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The Optical Marketplace

The optical technology is a high-growth market. As Figure 1–5 shows, it is expected to more than double between 2000 and 2003. Most of the growth will be for terrestrial WDM and optical networks, and submarine cable systems. The growth of conventional TDM systems will continue (shown in Figure 1–5 as SONET/SDH, and explained in Chapter 5), but at a lesser rate than the other areas. Optical systems are being incorporated into CATV networks, but this growth will be modest because the coaxial cable plant to the homes cannot be re-wired in a cost-effective manner. A residence does not need the bandwidth of fiber (at least not for the foreseeable future).

Figure 1–5 Worldwide market for optical components.

Figure 1–6 shows another study comparing the projected transmission capacity and the demand through 2004 [STRI01]. The figures pertain to the national backbone in the United States and not to the access loops. This study holds that the building-out of optical networks discussed earlier will provide excess capacity for the early part of this decade, and if one examines the gap between demand and capacity, it is reasonable to expect that capacity will exceed demand well beyond 2004.

Figure 1–6 Demand vs. capacity [STRI01].

There are those in the industry who disagree. They state that the upcoming applications will require huge amounts of bandwidth, and that this supposed excess capacity will be consumed by these applications. There is no question that some applications do indeed require a lot of bandwidth. A prime example is interactive high-quality Web traffic, exhibiting the integration of high-resolution, real-time voice, video, and data.

The Local Loop Bottleneck Must Be Solved

It is my view that the upcoming applications, and their demand for large chunks of bandwidth, are not going to be realized to any large degree until bandwidth is available on the access line (the local loop) to the end user. It does little good to download a Web response to a user at a terabit rate within the network when the vast majority of access lines are restricted to V.90 speeds (56 kbit/s). Certainly, some businesses can afford to purchase large bandwidths from the business to the terabit backbones. But many businesses cannot afford to purchase this bandwidth, nor can the majority of residential users. In addition, broadband access loops are not available to most residences anyway.

The situation in the United States is interesting, and quite frustrating to many customers, because many of them are limited to very low capacity links to the Internet. What is the incentive for the local access providers (the telephone local exchange carriers (LECs), CATV operators, and wireless providers) to expand their local access plant to the megabit or terabit rate? After all, with some minor exceptions (and in spite of the 1984 and 1996 legislative efforts), these companies have a lock on their market. Some people believe that these companies do not have a lot of incentive to invest in the upgrading of their plants.

Maybe so, but the local access providers will expand their plant if they think there is sufficient demand to enable them to make money on their investment. So, beyond the issues of government-sponsored monopolies, is there really that much demand for the deployment of high-capacity systems into the mass marketplace?1 Most Internet users use the Internet for email or simple text-oriented Web retrievals, and many have been conditioned to the slow response time in their interactions with their networks.

The present situation can be illustrated with a diagram shown in Figure 1–7.2 The circle in this figure illustrates the relationships of: (a) user applications' requirements for bandwidth (labeled "Applications" in the figure), (b) the capacity of the user or network computers (labeled "CPU" in the figure), and (c) the capacity of the communications media to support traffic (labeled "Bandwidth" in the figure).

1By mass marketplace, I mean deployment into residences on a large scale, well beyond the 15–20% penetration rate for the current efforts of telephone company and the cable company.

2I call this illustration the "eternal circle," because it shows a seemingly never-ending dependency-relationship between the three components.

Historically, the bottleneck in this circle has varied. At times, it has been the lack of CPU (and memory) capacity in the user's computer. At other times, it has been the lack of capacity in the network to support the capacity requirements of the users' applications.

Figure 1–7 shows the relationships with two-way arrows, which suggests that these three operations are interrelated and dependent upon each other. But which comes first? Does the application's requirement for more capacity lead to faster CPUs and/or the expansion of network bandwidth? Or does the introduction of more bandwidth encourage the development of faster computers and more powerful applications? There are no clear answers to these questions. Sometimes one pushes the other, and at other times the opposite occurs.

Figure 1–7 The eternal circle.

However, at this time in the telecommunications industry, we can state the following:

  • Within the optical network (the backbone or core network) the bottleneck is the "CPU," because its electrical-based architecture (in switches, routers, and bridges) cannot handle a large number of connected optical fiber WDM links that operate in the terabit range. Thus, the creation of all-optical photonic switches (PXCs) is a high priority in the industry.

  • At the edge of the network, and to the end user, the bottleneck is the "bandwidth," but not because of the optical fiber. The bottleneck is due to the continued use of the telephone-based copper plant, and the mobile phone links (and the very slow process of getting it upgraded).

  • The "applications" part of the Eternal Circle is a question mark to some people. If the network operators finally provide the bandwidth all the way to the mass market (the residence), will sophisticated three-dimensional, voice/video/data applications be developed to take advantage of the increased capacity? I believe the answer is a resounding yes, assuming the network operators can keep the price affordable to most households.

Expansion of Network Capacity

One of the more interesting changes occurring in the long-distance carrier industry in the United States is the extraordinary growth of bandwidth capacity. This growth is occurring due to the maturation of the WDM technology, and its wide-scale deployment. It is also occurring due to the aggressive deployment of fiber networks by the "non-traditional" carriers; that is, those carriers who have come into the industry in the last few years.

Figure 1–8 shows the growth of long-distance capacity since 1996, and projections through 2001. The shaded bars show total mileage, and the white bars show total capacity, in terabits per second.

Figure 1–8 Long-distance growth in the United States.

Some people question if this bandwidth will be used. Others see it as an opportunity to discount excess capacity, at the expense of the traditional carriers, who are enjoying healthy profits from their long-distance revenues. It will be interesting to see how the scenarios develop over the next few years. Some marketing forecasts state that this situation will lead to a "fire sale" of DS1 and DS3 lines.

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