OPTICAL COMMUNICATIONS TRENDS

The Internet and mobile devices continue to grow as key utilities in peoples lives, presenting the optical communications industry with new opportunities and challenges in 2011 to ensure that networks can keep up with demand. Internet and mobile use records were broken regularly in 2010, and this trend will continue in 2011. For example, 72 million people are expected to watch full-length TV episodes online in 2011 -- and they will want a fast, reliable, and high-definition service. This growing online viewership likely will eclipse a 2010 estimate that video consumes 37 percent of total bandwidth during peak viewing hours. And by 2013, Cisco predicts that global Internet traffic will reach 767 exabytes. Its hard to visualize this amount of data -- the number is 100X larger than all the grains of sand that cover our planet. In the mobile space, Verizon launched its 4G LTE network in December 2010, promising 10X the performance of its 3G network. Networks also saw surges in bandwidth that corresponded with the release of wildly popular new devices such as the iPhone 4. Its all about speed and performance for users, regardless of the access point or device. As fast as engineers can create new applications and devices, carriers will adopt them to differentiate and improve their service to the end user. Meanwhile, in developing regions of the world, the cost of deploying 2G networks will continue to decrease, and network expansions in these new markets will accelerate in 2011. Therefore the priorities for the optical communications industry in 2011 will be to support the need for faster data rates, more powerful switching, and smarter network architectures that can handle unpredictable and fast-changing traffic patterns and improve cost efficiencies. Optics created for the telecom market also will continue to move into other exciting new areas as businesses develop new products and technologies that benefit from the proven performance that optics provide. Suppliers that can combine product innovation with an optimized supply chain will have a decided advantage in all of these areas. Now, onto more specific trends and predictions for 2011. Industry becomes more streamlined but still awaits a smoother supply chain The consolidations among network equipment manufacturers (NEMs) that happened before and during the downturn will reap benefits in 2011 as fewer, bigger players earn larger pieces of network business. Alcatel-Lucent and Huawei will compete for the number one position in 2011 while Ciena will work to close the gap with the two leaders following its successful merger with Nortel. In 2011 NEMs will stick to their strategy of sourcing components from fewer optical vendors, simplifying the supply chain. Smaller component vendors are likely to encounter challenges unless they can provide unique, niche products that enable them to be relevant.

Responsiveness to fluctuating demand in the supply chain will be a challenge that optical suppliers will continue to face in 2011. All suppliers recognize the need to reduce cycle times, improve forecasting, and implement strategic inventory holding. Even with continued strong growth in demand, significant process improvements will reduce lead times for most major products to one or two weeks over the next year. Self-aware networks enter the scene Components and systems that add intelligence to the transport layer of networks will be developed in 2011. The goal of these new optics will be to create self-aware networks that have a flexible photonic layer and can adapt to changing traffic patterns, new applications, and unexpected bandwidth fluctuations in a very seamless way. Three big industry buzzwords -- colorless, directionless, and contentionless -- describe important elements of self-aware networks. These features provide functionality that enables any type of wavelength to travel across the network in any direction and to any desired destination. New, sophisticated optical switching components are being developed to construct network and node architectures that provide automated end-to-end wavelength, transponder, and route flexibility. These new components and architectures will build upon and complement the wavelength-selective switch (WSS), which will continue to be the central building block for flexible optical networks. The interest and attractiveness of functionally integrated optical circuit packs that integrate more optical functionality and hardware into a smaller package will continue to see accelerated adoption within NEM development processes. Such line cards have already proven to provide significant cost and density advantages through integration at a sub-module level. Expect to see a transition to self-aware networks that contain these optical elements in 2013 and 2014. Transmission gets faster and more flexible This year will finally see 40G networks go mainstream, as price points shrink and bandwidth skyrockets. Coherent modulation schemes will increase the length of 40G network links and act as a precursor for volume deployment of 100G coherent modulation schemes. The 100G market will follow closely behind 40G. More major NEMs will demonstrate platforms designed in-house and start to deploy the first networks, while also looking to outsource second-generation designs to optical component vendors. In fact, many in the industry believe that 100G will take off very strongly in 2011, capturing a large percentage of the highspeed market and curtailing growth of 40G significantly. When it comes to 100G client-side formats, two camps are forming. Brocade, Google, JDSU, and Santur announced in December 2010 the formation of a 10X10 multi-source agreement, a format where 10 channels at 10G function in parallel to support 100G transmission speeds. Other players are supporting a 4X25G architecture, though questions exist about the overall cost-effectiveness of this approach.

In the line-side 100G space, dual polarization quadrature phase-shift keying (DP-QPSK) with coherent detection has become both widely supported and adopted for new bandwidth deployments, with the first such networks currently going live. This is driving demand for a new range of high-speed optical components including modulators, narrow line width lasers, and passive multiplexing devices. Progress will also be made by standards committees -- particularly the International Telecommunications Union (ITU) and the Institute of Electrical and Electronics Engineers (IEEE) -- on how to manage frequency bandwidth apportioning for bit rates beyond 100G. In the future, there could be a departure from the ITU grid and 50-GHz spacing, forcing a radical reconsideration of how future networks are designed and managed To support transmission across longer network distances at higher speeds, NEMs will turn more frequently to Raman and other advanced amplification technologies in 2011 as well. NEMS will also rapidly adopt the tunable XFP as the module of choice because of its flexibility, small size, and attractive price point. The tunable XFP will take over the fixedwavelength market and grab significant share from the 300-pin transponder. Optics move from telecom to gesture recognition and clean energy Last year, new markets began to leverage optical technology because of its high reliability, performance, and efficiency. Gesture recognition, or the ability for a person to control technology using gestures or body movements, is one example of a new market that made a big debut at the end of 2010 in gaming applications. Basically, a gesture recognition system digitizes players bodies, incorporating them into an application within a game or TV. A personal avatar becomes part of the virtual environment and responds seamlessly to body movements made in the real world. The size of the gaming, computing, home entertainment, and mobile phone industries provide a big business opportunity for gesture recognition companies. Second- and thirdgeneration versions of gesture recognition technology are already in the works. Another market that is leveraging optics originally created for telecom is clean energy. For example, concentrated photovoltaic (CPV) cells efficiently concentrate sunlight in solar panels for clean energy production. Over the next few years, more solar systems integrators will employ CPV technology as mass volume production lowers costs, the key to widespread implementation. Further improvements to CPV technology can also be expected in 2011. Suppliers that will expand successfully into new markets are likely to be larger, diversified companies that have the resources to innovate in a number of areas while mitigating price and volume manufacturing pressures. In the near future, expect to see optical technology emerge in other new and exciting markets that will improve more products that people use every day.