# Presentation: 093356

## Optical Networking OutlookThe Private Sector – Then and NowThe Public Sector – Technology Leadership Role

- Optical Network Testbeds Workshop
- Federal Large Scale Network Coordination Group
- August 9-11, 2004
- Franz X. Birkner
- FXB Ventures & San Diego Telecom Council

## Acknowledgment and Thanks	

- This presentation includes the observations and insights of:
- RHK Analysis
- Goldman Sachs & Co.
- McKinsey & Co.
- Del’Oro Group
- Dr. Ron Reedy, CTO, Peregrine Semi
- Naser Partovi, Enterprise Partners
- Larry Smarr, Cal(IT)2
- Tom DeFanti, UIC
- Sadik Esener, UCSD
- George Papan, UCSD
- Many others!

## Optical Networking Industry Then... The Year 2000 Outlook

- Optical networking would *dominate* telecom transport, now and future
- First long haul, then regional, metro & last mile** **
- Install rate in 2000 was *75,000 fiber-miles/day*   (that’s Mach 4)

**Forecasters saw growth of huge markets for communications carriers’ optical networks!**

## Nov. 2000 Optical Network Sales Forecast (RHK): Grow at 45%/yr to $47 B in 2004

*Nov. 2000 Optical Network Sales Forecast (RHK):** Grow at 45%/yr to $47 B in 2004*

## Forecasts Drove Huge Investments in Essential Optical Enabling Technologies:- In 2000, $9.7B VC investments in 866 component and systems cos.- Additional $10B+ invested by Nortel, Lucent, Alcatel, etc.                              Nov. 2000 Forecast (RHK)

| Product Group | 2004 Sales ($ B) | 2000-2004 CAGR  |
| --- | --- | --- |
| Source Lasers | $4.6 | 42 % |
| External Mods | $3.6 | 51 % |
| Receivers | $1.9 | 49 % |
| Pump Lasers | $2.6 | 40 % |
| Mux-Demux Filters | $3.5 | 38 % |
| Other Passives | $2.7 | 29 % |
| DCMs | $0.8 | 47 % |
| Next Generation | $4.1 | 220% |

**Notes:**
This forecast includes optical components used in terrestrial DWDM systems for metro, long haul, and ultra-long-haul applications.  Some port, or drop, side sources and receivers are also included – specifically those operating at ITU grid 15XX nm wavelengths. Terrestrial grade components used in land-based terminals of undersea systems are included. Components specific to SONET and SDH add-drop multiplexers and line terminals are not included, except for a small minority of SONET & SDH sources that interface directly with DWDM terminals and operate at ITU 15XX nm wavelengths.   Optical components used to in data communications (e.g., for Gigabit Ethernet and Fibre Channel applications), in undersea repeaters (e.g., specialized ultra-high-reliability components), and in cable television applications (e.g., downstream broadcast video and return path narrowband optics) are not included. RHK focuses on the DWDM components market segment because it is both the largest and fastest growing segment of the total worldwide optical components market. 

## Actual Quarterly Revenues of 

*Actual Quarterly Revenues of *
*Publicly Traded Optical Component Vendors*

## Optical Networking Industry Now...The Outlook in 2004Global Components & Networks Market (Actual and Forecast)

## Breakeven Requirements For Selected Optical Competitors

## Driver of the Optical Networking Equipment Contraction was Collapse at Carriers

- Optimistic traffic growth forecasts
- Oversupply of investment dollars
- Huge carrier capital expenditures
- Excess capacity and price collapse
- Only carrier recovery can restart equipment growth and fund essential optical research
-            – What are the prospects?

## Total Capex (1985-2002)of Selected North American Carriers

## Actual & Forecast Bandwidth Demand Continues to be Robust

## But Excess Capacity Could Persist Through 2006

**                                ****U.S. Long-haul capacity (Terabps)**
**    ****Installed **_**Lit**_** Capacity                                   Required Capacity2**

## And Service Provider Revenue Per Bit Declines are Accelerating...                Historical                            Projected 

## Forecast Global Carrier Capex is Flat (2002A-2006E)

## Alternative applications are sought to restart optical revenues...

## Today the public sector must lead!

- Advances in optical networking technology must be sustained
- Science doesn’t ‘hibernate’
- Existing major initiatives must not be abandoned
- Carry forward tradition: Monet, Hornet, Opera
- Drive an optical ‘next generation’ in 3-5 years
- Essential to US global leadership
- International economic competition
- National security

## Public Sector Optical Networking Leadership Is Rapidly Emerging

- Public sector optical nets are booming!
- Powerful collaborations are developing
- Why we are here today

## US Public Sector Optical Network Testbeds & Regional Nets

- NSF DRAGON
- ADTnet/BoSSNET
- NSF CHEETAH
- NSF OptIPuter
- StarLight/TransLight/GLIF
- OMNInet
- National LamdaRail
- Internet2 HOPI
- DOE UltraScience

- Pacific Wave
- WAN in Lab
- FiberCo RONs
- CENIC
- iWIRE
- MAX
- SOX
- Fla LamdaRail

## The Public Sector Optical Networking Opportunity

- Create a next generation of optical networking technology
- Beyond SONET, the ITU, even Cisco
- Reset the technology path
- Innovate *within the photonic cloud*:
- A free choice of signal rate and format, spectrum, power, phase, polarization, network topology
-               – drive new standards!
- Pursue the true optical frontier!

## Frontier Optical Research Topics

- Optical wavelength synthesis, conversion, switching
- Innovative amplifiers
- Optical 3R regeneration
- Signal processing: polarization and dispersion control
- Optical routing
- Photonic crystals & nanophotonics (IC fabrication)

## Frontier Optical Research Topics

- Coherent modulation and bipolar coding
- Enhanced spectral and power efficiency
- Increased channel granularity
- Use wavelength, phase, polarization, delay, quantum properties for orthogonal coding/routing
- Research ways to monitor & manage all this!

## Optical Networking Trends - Conclusion

- For 3 to 5 years, public sector - universities and labs - must carry the torch
- You have expertise and facilities
- You have momentum and initial funds
*Optical networking is still in infancy*
*It will transform telecommunications*
- The private sector will return ...
-  a $20B global market for optical telecom beckons
- Let’s work together!