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Optical Networks: DWDM and SONET
2003-2008
a market research report
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Forecasting demand for telecommunications services and equipment has been a challenge for the last two years––especially with respect to optical networks. During this time, SONET/SDH sales have tanked as service providers chose to limit their capital investment in growth and responded to additional capacity needs by using up the reserve capacity in their well-engineered networks, leaving little margin for planning errors.
Insight’s research suggests that SONET/SDH will resurge as carriers again see the need to add capacity in response to undiminished end-user demand for ever-greater amounts of bandwidth. Carriers will continue using SONET/SDH since it is an established technology that has already performed well for voice transmission. Given the hype about replacing SONET/SDH with alternatives such as dense wavelength-division multiplexing (DWDM), the path of SONET’s evolution is not entirely clear.
In this Optical Networks report, Insight provides a detailed analysis of the worldwide market for SONET and DWDM transmission systems. We look at key factors driving the market––the Internet, deregulation and telecom policy, home networks, and broadband competition. From long-haul buildouts to last mile connections, this report supplies a comprehensive overview of optical technology, service providers, and vendors.
Optical Networks: DWDM and SONET projects worldwide fiber deployment by network type, and forecasts revenues for the subsystem market––including transmitters, receivers, amplifiers and passive components.
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Report Excerpt
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SONET, DWDM, and Optical Networks
Forecasting demand for telecommunications services and equipment has been a challenge for the last two years—especially with respect to optical networks. During this time, SONET/SDH sales have tanked as service providers chose to limit their capital investment in growth and responded to additional capacity needs by using up the reserve capacity in their well-engineered networks, leaving little margin for planning errors. Insight’s research suggests that SONET/SDH will resurge as carriers again see the need to add capacity in response to undiminished end-user demand for ever-greater amounts of bandwidth. Carriers will continue using SONET/SDH since it is an established technology that has already performed well for voice transmission. Given the hype about replacing SONET/SDH with alternatives such as dense wavelength-division multiplexing (DWDM), the path of SONET’s evolution is not entirely clear.
DWDM increases the capacity of optical networks by increasing the number of wavelengths, or “colors”, of light that can be transmitted down a fiber optic path. At the same time, DWDM possesses advantages that may reduce reliance on SONET in the network, at least in the form used today. In particular, routing traffic by wavelength may render some of SONET’s advantages obsolete.
Although SONET carries multiplexed voice circuits well, the multiplexing of voice is now a much less important task in optical networks compared to the movement of data. In most systems today, data is still multiplexed by SONET add-drop multiplexers (ADMs) before transport by DWDM systems. One advantage of this approach is that SONET provides many functions to simplify the management and operation of transport networks. Network management functions are performed by an embedded communications channel between network elements that allows signal labels, remote error indicators, signal traces, error detection, multiplexing, and synchronization.
Yet with so much data traffic in the form of pure Internet protocol (IP) packets, service providers are tempted to boost the efficiency of their networks by eliminating layers between IP and DWDM. Recently-developed OC-48c and OC-192c high-speed interfaces enable routers and switches to interface directly with DWDM systems without time division multiplexing (TDM) from a SONET ADM. For the first time, carrying IP or asynchronous transfer mode (ATM) traffic directly over photonics becomes possible. Such a move could reduce the costs of high-capacity networks, if the network functions now provided by SONET could be built into the optical layer. Some of the SONET management functions can indeed be provided by DWDM systems by using an optical supervisory channel (OSC), which uses either a separate wavelength or a small amount of bandwidth (per-channel) to facilitate communications among optical network elements. The OSC typically provides an embedded data communications channel, order-wire capability, signal label and trace, and remote error indications. Some SONET features, however, such as fault isolation, synchronization, protection, and restoration are not easily duplicated within an OSC.
While DWDM will not replace SONET entirely—at least not any time soon—SONET’s long-term future is certainly not rosy. Whether SONET can last or should be abandoned is a popular question, with more than a few players in the business hoping for SONET’s speedy demise. Any network architecture that requires significant SONET multiplexing also requires burdensome optical-to-electrical conversion with added cost. Misleading advertising by many vendors has unfortunately created confusion by suggesting the imminent arrival of an “All Optical Network”.
An All Optical Network
The average person with limited understanding of optical systems would assume that an all-optical network offers
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complete Executive Summary.
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Market Segmentation
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Fiber Deployment by Region
• North America
• Europe
• Japan
• Rest of Asia
• Rest of World
Worldwide Fiber Deployment by Network Type
• Metro
• Long-Haul
• Submarine
• Residential
PCs Online
• North America Home
• North America Small/Medium Enterprise
• Rest of World Home
• Rest of World Small/Medium Enterprise
Bandwidth Demand (Gbit/s)
• North America Home
• North America Small/Medium Enterprise
• North America Large Enterprise
• Rest of World Home
• Rest of World Business
Worldwide Fiber Deployment, Metro vs. Long Haul
• Metro Rings
• Metro Nodes
• Long-Haul Rings
• Long-Haul Nodes
SONET/SDH Terminal Market and Price Forecast by OC Type
• OC-3
• OC-12
• OC-48
• OC-192
• OC-768
DWDM System Prices and Worldwide Sales
• DWDM Metro
• DWDM Long-Haul
Worldwide Photonics Market by Subsystem Type
• Transmitters
• Receivers
• Other Active
• Passive
• Amplifier
Tunable Laser Penetration
• Tunable Lasers
• Non-Tunable Lasers
Market Growth
• Transmitter Subsystem
• Receiver Subsystem
• Other Active Component Subsystem
• Passive Component Subsystem
• Amplifier Subsystem
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Table of Contents
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Chapter I
EXECUTIVE SUMMARY
1.1 Overview
1.2 Development of the All-Optical Network
1.3 The Market
Chapter II
MARKET DRIVERS
2.1 Overview
2.2 The Internet
2.2.1 Internet Application Growth
2.2.2 Internet Traffic Growth
2.2.3 Broadband Markets
2.2.4 Internet2 and the Next-Generation Internet
2.2.5 Gaming and other Multimedia Entertainment
2.3 Deregulation and Worldwide Telecom Policy
2.3.1 Results of the Telecommunications Act of 1996 in the US
2.3.2 Price Reductions
2.4 Home Networks and Fiber-to-the-Home
2.5 The Competition in Broadband Access
2.5.1 DSL vs. Cable Modems vs. Wireless
2.5.2 Power Line Networking
2.6 Voice Communications Growth
2.6.1 Wireless
2.6.2 The Convergence of Voice and Data Communications
2.7 Summary
Chapter III
OPTICAL TECHNOLOGY
3.1 The Emergence of the Optical Network
3.2 Overview of the All-Optical Network
3.3 Components of the All-Optical Network
3.3.1 Optical Transmitters
3.3.1.1 Tunable Lasers
3.3.1.2 Modulators
3.3.2 Optical Receivers
3.3.3 Optical Fiber
3.3.3.1 Development of Fiber
3.3.3.2 Linear and Nonlinear Transmission Effects
3.3.3.3 New Types of Fiber
3.3.3.4 Future Fiber Design
3.3.4 Amplifiers
3.3.4.1 Erbium-Doped Fiber Amplifiers
3.3.4.2 Semiconductor Laser Amplifiers
3.3.4.3 Raman Amplifiers
3.3.5 Passive Components
3.3.5.1 Connectors
3.3.5.2 Splices
3.3.5.3 Attenuators
3.4 Optical Systems
3.4.1 Multiplexers/Demultiplexers
3.4.2 Optical Switches, Routers, and Cross-Connects
3.5 Equipment Manufacturing Issues
3.5.1 Packaging and Assembly
3.5.2 Hardware Cost Concerns
3.6 Multiplexing Trends
3.6.1 Advantages of Time Division Multiplexing
3.6.2 Advantages of Wavelength Division Multiplexing
3.7 Present and Future DWDM Systems
3.7.1 Long-Haul Systems
3.7.2 Metropolitan Systems
3.8 Management of All-Optical Networks
3.8.1 End-to-End Wavelength Management
3.8.2 Optical Network Monitoring
3.8.3 Restoration
3.9 Developing Technology
3.9.1 Soliton-Based Systems
3.9.2 Advances in Components
3.10 Standards Efforts and Organizations
3.10.1 Optical Domain Service Interconnection Coalition
3.10.2 Optical Internetworking Forum
3.10.3 Internet Engineering Task Force
3.11 IP, ATM, DWDM, and the Future of SONET
Chapter IV
OPTICAL SERVICE PROVIDER SOLUTIONS
4.1 Long-Haul and Metropolitan Infrastructure Buildouts
4.1.1 Overview
4.1.2 List of Buildouts
4.2 Submarine Fiber Optic Cable Deployment
4.2.1 Submarine Fiber vs. Satellites
4.2.2 Deployment Process
4.2.3 Underseas Cable System Ownership
4.2.4 Impact of WDM/DWDM on Submarine Fiber Cable
4.2.5 Submarine Fiber Cable Deployments
4.3 The Last Mile: PONs and Fiber-to-the-X
4.3.1 Fiber to the Home: PONS in the Local Loop
4.3.1.1 The BellSouth Project
4.3.1.2 The Palo Alto Project
4.3.1.3 Other Ventures
4.3.2 Fiber-to-the-Business and Multiple Dwelling Units
4.4 Hybrid Fiber Coax Systems
4.4.1 Hybrid Fiber Coax Technology
4.4.2 HFC Telephony
4.5 Utility Company Involvement
Chapter V
THE OPTICAL VENDOR LANDSCAPE
5.1 Semiconductor, Integrated, and Planar Optics Vendors
5.1.1 Fabless Semiconductors
5.1.2 Integrated Optics Vendors
5.1.3 InP-Based Development
5.2 Transmitter, Receiver, and Modulator Vendors
5.2.1 VCSELs
5.2.2 Tunable Lasers
5.2.3 Receivers
5.3 All-Fiber Component Vendors
5.4 Multiplexer/Demultiplexer Vendors
5.5 Passive Component Vendors
5.6 Module and Subsystem Vendors
5.6.1 Integrated Components
5.6.2 Switch, Router, and Cross-Connect Vendors
5.6.3 MEMS vs. Liquid Crystals vs. Lithium Niobate Switches
5.6.3.1 MEMS in Fiber Optic Systems
5.6.3.2 Liquid Crystal Switches
5.6.4 Optoelectronic Devices
5.7 Systems, Platform, and Infrastructure Vendors
5.7.1 Metro System Vendors
5.7.2 Infrastructure Providers
5.7.2.1 Niche All-Optical Infrastructure Providers
Chapter VI
MARKET FORECASTS
6.1 Summary
6.2 Fiber Deployment
6.2.1 Worldwide Fiber Deployment by Network Type
6.3 Growth in Worldwide Bandwidth Demand
6.4 The Future of SONET/SDH
6.5 The DWDM Market
6.5.1 The Metro DWDM Market
6.6 Photonic Subsystem Market Growth
6.6.1 Transmitters
6.6.2 Receivers
6.6.3 Other Active Components
6.6.4 Passive Components
6.6.5 Amplifiers
Appendix
GLOSSARY
Table of Figures
I-1 Worldwide PCs Online, 2000-2006
I-2 Worldwide SONET/SDH and DWDM System Revenue, 2000-2006 ($Billions)
II-1 Worldwide Internet Traffic Growth, 2000-2005 (Gigabits per Second)
II-2 Host and Domain Name Growth, 2000-2006 (Millions)
II-3 Worldwide E-commerce Revenue, Business vs. Consumer, 2000-2006 ($Billions)
III-1 SONET Ring Configuration
III-2 Switched Optical/Electrical Networks vs. All-Optical IP Meshed Networks
III-3 Optical Fiber Structure
III-4 Optical Transmitter, Amplifier, and Receiver Basic Configuration
III-5 Functional Elements of Optical Systems
III-6 ITU-T Wavelength Spacing Grid for DWDM Systems (Nanometers)
III-7 DWDM Bands Around 1550 Nanometers
III-8 Chromatic Dispersion
III-9 Stimulated Raman Scattering
III-10 Four-Wave Mixing
III-11 Three-Stage EDFA Structure
III-12 Demultiplexing Using Cascaded Thin-Film Filters
III-13 Example of 80-Channel Multiple Step Demultiplexing Using Interleavers
III-14 Optical Add-Drop Multiplexer
III-15 Optical Cross-Connect
III-16 TDM Expansion vs. WDM Expansion
III-17 Long-Haul DWDM System
III-18 Two Ways to Expand DWDM Capacity
III-19 Six Different Layered Approaches Used in Optical Networks Today
III-20 Comparative Restoration Timing Performance (DCS, OXC, SONET, and Optical Rings)
IV-1 Submarine Cable Layout
IV-2 Types of PONs
IV-3 Basic APON Architecture for FTTH, FTTB, FTTC, and FTTCab Structure
IV-4 HFC Architecture
VI-1 Fiber Deployment by Region, 2000 vs. 2006
VI-2 Worldwide Fiber Deployment by Network Type, 2000 vs. 2006
VI-3 Average Cable Cross-Sections, 2000-2006 (Fibers/Cable)
VI-4 Decline in Bandwidth Cost, Short- vs. Long-Haul, 2000-2006 ($ per Gbit/s per Kilometer)
VI-5 Worldwide SONET/SDH Equipment Unit Sales, 2000-2006 (Thousands)
VI-6 SONET/SDH Terminal Market, 2000-2006 ($Billions)
VI-7 SONET/SDH Terminal Price Forecast, 2000-2006 ($Thousands)
VI-8 DWDM Mux/Demux Prices, 2000-2006 ($Thousands Per Port)
VI-9 Worldwide DWDM Sales, 2000-2006 ($Billions)
VI-10 Transmitter Subsystem Market Growth, 2000-2006 ($Billions)
VI-11 Tunable Laser Penetration, 2000-2006 (% of Total Lasers)
VI-12 Receiver Subsystem Market Growth, 2000-2006 ($Billions)
VI-13 Other Active Component Subsystem Market Growth, 2000-2006 ($Billions)
VI-14 Passive Component Subsystem Market Growth, 2000-2006 ($Billions)
VI-15 Amplifier Subsystem Market Growth, 2000-2006 ($Billions)
Table of Tables
I-1 Optical Networking`s Advantages Over Legacy SONET/SDH
I-2 Trial DWDM Systems With the Largest Capacity, 2001
II-1 Download Time Comparison by Type of Internet Access
II-2 Online PCs, North America and Rest of World, Home vs. SME, 2000-2006 (Millions)
III-1 ITU-T Frequency and Wavelength Grid for DWDM Systems
III-2 Typical Features of First Generation Metropolitan vs. Long-Haul DWDM Networks
IV-1 List of Major Landline Fiber Deployments
IV-2 Major In-Service and Planned Atlantic Submarine Cables, 1995-2002
IV-3 Major In-Service and Planned Pacific Submarine Cables, 1995-2002
IV-4 PON Technical Features
VI-1 Fiber Deployment by Region, 2000-2006 (Gigameters)
VI-2 Worldwide Fiber Deployment by Network Type, 2000-2006 (Gigameters)
VI-3 PCs Online, North America vs. Rest of World, Home vs. SME, 2000-2006 (Millions)
VI-4 Bandwidth Demand, N America vs. Rest of World, Home vs. SME, 2000-2006 (Gbit/s)
VI-5 Worldwide SONET/SDH Equip Unit Sales, Metro vs. Long-Haul, 2000-2006 (Thousands)
VI-6 SONET/SDH Terminal Market by OC Type, 2000-2006 ($Billions)
VI-7 SONET/SDH Terminal Price Forecast by OC Type, 2000-2006 ($Thousands)
VI-8 DWDM System Prices, Metro vs. Long-Haul, 2000-2006 ($Thousands Per Port)
VI-9 Worldwide DWDM Sales, Metro vs. Long-Haul Systems, 2000-2006 ($Billions)
VI-10 Worldwide Photonics Market by Subsystem Type, 2000-2006 ($Billions)
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