues to get worse; that causes a slowdown.
A second factor is that in North America there was a decline in the second quarter, which is pretty unusual. Part of it, we think, might be that operators have caught up with a lot of the spending to increase broadband, after adding [to the network] for a couple of good years.
The third issue is that the China market has had a really slow start. And while there has been talk about the Chinese market softening, it seems that the CapEx [capital expenditure] is there for a strong second half.
What categories does Dell'Oro include when it talks about optical transport?
There are two main pieces: WDM [wavelength division multiplexing], both metro and long haul, and the multi-service multiplexer used for aggregation. The third piece, which is really small, is optical switching - optical cross-connect used in the core and lately more so in the metro.
According to Dell'Oro, wavelength division multiplexing was up 5 percent in the first half of 2012 compared to the same period a year ago, due to demand for 40 Gig and 100 Gig. What is happening in these two markets?
At 100 Gig we are at an inflection point where demand growth rates are really high. We've got a doubling in demand and shipments quarter-on-quarter [in the second quarter]. For the year, it is going to be a fivefold growth rate.
Also the 40 Gig is still growing. It has been around for a few years so its growth rate is not as strong [as 100 Gig transport] but it is still a significant part of the market.
Has the market settled on particular modulation scheme, especially at 40 Gig?
For 100 Gig the majority [deployed] is coherent. There is one company at least, ADVA Optical Networking, which is coming out with its direct-detection scheme for 100 Gig. This has now been shipping for one quarter. There is a market for the price point and the lower-span link of direct-detection.
For 40 Gig there is still a mix of modulations. Vendors coming out with 100 Gig coherent are also coming out with 40 Gig coherent options. So coherent at 40 Gig is now approaching half of the total market and is happening pretty quickly.
As for [40 Gig] DQPSK [differential quadrature phase-shift keying] modulation, it is probably a little bit more than DPSK [differential phase-shift keying].
You also report a rise in the adoption of optical packet products and that it contributed close to one-third of the optical market revenues in the first half 2012. Why is that?
The optical packet platform is a wider definition than just packet optical transport systems (P-OTS).
One reason why optical packet is growing is that with traditional P-OTS, you have cross-connect and switching capabilities in a WDM system so as you go to higher 40 and 100 Gig wavelengths you want some bandwidth management in that system.
Another thing is that people are trying to make the aggregation layer - the traditional SONET/SDH - more Ethernet friendly and MPLS-TP [multiprotocol label switching, transport profile] is gaining traction.
Combined, we are seeing this optical packet market has grown 12 percent year-on-year in the second quarter whereas the overall market has declined.
Dell'Oro said Huawei has 20 percent market share, which other vendors have double-digit market share?
Besides Huawei, the other vendors with double-digit percentage for the quarter - in order - are ZTE, Alcatel-Lucent and Ciena.
Did you see anything in this latest study that was surprising?
There was nothing in this quarter but I saw it last quarter. The legacy equipment – traditional SONET/SDH – is declining. Most of the market decline for optical is in legacy.
SONET/SDH sales in the second quarter of 2012 declined by 20 percent year-on-year. It is finally happening: the market is shifting away from SONET/SDH.
60-second interview with .... Sterling Perrin
Heavy Reading has published a report Photonic Integration, Super Channels & the March to Terabit Networks. In this 60-second interview, Sterling Perrin, senior analyst at the market research company, talks about the report's findings and the technology's importance for telecom and datacom.
"PICs will be an important part of an ensemble cast, but will not have the starring role. Some may dismiss PICs for this reason, but that would be a mistake – we still need them."
Sterling Perrin, Heavy Reading
Heavy Reading's previous report on optical integration was published in 2008. What has changed?
The biggest change has been the rise of coherent detection, bringing electronics to prominence in the world of optics. This is a big shift - and it has taken some of the burden off photonic integration. Simply put, electronics has taken some of the job away from optics.
How important is optical Integration, for optical component players and for system vendors?
Until now, photonic integration has not been a ‘must have’ item for systems suppliers. For the most part, there have been other ways to get at lower costs and footprint reductions.
I think we are starting to see photonic integration move into the must-have category for systems suppliers, in certain applications, which means that it becomes a must-have item for the components companies that supply them.
How should one view silicon photonics and what importance does Heavy Reading attach to Cisco System's acquisition of silicon photonics' startup, Lightwire?
When we published the last [2008] report, silicon photonics was definitely within the hype cycle. We’ve seen the hype fade quite a bit – it’s now understood that just because a component is made with silicon, it’s not automatically going to be cheaper. Also, few in the industry continue to talk about a Moore’s Law for optics today. That said, there are applications for silicon photonics, particularly in data centre and short-reach applications, and the technology has moved forward.
Cisco’s acquisition of Lightwire is a good testament for how far the technology has come. This is a strategic acquisition, aimed at long-term differentiation, and Cisco believes that silicon photonics will help them get there.
"It will be interesting to watch what other [optical integration] M&A activity occurs, and how this activity affects the components players"
What are the main optical integration market opportunities?
In long haul, we already see applications for photonic integrated circuits (PICs). Certainly, Infinera’s PIC-based DTN and DTN-X systems stand out. But also, the OIF has specified photonic integration in its 100 Gigabit long haul, DWDM (dense wavelength division multiplexing) MSA (multi-source agreement) – it was needed to get the necessary size reduction.
Moving forward, there is opportunity for PICs in client-side modules as PICs are the best way to reduce module sizes and improve system density. Then, beyond 100G, to super-channel-based long-haul systems, PICs will play a big role here, as parallel photonic integration will be used to build these super-channels.
Were you surprised by any of the report's findings?
When I start researching a report, I am always hopefully for big black and white kinds of findings – this is the biggest thing for the industry or this is a dud. With photonic integration, we found such a wide array of opinions and viewpoints that, in the end, we had to place photonic integration somewhere in the middle.
It’s clear that system vendors are going to need PICs but it’s also clear that PICs alone won’t solve all the industry’s challenges. PICs will be an important part of an ensemble cast, but will not have the starring role. Some may dismiss PICs for this reason, but that would be a mistake – we still need them.
What optical integration trends/ developments should be watched over the next two years?
The year started with two major system suppliers buying PIC companies: Cisco and Lightwire and Huawei and CIP Technologies. With Alcatel-Lucent having in-house abilities, and, of course, Infinera, this should put pressure on other optical suppliers to have a PIC strategy.
It will be interesting to watch what other M&A activity occurs, and how this activity affects the components players.
The editor of Gazettabyte worked with Heavy Reading in researching photonic integration for the report.
The OTN transport and switching market
Source: Infonetics Research
The OTN transport and switching market is forecast to grow at a 17% compound annual growth rate (CAGR) from 2011 to 2016, outpacing the 5.5% CAGR of the optical equipment market (WDM, SONET/SDH). So claims a recent study on the OTN equipment marketplace by Infonetics Research.
A Q&A with report author, Andrew Schmitt, principal analyst for optical at Infonetics.
How should OTN (Optical Transport Network) be viewed? As an intermediate technology bridging the legacy SONET/SDH and the packet world? Or is OTN performing another, more fundamental networking role?
There is a deep misconception that once the voyage to an all-packet nirvana is complete, there is no need for SONET/SDH or an equivalent technology. This isn’t true. Networks that are 100% packet still need an OSI layer 1 mechanism, and to date this is mostly SDH and increasingly OTN.
OTN should be viewed as the carrier transport protocol for the foreseeable future. For many carriers, OTN will be used not just for carrying a single packet client, but for interleaving multiple clients onto the same wavelength. This is OTN switching, and it is a superset of OTN transport functionality.
Most people talk about the OTN market but they fail to distinguish between whether OTN is used as a point-to-point technology or as a switching technology that allows the creation of an electronic mesh network.
What is OTN doing within operators' networks that accounts for their strong investment in the technology?
OTN is the new physical layer protocol carrying out the OSI [Open Systems Interconnection] layer 1 functions. Carriers are investing in OTN as part of their continuing investments in WDM [wavelength division multiplexing] equipment, most of which supports OTN transport, a maturing market. The new market is that of OTN switching, which resembles the SONET/SDH multiplexing scheme, but with much better features and management.
OTN switching deployments are directly related to large scale deployments of 40G and 100G transport networks as part of what I like to call The Optical Reboot. As these new wavelength speeds are rolled out, often on unused fibre, other technologies are being introduced at the same time – things like OTN switching and new control plane methods.
"People are underestimating how hard it is to build this [OTN] hardware and combine it with control plane software"
Please explain the difference between the main platforms - OTN transport, OTN switching and P-OTS. And will they have the same relative importance by 2016?
OTN switching is a superset of OTN transport, and the differences are shown in a Venn diagram (chart above) from a recent whitepaper I wrote, Integrated OTN Switching Virtualizes Optical Networks. Somewhere between the two is the muxponder application, which is good for low-volume deployments but becomes expensive and tough to manage when used in quantity.
P-OTS (packet-optical transport systems) are boxes that combine both layer 1 (SONET/SDH and/or OTN switching) with layer 2 (Ethernet, MPLS-TP, other circuit-oriented Ethernet (COE) protocols) in the same hardware and management platform.
Cisco was one of the early leaders in this space with some creative brute-force upgrades to the venerable 15454 platform. Since then, many legacy SONET/SDH multi-service provisioning platforms (MSPPs) have seen upgrades to carry Ethernet. Some of the best examples of this platform type are the Fujitsu 9500, Tellabs' 7100, and Alcatel-Lucent's 1850.
You say a big vendor battle is brewing in the P-OTS space: Cisco, Tellabs, and Alcatel-Lucent are the top 3 vendors, but Fujitsu, Ciena, and Huawei are gaining. What factors will determine a vendor's P-OTS success here?
It really depends. In the metro-regional applications of bigger boxes, things like 100G optics and OTN switching will be more important, as the layer 2 functions are handed off to dedicated layer 2/3 machines. As you get closer to the edge, though, OTN switching will have no importance and everything will depend on the layer 2 and layer zero features.
For layer 2, this means supporting a lightweight circuit-oriented Ethernet protocol with awareness of all the various service types that might be in play. For layer zero, it is all about cheap tunable optics (tunable XFP and SFP+), but particularly ROADMs. I think BTI Photonics, Cyan, Transmode, and ADVA Optical Networking are some of the smaller players to watch here. Mobile backhaul, data centre interconnect, and enterprise data services are the big engines of growth here.
Were there any surprises as part of your research for the report?
There just are not that many vendors shipping OTN switching systems today. I think people are underestimating how hard it is to build this hardware and combine it with control plane software. In 2011, only Ciena, Huawei, and ZTE shipped OTN switching for revenue. This year we should see Alcatel-Lucent, Infinera, Nokia Siemens, and maybe a few more.
Is there one OTN trend currently unclear that you'd highlight as worth watching?
Yes: It isn’t clear to what degree carriers want integrated WDM optics in OTN switches. In the past, big SONET/SDH switches like Ciena’s CoreDirector were always shipped with short-reach optics that connected it to standalone WDM systems. I think going forward, OTN switching and the WDM transport functions must be built into the same hardware in order to get the benefits of OTN switching at the best price, and that’s why I wrote the Integrated OTN Switching white paper – to try to communicate why this is important. It is a shift in the way carriers use this equipment, though, and as you know, some carrier habits are hard to break.
Further reading
OTN Processors from the core to the network edge, click here
60-second interview with .... Vladimir Kozlov
A Q&A with Vladimir Kozlov, CEO of market research firm, LightCounting. The first of occasional, brief interviews with industry figures.
"You have to look over a longer time frame to understand the industry and appreciate the progress"
What exactly does your job entail?
As the founder and CEO my primary responsibility is to ensure that LightCounting's business grows smoothly. In practice this means managing a small team of industry experts to deliver quality market intelligence to our customers, co-ordinating sales and marketing and looking for new business opportunities.
What aspect of the job do you most enjoy?
I love talking with clients and industry experts. A good discussion is an essential element of market research, sales and business development. Not to mention that many of these people are my good friends by now.
How is the optical industry changing?
Slowly but steadily. If you look at it on a daily or quarterly time frame, it is full of problems and nothing is really changing. You have to look over a longer time frame to understand the industry and appreciate the progress.
What are you working on now?
I recently attended Optinet China held in Beijing. I am working on a report based on that exhibition and starting to work on a forecast report. China is a wild card, the economic systems of Europe are falling apart, and the U.S. is full of uncertainty. Someone needs to come up with a forecast for the next four years, despite this uncertainty. It is a big responsibility and a privilege at the same time.
You have been covering optical as an analyst for over a decade. What advice about market research would you give to someone starting now?
Doing a really good job in market research is much harder than it looks. You have to live on the edge to be able to do it right. Scanning the news and running forecast models is the easy part. Digging deep into the industry by finding the right questions and people who can answer them is much more challenging, but it is also a lot of fun.
Unless you can live on the edge and get excited by challenges, do not go into market research. Really good market research people are a bit crazy…I am not really good at it, but I am learning every day and I will certainly be crazy when it is time to retire.
LightCounting is a market research and consulting company focused on high speed interconnects for the datacom, telecom, and consumer communications.