Overview

This report provides an overview of fiber optic backbone network deployment around the world, including submarine systems. It gives an economic snapshot of most major countries, including their teledensity, minutes of traffic, telecom service revenue, telecom investment, and current and expected fiber optic deployment of the dominant carriers. Market forecasts for DWDM and SONET/SDH products are given for each region. A technical overview is also provided, but this is not the focus of the report. For more complete discussions of the available technologies, see the previously published INSIGHT reports, “Network Topologies for Future Telecommunications Services 1997-2002” and “SONET Transmission Systems: Telecom Backbone Networking 1997-2002” or the upcoming “ATM: Services and Technology at a Crossroads 1998-2003.”

The services that use fiber optic transmission facilities are provided by a wide range of carriers, some with a long track record in the industry, and others that are just getting started. Those that have been in the business awhile have a great deal of fiber optic plant in place and are looking to expand its capacity as cheaply as possible. The newer carriers are looking to build network offerings that are significantly less expensive than those installed by the entrenched carriers, thus allowing them to enter the market with a sufficiently attractive cost per bit to help bring users over to their service offerings.

At $80,000 per month for a transcontinental T-3 line, the cost today for transporting a single bit is about two nanodollars, or two billionths of a dollar. With the technology described here, INSIGHT believes that the cost will easily drop to 0.2 nanodollars per bit within three years due to competition and technological advances. It is interesting to note that two nanodollars for a bit equates to one cent per minute for a voice connection with no compression. At 0.2 nanodollars per bit and even a moderate level of compression, the cost for carrying a minute of voice across the country could easily be less than 0.01 cents. (Note: this estimate does not include any costs incurred by access to the long distance network.)

The Emergence of WDM

From the late 1980s to as recently as 1996, Synchronous Optical Networking (SONET) and Synchronous Digital Hierarchy (SDH) were the hot discussion topics, being billed as the backbone technology standards of all future telecommunications. By 1997, wavelength division multiplexing (WDM) suddenly became the item of greater interest, as managers and technical gurus realized that multiple wavelengths could increase capacity of existing installed fiber to 100 Gbit/s and beyond, without the problems that time division multiplexing (TDM) presented at greater speeds.

The SONET and SDH standards were set up for the transmission of TDM digital signals in the 1980s. With TDM, a data stream at a higher bit rate is generated directly by multiplexing lower bit rate channels. High capacity TDM systems operate at levels up to OC-192 (10 Gbit/s), quadrupling OC-48 SONET systems operating at 2.5 Gbit/s, through the use of high speed lasers. The problem comes in upgrading to OC-768 (40 Gbit/s) and above, where TDM has trouble operating. TDM transport carried over SONET or SDH still needs electronic transmission and switching, and the conversion may be too difficult and expensive over the higher rates.

WDM, in contrast, can carry multiple data bit rates, allowing multiple channels to be carried on a single fiber. The technique quite literally uses different colors of light down the same fiber to carry different channels of information, which are then separated out at the distant end by a diffraction grating that identifies each color. All optical networks employing WDM with add/drop multiplexers and cross-connects permit this. Dense WDM (DWDM) systems multiplex up to 8, 16 or more wavelengths in the 1550 nanometer (nm) window, increase capacity on existing fiber, and are data rate transparent.

WDM was first developed to increase the distance signals could be transported in long distance networks, from 35-50 km to as much as 970 km or more with optical amplifiers. Subsequently companies such as Ciena and Cambrian discovered that DWDM would work in metropolitan networks just as well. These DWDM ring systems can be connected with Asynchronous Transfer Mode (ATM) switches and Internet Protocol (IP) routers. ATM networks are expected to use SONET/SDH physical layer interfaces with OC-12 add/drop multiplexers. ATM can carry voice, video and data communications in the same transport and switching equipment.

WDM systems require non-zero dispersion fiber that is produced by vendors such as Corning (SMF-LS) and Lucent (TrueWave). This type of fiber introduces a small amount of dispersion that decreases nonlinear component effects.

Originally SONET equipment makers were expected to be forced to make reliable OC-192 (10 Gbit/s) systems or face stiff competition from DWDM manufacturers. What is actually happening is that SONET/SDH manufacturers have jumped onto the WDM bandwagon with their own products. The major SONET/SDH and WDM systems manufacturers include Lucent Technologies, Ciena, Cambrian, Pirelli, Nortel, Alcatel, Fujitsu, NEC, Ericsson, Siemens, and Hitachi. For components, there are many firms, including JDS Fitel, E-Tek Dynamics, GPT Optical Corp. of America, Advanced Optronics, Alliance Fiber Optics, AMP, ATI Electronique, Bosch Telecom, Corning, DiCon Fiberoptics, Gould Electronics, Instruments SA, Mitsubishi, and MP Fiberoptics.

Insight’s research indicates that SONET-layered ring networks and SDH will continue to be the backbone for high-speed networks, with OC-48 and/or OC-192 add-drop multiplexers at network nodes, but will increasingly use WDM technology to permit network capacity to grow to 20, 80 Gbit/s or more. WDM also may be integrated into OC-12, OC-48 and OC-192 networks, as long as vendors provide standard wavelengths in the 1550 nm window. The mix of OC-48 and OC-192 WDM architecture requires fewer rings and saves on cost. In some cases WDM cannot be placed over the SONET layer, and instead must use transponders, which are costly. In general, though, WDM will be the most cost effective option that provides the necessary bandwidth without installation of more fiber.

It is important to note that a dedicated SONET/SDH terminal is assumed for each wavelength, and therefore the use of WDM does not, in and of itself, have a major impact on the SONET/SDH market. Indeed, the fact that WDM effectively provides fiber at a much lower cost will likely stimulate the SONET/SDH market. However, it should be noted that DWDM permits the use of multiple lower speed SONET/SDH terminals (such as OC-12 or OC-48) where much higher speed (OC-192) might have been the only available choice, effectively reducing the market growth potential for 10 Gbit/s equipment.

There is one reduction in demand for SONET/SDH equipment that will occur at intermediate points in transmission with the use of DWDM. Instead of the fiber being terminated in an electronics terminal to regenerate the signal, the fiber goes through an optical amplifier which allows the signal to continue without being converted to electronics. Insight believes that this reduction in demand for SONET/SDH equipment will be far outstripped by the increase in demand for terminal equipment where multiplexing and management functions are needed.

In the future, it is likely that optical technology and more advanced switching technologies will extend the optical layer capability further. It will allow the use of optical switching for recovery from failures as well as expansion of the add-drop multiplexing function. The first optical crossconnects are expected to be able to route a particular wavelength from one fiber route to another without reducing it to an electronic form. Still later will come the ability to optically move a particular bit stream from one wavelength to another, allowing for more effective packing of fiber links.

The International Markets

Recognizing the importance of a state-of-the-art telecommunications network to international competitiveness, the governments of many countries have made upgrading their networks a priority, using fiber, satellite and wireless networks. In most cases deployment of fiber has been necessitated by demand and global interconnectability. Sixty-nine countries have now signed the WTO agreement to open up telecommunications between 1998 and 2013. In addition many global networks are being established such as the new BT-AT&T joint venture, Global One, submarine partnerships, etc.

There is still a vast disparity in telecommunications access and new equipment investment between First and Third World areas. Yet INSIGHT’s research indicates that telecommunications companies are serious about increasing bandwidth capacity worldwide. In 1996, about 76 million km of fiber had been installed worldwide with that number increasing to over 150 million by 2000—a growth rate of 26 percent. The fiber optic market has grown from $4.4 billion in 1992 to $7.9 billion in 1995, and is expected to be about $15 billion in 2000, mainly for singlemode fiber. Predictions call for fiber consumption of $20 billion by 2002. The percentage of fiber installed will decrease in comparison to the need to install transmitters, receivers, WDM, connectors and other equipment. Much of this will be spent on local networks or shorter hauls.

As international service providers begin or continue to improve access, they will also be forced to upgrade the capacity levels on their backbone. INSIGHT’s research indicates that the SONET/SDH market will grow from $6.3 billion in 1998 to $14.9 billion in 2003. The largest markets will be the US, China, Germany, India, Mexico, the UK and Canada.

The DWDM market will grow from $980 million in 1998 to $5.2 billion in 2003. The first deployments of WDM systems were in the US, but this has now expanded to the UK, Italy, France, Norway, Finland, Japan, China and Korea. Undersea submarine cables are almost entirely relying on DWDM. DWDM is also being deployed in broadband networks using new fiber technologies, optical amplifiers and SONET and SDH transport terminals.

Back to Top