LH DWDM HeavyReading

Heavy Reading Independent quantitative research and
competitive analysis of next-generation hardware and software solutions for service providers and vendors
VOL. 5, NO. 2, FEBRUARY 2007

KEY FINDINGS
The long-haul DWDM
market grew by more
than 30 percent in
2006, to $1.8 billion
worldwide
The bandwidth glut
is over, and operators
are scrambling to add
network capacity
Nearly all network
operators either are
now upgrading or will
soon upgrade their
DWDM backbones
Opex reduction tops
the list of operator priorities for core DWDM
Residential Internet
service is a far bigger
driver of core bandwidth demand growth
than video services
Vendors must focus
on rolling out 40-Gbit/s
Ethernet and keep
developing 100-Gbit/s
Ethernet for the future
Core switching must
evolve to become
better optimized for
packet transport
Long-Haul DWDM: Market &

Technology Outlook
Long-haul DWDM transport was one of the most fiercely punished markets after the telecom collapse of 2001, and it has
been one of the slowest segments to return to health. In 2006,
however, real signs of recovery finally became evident throughout this market, in every region of the globe: Operators had already consumed whatever bandwidth glut may have existed in
their backbone networks, and a raft of new broadband applications and users were demanding more capacity.
Operators are reacting beyond simply adding capacity to existing
systems; many are opting to deploy wholly new systems, taking
advantage of tremendous improvements in technology and economics over the past few years. This strategy shift has made the
long-haul DWDM sector competitive and fresh for the first time in
nearly seven years.
This report examines the core DWDM market using a combination of direct one-on-one interviews with key carriers and an exclusive worldwide survey of service provider professionals. The
report evaluates the long-term health of the core DWDM transport sector; the current and future drivers of growth; and the obstacles and challenges that remain. It also provides a comparative analysis of suppliers in this demanding sector.
AUTHOR: SCOTT CLAVENNA, CHIEF ANALYST, HEAVY READING
Use of this PDF file is governed by the terms and conditions

stated in the Subscriber License Agreement included in this file.
Any violation of the terms of this Agreement, including unauthorized distribution of this file to third parties, is considered a
breach of copyright. Light Reading Inc. will pursue such
breaches to the full extent of the law. Such acts are punishable
in court by fines of up to $100,000 for each infringement.
HEAVY READING | VOL. 5, NO. 2, FEBRUARY 2007 | LONG-HAUL DWDM: MARKET & TECHNOLOGY OUTLOOK
TABLE OF CONTENTS
LIST OF FIGURES................................................................................................ 3
I.
INTRODUCTION & KEY FINDINGS..................................................................... 4
1.1
1.2
1.3
Key Findings.......................................................................................................... 5
Report Methodology .............................................................................................. 7
Report Structure .................................................................................................... 8
II.
LONG-HAUL DWDM MARKET ASSESSMENT .................................................. 9
2.1
2.2
Demand Drivers .................................................................................................. 10

Other Considerations .......................................................................................... 11
III.
OPERATOR DEPLOYMENT PLANS FOR CORE DWDM ................................ 13
3.1
3.2
3.3
3.4
Operator Backbone Expansion Plans ................................................................. 13

Operator Requirements & Impediments in the Core DWDM Market................... 14
40-Gbit/s Trends in Operator Backbone Networks.............................................. 15
100-Gbit/s Ethernet & Core DWDM Networks .................................................... 17
IV.
CORE DWDM ARCHITECTURES & OPERATIONS ......................................... 20
4.1
4.2
"Alien Wavelengths" & the Integration of WDM Optics on Client Equipment ...... 20
Switching in the Core DWDM Network................................................................ 21
V.
NETWORK OPERATOR INTERVIEWS AND ANALYSIS ................................. 25
5.1
5.2
5.3
5.4
5.5
AT&T Inc. ............................................................................................................ 25

Comcast .............................................................................................................. 26
Interoute Communications Ltd. ........................................................................... 27
Level 3 Communications Inc. .............................................................................. 28
Verizon Communications Inc............................................................................... 29
VI.
VENDOR PROFILES AND STRATEGIC ANALYSIS ........................................ 32
6.1
6.2
6.3
6.4
6.5
6.6
6.7
6.8
6.9
Alcatel-Lucent...................................................................................................... 32
Ciena Corp. ......................................................................................................... 32
Ericsson AB......................................................................................................... 33
Huawei Technologies Co. Ltd. ............................................................................ 34
Infinera Corp........................................................................................................ 37
Nortel Networks Ltd............................................................................................. 38
Siemens AG ........................................................................................................ 40
Xtera Communications Inc. ................................................................................. 41
ZTE Corp............................................................................................................. 41
APPENDIX A: ABOUT THE AUTHOR........................................................................... 43

APPENDIX B: LEGAL DISCLAIMER ............................................................................ 44
LIST OF FIGURES*
SECTION I
Figure 1.1
Figure 1.2
Figure 1.3
Figure 1.4
Operator Plans for Backbone DWDM Upgrades....................................................5

Survey Respondents by Type ................................................................................7
Survey Respondents by Geographic Region .........................................................8
Survey Respondents by Job Function....................................................................8
SECTION II
Figure 2.1
Figure 2.2
Figure 2.3
Evolving Provider Transport Network Strategies....................................................9

Annual Growth Estimates for Backbone Transport Capacity ...............................10
Backbone Transport Capacity Growth Drivers .....................................................11
SECTION III
Figure 3.1
Figure 3.2
Figure 3.3
Figure 3.4
Figure 3.5
Figure 3.6
Figure 3.7
Figure 3.8
Figure 3.9
Figure 3.10
Worldwide Network Operator Plans for Backbone DWDM Upgrades .................13

Network Operator Backbone DWDM Capacity Expansion Plans ........................14
Top Attributes of Backbone DWDM Systems for Operators Worldwide ..............15
Current Limitations of Operator Backbone DWDM Networks, Ranked................15
Most Common New Wavelength Rates in Long-Haul DWDM Networks .............16
Primary Drivers of 40-Gbit/s Wavelengths Today ................................................16
40-Gbit/s Interfaces Requirements in Operator Networks Today ........................17
Virtual Concatenation for 100-Gbit/s DWDM Transport .......................................18
Inverse Multiplexing for 100-Gbit/s Ethernet: Ethernet LAG vs. VC ....................19
Network Operator Approaches to 100-Gbit/s Wavelengths .................................19
SECTION IV
Figure 4.1
Figure 4.2
Figure 4.3
Figure 4.4
Figure 4.5
Figure 4.6
Figure 4.7
Figure 4.8
Value of Integrating DWDM Optics on Client Equipment.....................................20

Concerns About Integrating DWDM Optics on Routers & Switches ....................21
ITU-T G.709 OTN in the Network.........................................................................22
Switching Requirements at Core Optical Network Nodes....................................22
Wavelength Add-Drop/Switching Requirements on DWDM Backbones .............23
Network-Level Automation Values in the Optical Core ........................................23
Operator Plans for GMPLS/ASON .......................................................................24
Value of GMPLS/ASON in Operator Networks ....................................................24
SECTION V
Figure 5.1
Figure 5.2
Figure 5.3
AT&T U.S. Domestic 40-Gbit/s OTN/DWDM Express Backbone ........................25

Comcast Regional Area Network Diagram...........................................................26
Verizon ROADM-Enabled Network Mode of Operation .......................................30
SECTION VI
Figure 6.1
Figure 6.2
Figure 6.3
Figure 6.4
Figure 6.5
Figure 6.6
Figure 6.7
Ericsson Optical Product Line ..............................................................................33

Huawei Optical Product Line ................................................................................34
Huawei Optical Contract Sales by Region, 2005 .................................................35
Huawei Optical Contract Sales by Product, 2005 ................................................35
Huawei Optical Backbone Deployments ..............................................................36
Huawei Optical Roadmap.....................................................................................36
Nortel's Metro Ethernet Network & Optical Strategy ............................................39
* All charts and figures in this report are original to Heavy Reading, unless otherwise noted.
I.
Introduction & Key Findings
Over the first half of this decade, the long-haul and ultra-long-haul dense wavelength division
multiplexing (DWDM) markets lacked the energy, steady growth, and rapid innovation of metro
optical networks, but in 2006 they began to show significant signs of improvement. Growth outpaced even the most sanguine forecasts, and the improving health of the wavelength services
market, combined with ever-growing bandwidth demand, has set the stage for an ongoing surge
in core DWDM investment by network operators.
Long-Haul DWDM: Market & Technology Outlook provides a detailed look at this expanding
market through an extensive and exclusive survey of network operators worldwide; a forecast of
the equipment market; and information gathered from direct interviews with carriers and suppliers. The report analyzes an optical market segment that has been in the shadows of the higherprofile metro and regional markets of late. The findings of this latest research reveal a market in
the midst of an impressive recovery, as operators not only shore up capacity on their installed
base of long-haul DWDM gear to keep up with demand, but also overlay routes or entire backbones with new gear to take advantage of the latest generation of equipment.
The key questions now facing network operators include:
At what pace will backbone bandwidth demand continue to grow, and is there any way to
"future proof" a core DWDM network?
How can network operators take advantage of new technologies to improve provisioning
times and lifecycle costs, given their capital constraints?
How will the trend in the metro-aggregation network toward Ethernet and packet networking affect network operator decisions in the core?
Will growth in the core network be cyclical or linear?
Will wavelength services migrate to optical transport network (OTN) services? And will
OTN migrate to a true networking layer, beyond Sonet/SDH?
Will 40-Gbit/s transport be squeezed out of the market by 100-Gbit/s Ethernet?
This report explores each of these questions in detail, with some answers provided by an exclusive worldwide survey of 88 service provider employees, designed to elicit their core DWDM deployment plans and feature requirements. The survey was supplemented by direct interviews with
DWDM operators and vendors. Network operators interviewed for and analyzed in this report are:
AT&T Inc. (NYSE: T)

Interoute Communications Ltd.
Level 3 Communications Inc. (Nasdaq: LVLT)
Verizon Communications Inc. (NYSE: VZ)
Equipment vendors interviewed for and analyzed in this report are:
Alcatel-Lucent (NYSE: ALU)

Ciena Corp. (Nasdaq: CIEN)
Ericsson AB (Nasdaq: ERIC)
Huawei Technologies Co. Ltd.
Infinera Corp.
Nortel Networks Ltd. (NYSE/Toronto: NT)
Siemens AG (NYSE: SI; Frankfurt: SIE)
Xtera Communications Inc.
ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763)
1.1
Key Findings
The long-haul DWDM market is on fire. In 2006, the long-haul DWDM market including those
systems designed for backbone networks, with spans in excess of 1,000 km grew more than 30
percent, to approximately $1.8 billion. This growth benefited nearly every long-haul DWDM vendor worldwide. There are many drivers, but the market is clearly ramping quickly to a cyclical
peak, driven by converging factors of intense bandwidth demand from broadband Internet and
mobile applications; a healthy, stabilized wholesale bandwidth and wavelength services market;
new core overlays to address the requirements of newly merged operators; and generational upgrades due to aging DWDM infrastructure that is no longer economical to expand incrementally.
The "bandwidth glut" is over. Operators worldwide are reporting limited bandwidth supply and
more stable pricing. Many new backbone optical builds are underway, and there are few if any
"distressed assets" in the carrier market that can disrupt pricing and supply in wholesale markets.
The vast majority of network operators either are upgrading, or soon will upgrade, their
DWDM backbones. According to our service provider survey, 52 percent of respondents say
their company is currently expanding its DWDM backbone; another 42 percent will expand in
2007 or 2008. As shown in Figure 1.1, only a miniscule percentage of our respondent base either
planned to expand their backbone in 2009, planned no expansion, or didn't know.
Figure 1.1: Operator Plans for Backbone DWDM Upgrades
There is a strong trend toward the 10-Gbit/s Ethernet LAN PHY, as operators look to reduce backbone costs by transitioning core router interfaces to Ethernet. In the core, the
migration to an IP-over-optical architecture in which routers and multiservice switches directly
link to WDM-based transport devices without the need for intermediary Sonet/SDH multiplexing
systems has been underway for at least five years. This has typically been accomplished via
2.5-Gbit/s or 10-Gbit/s packet-over-Sonet interfaces on routers, but there has recently been a
move to 10-Gbit/s Ethernet LAN PHYs in many operator cores. This transition is about economics, as 10-Gbit/s Ethernet interfaces on routers typically cost less than packet-over-Sonet interfaces. The Ethernet-over-wavelength approach represents the final link in the end-to-end OTN,
and has allowed a number of operators to plan for a complete network transition to Ethernet.
In the core, video services are trumped by residential Internet demand. In previous Heavy
Reading research, video and IPTV were identified as the main bandwidth drivers in the aggregation network; yet in this current survey of core network operators, video ranked near the bottom of
the list of drivers. The top drivers were (in order): residential Internet access, wholesale privateline services, dedicated network services, and retail private-line services; video, surprisingly, garnered merely 3 percent of the vote. The explanation lies in current telecom video architectures, in
which carriers distribute video to their metro areas via satellite, caching, or some other efficient
means. Once in the metro, things get complicated and video chews up capacity; but in the core,
bandwidth is being driven more by the need to shore up Internet backbones and wholesale wavelength services than by any particular service.
More operators are choosing overlays in the core. In our survey of network operators worldwide, 50 percent said they are upgrading core DWDM routes by simply adding capacity to deployed systems, while 27 percent are overlaying new DWDM systems on a route-by-route basis
and another 23 percent are performing a complete backbone overlay of new DWDM systems.
Operators may be getting the opex religion, finally. Operators put lifecycle costs at the top of
their requirements for core DWDM systems, above initial installation cost and a range of next-gen
features. Operators also point to the high ongoing operational costs (opex) and capital costs
(capex) of adding additional capacity as key concerns.
Vendors must focus on rolling out 40-Gbit/s Ethernet and keep developing 100-Gbit/s
Ethernet for their next releases. Regardless of recent demonstrations and activity around 100Gbit/s Ethernet, carriers all want to see 40 Gbit/s, so vendors have to respond. Cisco and its
CRS-1 remains the main driver for 40 Gbit/s in long-haul DWDM, but this remains relegated to
the core of the core IP networks, so volume will remain low, and it will be more of a nag than a big
opportunity for DWDM vendors. In the survey, a fraction of operators responded that 40-Gbit/s
economics can be superior to 10-Gbit/s economics, but anecdotal evidence and interviews does
not support that claim today: 10-Gbit/s equipment is getting cheaper all the time, comes in nice
small form factors, has a wealth of test equipment to support it, and has built up a solid operational history. 40 Gbit/s is still challenged in every way, and is not on the same cost curve.
100-Gbit/s Ethernet is coming fast, and will negatively affect the 40-Gbit/s market. Most carriers have a keen interest in seeing 100-Gbit/s Ethernet come to fruition soon. There are many
solutions in the labs today from striped, multi-lane 5 x 20 Gbit/s, to a more sophisticated, seriallike 2 x 50 Gbit/s, leveraging 40-Gbit/s optoelectronics that can get carriers to some kind of 100Gbit/s transport within three years. This puts real pressure on the 40-Gbit/s market, and may just
spell its contraction, after a brief period of growth.
OTN is moving to the client side slowly. By virtue of its improved performance management
and longer reach, the optical transport network (OTN) has become well established on the network side of long-haul DWDM. But operators, mainly in Europe, are now looking at client-side
OTN, mainly to offer inter-carrier OTN services and support interconnect from OTN-enabled
metro aggregation gear. Future applications of OTN include a more complete migration into the
metro network, through introduction of an optical channel data unit (ODU) that would contain a
Gigabit Ethernet signal and provide networking of individual Gigabit Ethernet lines through a
switched OTN. In Heavy Reading's survey of network operators, 62 percent of respondents saw a
clear and compelling need to transition from Sonet/SDH to OTN.
OTN faces some limitations to adoption, particularly outside of Europe, with the installed
base of Sonet/SDH and DWDM equipment topping the list. The resistance is strongest in the
U.S. and Asia, but smaller operators are starting to take advantage of OTN and will begin moving
the market in that direction. Of the largest operators, Verizon (particularly Verizon Business) is an
advocate of OTN migration, while AT&T remains on the sidelines for now.
"Alien wavelengths" and direct-connect DWDM architectures are overhyped. Though Cisco
has put a full solution onto the market, and most long-haul DWDM suppliers support some kind of
alien wavelength architecture, a core DWDM solution that is largely based on passive multiplexing of International Telecommunication Union (ITU)-grid wavelengths coming off switches,
routers, and metro gear just isn't taking hold with operators: Trials and requirements are commonplace, but there has been very little purchasing. Carriers still prefer a hard demarcation point
at the DWDM terminal, and consider the premium over alien wavelength architectures justified.
Core switching must evolve. All the operators we surveyed saw a real need to move beyond
simple STS or VC4 switching systems to something more optimized for packet transport. Solutions such as Provider Backbone Bridges with Traffic Engineering and Transport MPLS are gaining interest in the metro-aggregation network of a number of large carriers, and setting the stage
for a core switch that is packet-optimized in a similar fashion. This could become a new product
line from transport switch vendors, rather than router or Ethernet switch vendors.
1.2
Report Methodology
The methodology of this report was designed to gather information critical to equipment suppliers
and service providers in the core DWDM transport market. Our primary research was conducted
in two stages:
First, Heavy Reading conducted a series of one-on-one interviews with employees of network
operators typically senior network planners, directors of R&D, and network architects. Subjects
covered included a review of current core DWDM deployments, transport requirements for future
services, feature requirements for next-gen core DWDM, and timing of deployments.
Second, Heavy Reading conducted a global online survey of telecom operators to gather information on their current core DWDM strategies and future technology plans. Heavy Reading's Fall
2006 DWDM Deployment Survey elicited 88 quality responses from employees of 88 unique service providers, including incumbent and competitive operators of every stripe.
The majority of respondents were from incumbent PTTs and ex-PTTs, interexchange carriers
(IXCs), Internet service providers (ISPs), and competitive local exchange carriers (CLECs). Figure 1.2 breaks out the responses by service provider type.
Figure 1.2: Survey Respondents by Type
The Heavy Reading survey reached a broad global audience, although it was concentrated in
North America and Western Europe, as shown in Figure 1.3. The survey drew responses from a
wide variety of service provider personnel. In this light, the survey results should be considered
as a reflection of perceptions within operators, not as providing strict guidance on operator capex
plans. Figure 1.4 illustrates the diversity of responses.
Figure 1.3: Survey Respondents by Geographic Region
Figure 1.4: Survey Respondents by Job Function
1.3
Report Structure
Long-Haul DWDM: Market & Technology Outlook is structured as follows:

Section II assesses the long-haul DWDM market, analyzing its current strength and growth prospects, and offers a five-year growth forecast, drawing on supplier data and carrier interviews.
Section III details the results of Heavy Reading's service provider survey on technology requirements for long-haul DWDM deployments.
Section IV considers evolving service provider architectures for long-haul DWDM deployments.
Section V profiles select service providers with long-haul DWDM plans of particular interest.
Section VI examines the equipment vendors in the long-haul DWDM space.
II.
Long-Haul DWDM Market Assessment
The long-haul DWDM market was the first to crash in 2001, yet recently has been on a steady
upswing as operator consolidation, ongoing bandwidth demand increases, and aging systems
have combined to create opportunities for expansion and upgrades in nearly every operator network. In addition, carrier backbones themselves are evolving in a number of important ways. The
table below, from AT&T, illustrates the new realities of a provider transport network, making clear
just how comprehensive this evolution has been over the past five years.
Figure 2.1: Evolving Provider Transport Network Strategies
OLD MODEL
TODAY'S REALITY
Traffic growth steady and predictable

onto multiple parallel backbones
Volatile traffic growth onto a

single converged network
Client access rate is always less

than the backbone rate
Client access channel rate approaches

or equals backbone channel rate
Aggregation at ingress to backbone
Greater amount of aggregation

close to or done by the client
Backbone relatively static
Agile backbone (ROADM, GMPLS)
Separate domestic and global pieces
Seamless domestic/global network
Source: AT&T
One factor to note in this chart is the impact of operating a single converged network. While there
is clearly a value in converging stovepipe networks onto a common IP/MPLS/DWDM backbone,
this approach does make predicting bandwidth demand and growth rates on the backbone much
more complex, if not impossible. Also, each of the different types of traffic traversing the common
core will have varying characteristics and network requirements.
Other key contributors to the recent growth of the long-haul DWDM market include:
Consolidated operators find the management of many separate vendors in their new
backbones to be bothersome and an inhibitor to rapid deployment of capacity and services, and are often inspired to finance the overlay of a more unified core transport layer.
Next-generation network transition efforts are often about cutting opex in the face of eroding voice and wireline revenues. These efforts often involve creation of a more scaleable
backbone, fueling deployments of long-haul and ultra-long-haul DWDM express layers.
Many core DWDM backbone routes in the U.S. and Europe are reported to be more than
75 percent utilized, creating demand for new overlays, or in some cases whole new
backbones, if the operator chooses to move to next-gen equipment or a new vendor.
In China and emerging markets, there continues to be strong demand from both wireline
and mobile operators for new backbone networks, creating a fierce battleground for suppliers and providing strong growth opportunities for vendors such as Huawei and ZTE.
Many systems installed in 1999-2000, even if not reaching capacity exhaust, are being
retired in favor of newer systems that offer much improved economics and features.
Wavelength services are selling more briskly, as many ISPs, alternate operators, and
mobile operators shore up backbones with 2.5-Gbit/s and 10-Gbit/s waves. The 10-Gbit/s
Ethernet LAN PHY wavelength is particularly attractive to ISPs and content providers.
Private networks, research and education networks, and government networks are more
often adopting long-haul DWDM to create end-to-end optical networks.
In the past two years, the results for the long-haul DWDM market, comprising those DWDM systems designed for routes over 1,000 km, have been impressive. This market segment was not
long ago the most impressive in the whole telecom industry, taking in more than $6 billion in
2001. Yet within a year the segment plummeted, and continued to fall over the next several
years, hovering around $1 billion in annual revenues from 2002-2004.
But there were real signs of growth in 2005, particularly overseas, and the market grew to $1.35
billion an increase of 22.7 percent over 2004. This was no fluke: Heavy Reading estimates the
2006 long-haul DWDM market at $1.77 billion, a increase of 31 percent over 2005. We also estimate that this growth rate will continue into 2007, as many operators worldwide continue to deploy full backbone overlays or add significant capacity to high-demand routes.
How long will this growth be sustainable? Heavy Reading believes the optical market, particularly
at the backbone, to be modestly cyclical. National backbone builds obviously don't happen every
year, in every country. Most operators will undergo a transition from broad deployment to more
focused capacity expansion by simply adding transponders to installed systems. China is currently deploying a number of high-profile backbone networks, but will not continue this level of
construction indefinitely. And in North America, the consolidation of network operators will ultimately have a negative effect on the total addressable market.
That said, Heavy Reading expects the long-haul DWDM market to begin to plateau in 2009, and
potentially contract by 2011. Predicting the timing of a contraction is difficult in the global telecom
market today, because so many factors remain uncertain, but we do feel strongly that optical
networks markets cannot grow indefinitely: They are infrastructure markets that mature, stabilize,
contract, then rise again with a new wave of investment.
2.1
Demand Drivers
In the network core, demand drivers always originate in the access and edge network, and specific applications or services driving demand this deep in the network aren't always known. In our
survey of network operators about their metro optical networks, there was a clear understanding
of service and application drivers of bandwidth demand; while in the core, where the unit of currency is often the 2.5-Gbit/s or 10-Gbit/s wavelength, operators are often not exposed to the underlying drivers of demand. In the core, operators are more attuned to overall bandwidth demand,
and note shifts in customers, connectivity requests, and pricing fluctuations.
Figure 2.2: Annual Growth Estimates for Backbone Transport Capacity
AT WHAT ANNUAL PACE IS TRANSPORT CAPACITY CURRENTLY
GROWING ON YOUR DWDM BACKBONE NETWORK?
NUMBER OF
RESPONSES
PERCENT
OF TOTAL
Less than 10%
10%
10% to 30%
35
39%
30% to 50%
19
21%
50% to 100%
13
15%
More than 100%
3%
Don't know/Not sure
10%
Total
88
The responses to our survey reveal a widespread perception that core backbone traffic is growing
at a significant pace, with nearly 40 percent of respondents seeing annual growth of 10 to 30 percent, and more than 35 percent of respondents seeing growth in excess of 30 percent per year.
This pace of growth in the network core is significant, reflecting dramatic growth in the access
HEAVY READING | VOL. 5, NO. 2, FEBRUARY 2007 | LONG-HAUL DWDM: MARKET & TECHNOLOGY OUTLOOK 10
network, which is then reduced through the processes of aggregation and statistical multiplexing
as it travels towards the network backbone. At these rates, core capacity will continue to be under
constant pressure to scale cost-effectively, encouraging new lower-cost transport platforms.
As noted above, the largest carriers are seeing a significant change in the operation of their core
networks, addressing an increase in traffic volatility and uncertainty with a more agile, scaleable
network. This occasions more than simply deploying DWDM systems that offer a lower cost per
transported bit; there is a need to deploy systems that offer lower capex, opex, and agility through
technologies such as reconfigurable optical add/drop multiplexing (ROADM), wavelength crossconnect, generalized multiprotocol label switching (GMPLS)/automatic switched optical network
(ASON), and enhanced optical performance monitoring.
This core growth will also continue to push the 40-Gbit/s and 100-Gbit/s markets forward. We are
already seeing some major bandwidth users, such as large enterprise customers and research
organizations, asking service providers about 100-Gbit/s wavelength services. The reason is fairly
straightforward: 10-Gbit/s Ethernet switches are rapidly becoming the norm in large data centers,
as nearly every server installed today attaches at Gigabit Ethernet rates. As connectivity requirements continue to scale up, data centers will need to migrate beyond 10-Gbit/s Ethernet switching
to 100-Gbit/s Ethernet. Once this has occurred, they will prefer to interconnect across the metro
and wide area at these rates to support their business continuity and data protection plans.
Figure 2.3: Backbone Transport Capacity Growth Drivers
WHAT IS THE BIGGEST DRIVER TRANSPORT CAPACITY GROWTH?
NUMBER OF
RESPONSES
PERCENT
OF TOTAL
Retail private-line services (e.g., T1, T3, OCn)
11
13%
Wholesale private-line services (e.g., wavelength services)
15
17%
Dedicated network services (e.g., dedicated ring services)
14
16%
Frame Relay
1%
ATM
2%
E-Line retail (over fiber, over Sonet, over switched network)
5%
E-LAN retail
1%
E-Line wholesale
3%
E-LAN wholesale
2%
Dedicated Internet access
3%
Layer 3 VPN
10%
Residential video
3%
Residential Internet access
17
20%
Storage-area network (SAN) transport/data center extension
2%
Total
87
2.2
Other Considerations
When considering the top drivers of backbone transport demand, it is interesting to contrast this
with recent surveys of operators about traffic growth in their metro networks. Here, in the backbone, operators point to residential Internet access first, followed by their high-capacity privateline and dedicated network services. Ethernet and video are near the bottom. In the metro, the
reverse is true: Video is already starting to have a major impact in the metros of many operators,
and Ethernet is driving bandwidth well above traditional leased-line services and Internet access.
An important observation to make here is that in most operator networks, IPTV and Ethernet are
really metro and access services, and do not always traverse the core network. Ethernet services
often provide internetworking between customer locations in a single metro, or from a customer
location to the nearest service provider point of presence (POP). For IPTV, operators often distribute broadcast video signals efficiently via satellite or a handful of dedicated circuits across the
nationwide network, while more interactive, unicast services such as video on demand (VOD)
originate in local or metro networks, isolating their bandwidth impact.
For backbone operators, the impact of peer-to-peer networking, arising from broadband Internet
access, is much more profound than the impact of these newer services, and will continue to be
the primary driver of capacity. It is also important to consider Internet video, which is distinct from
an IPTV or "telco TV" service, in that video is delivered via a user's broadband connection to the
PC, rather than via a dedicated video services network. Internet video is not easy to quantify and
track, unlike cable operator or telco VOD services, which deliver packaged video content from
local or regional servers directly to a customer's set-top box. That said, Internet video is likely just
lumped into "residential Internet access" in our survey, and must be considered a major driver.
Lastly, backbone operators are often in the wholesale business, and in these cases simply lease
wavelengths to customers, and do not therefore track the purpose for which they are used. So in
this survey, where wholesale private-line services came in second, it is safe to assume that those
wavelengths could be used for a variety of purposes, including building out an operator's video
delivery backbone.
The important takeaway here, regardless of how the market drivers are interpreted, is the rate at
which bandwidth demand is growing and the diversity of the drivers. The public Internet remains
the top driver, and while broadband subscriber growth has begun to mature in many markets, the
usage of broadband connections continues to expand, as does the access connection rate. Existing users consume more bandwidth, even as new subscriber numbers slow. Beyond the consumer, the transition to Ethernet-based services in the corporate market enables this customer
base to make a significant leap in bandwidth usage at little extra expense. Finally, in the research
and education markets, customers are often building their own high-speed optical infrastructures,
using carriers for wholesale connectivity at 2.5-Gbit/s and 10-Gbit/s speeds.
III.
Operator Deployment Plans for Core DWDM
Heavy Reading's forecasts for the DWDM market are created through a blend of analyses: operator surveys, interviews, and supplier interviews. In this section, we provide detailed results from
Heavy Reading's Fall 2006 DWDM Deployment Survey, which shed a great deal of light on the
DWDM market, and provide ample evidence to suggest that the market is in a period of rapid
growth and transition, as more operators are deploying overlays of next-generation technology,
while making a concerted transition to OTN, 40 Gbit/s, and a more dynamic optical layer.
3.1
Operator Backbone Expansion Plans
Looking at plans for backbone upgrades with DWDM, the survey shows a clear level of backbone
expansion activity currently underway (52 percent of respondents), while showing another 42
percent will be expanding over the next two years. In our conversations with core DWDM suppliers, all are seeing growth beyond their expectations currently and is the past three or four quarters. Sales are up around 25 percent in 2006, which is well above initial expectations of a 15 percent growth for the year. Similar numbers are expected for 2007.
Figure 3.1: Worldwide Network Operator Plans for Backbone DWDM Upgrades
This activity is most pronounced in 2006 (when the survey was conducted), followed by a significant number in 2007. The numbers dwindle from there, which raises the question of whether the
core DWDM market can continue to expand at rates in excess of 20 percent per year, or if this
market is cyclical in nature. Arguably, this market could follow six- to seven-year cycles indefinitely, driven more by the introduction of new generations of technology into the marketplace than
by construction and deployment cycles.
Much of the anecdotal data gathered by Heavy Reading for this report indicates that in many
cases, operators are deploying new backbone DWDM systems not because their currently deployed systems have approached maximum capacity, or "fill," but because continuing to expand
capacity with current systems is too expensive. In many cases, an operator with sufficient budget
sees an advantage in deploying an overlay backbone DWDM layer with the latest generation of
technology, rather than continuing to pay a premium to add linecards to the installed base.
In years such as 2006 and 2007, when indications are that a real spike in demand for backbone
DWDM occurred worldwide (driven by the combined factors of emerging markets expansion, installed base obsolescence, and rapid bandwidth demand from a more video-centric Web), it may
be safe to assume that this is the peak of a cycle of infrastructure deployment, and from here the
market will level and ultimately contract slightly.
The DWDM market, though now nearly two decades old, is still quite young in terms of tracking
cycles so there is little historical information to draw upon to gauge the shape of the next cycle.
The situation is further confounded by the fact that the drivers underlying this market are rapidly
changing, quite unlike the more consistent cyclical drivers that define other commodity industries.
That said, we believe the DWDM market has enough fuel to grow over the next three years, and
then may begin to ease off by 2009.
In the Heavy Reading survey, we asked respondents to identify how their companies are planning
to expand the capacity of their DWDM backbones. The responses to this question will indicate the
way in which the core DWDM market is growing, which will have an impact on how individual
suppliers fare. The central question may be considered: Will spending predominantly flow to suppliers who already have an installed base of equipment in the network, or will the trend toward
deployments of overlays benefit new entrants and support shifts in market share?
Figure 3.2: Network Operator Backbone DWDM Capacity Expansion Plans
HOW IS YOUR COMPANY UNDERTAKING ITS BACKBONE DWDM CAPACITY EXPANSION?
NUMBER OF
RESPONSES
PERCENT
OF TOTAL
We will light more wavelengths on existing

DWDM systems on a route-by-route basis.
42
50%
We will overlay new DWDM systems

(lighting new fibers) on a route-by-route basis.
23
27%
We will do a complete backbone overlay

of new DWDM systems.
19
23%
Total
84
The results are encouraging for new entrants. Fully half of the respondents to our survey say their
company is deploying core DWDM systems as overlays, opening up significant opportunities for
new entrants and for market-share shifts among the larger incumbent suppliers. The most significant result here is the 27 percent of respondents who claim their company will perform a complete backbone overlay of new DWDM systems indicating a decisive move away from the routeby-route approach to backbone scaling that has been predominant over the past five years, and
toward a much more ambitious approach.
Indeed, one of our most important observations about the long-haul DWDM market is the speed
at which market share has changed in recent years. The market has radically shifted first as
Huawei stormed on the scene, buoyed by significant Chinese contracts, then by explosive business in emerging markets; and then as Infinera charged in, rapidly snapping up business with
major wholesale backbone operators in the U.S. and Europe, while setting the stage for more Tier
1 carrier wins in the future.
3.2
Operator Requirements & Impediments in the Core DWDM Market
Our online survey also asked operators to provide input on which features they considered most
important in their equipment purchases for backbone DWDM infrastructure. They were asked to
rank each feature on a scale of 1 to 10, with 10 being the most important. On average, respondents ranked lifecycle costs highest indicating an increased focus on the operations costs of
DWDM systems, rather than capital costs, which had been the paramount consideration over the
past five years. Ranking second was "transparent support of any protocol" a key endorsement
of OTN or any other solution that can enable this functionality. Notice that support for "alien"
wavelengths and ultra-long reach fell near the bottom of the list both features many DWDM
vendors tout in their marketing, but which are clearly not of great importance to operators, as
gauged by our survey.
Figure 3.3: Top Attributes of Backbone DWDM Systems for Operators Worldwide
ATTRIBUTE
SCORE
Lifecycle cost
7.80
Transparent support of any protocol
7.68
Ease of design, installation, and service provisioning
7.44
First-installed cost
7.34
ROADM, wavelength crossconnect support
6.75
Integrated packet aggregation or switching
6.70
Network reach "multi-haul" systems that span metro-regional to long-haul
6.66
Automated optical control plane (GMPLS/ASON)
6.60
Sub-wavelength crossconnect support
6.58
Support for 40-Gbit/s wavelengths
6.20
Roadmap to 100-Gbit/s support
6.04
Support for "alien" wavelengths
6.02
Ultra-long reach > 2,000 km unregenerated span support
5.36
We next asked respondents to rank the limitations of their current backbone DWDM systems, to
explore how these aligned with current technological developments. The leading response the
capital cost of adding capacity supports our thesis that part of the core DWDM market's recent
growth is spurred by aging infrastructure that is too expensive to scale. Second is operations
cost, which is clearly rising in importance as operators look to scale their networks to support a
flood of bandwidth from new broadband services. And in third place is lack of flexibility a concern that supports the current trend toward the adoption of ROADM, wavelength-selective switching (WSS), and tenability in DWDM systems from metro to core, which in turn supports operator
requirements for more rapid provisioning of wavelengths and services from their transport cores.
Figure 3.4: Current Limitations of Operator Backbone DWDM Networks, Ranked
ATTRIBUTE
SCORE
Capital cost of adding additional capacity
7.21
Ongoing operations costs
6.72
Lack of flexibility (ROADM, WSS, tunables)
6.62
Poor planning tools, complex network design
6.29
Reach limitations
5.83
No support for 10-Gbit Ethernet
5.67
No support for OTN
5.64
No support for 40-Gbit/s
5.21
3.3
40-Gbit/s Trends in Operator Backbone Networks
DWDM has completely overtaken Sonet/SDH systems in carrier backbones, reducing them to
linecards on DWDM systems, instead of standalone ADMs. The most common line rate deployed
today is 10 Gbit/s, and there is a strong trend toward the 10-Gbit/s Ethernet LAN PHY, as opera-
tors look to reduce their backbone costs by transitioning core router interfaces to Ethernet. In our
survey, 61 percent of respondents identified 10 Gbit/s as the most common new wavelength rate
deployed in the long-haul DWDM network, while 28 percent said it was 2.5 Gbit/s.
Figure 3.5: Most Common New Wavelength Rates in Long-Haul DWDM Networks
Surprisingly, nine operators (representing 10 percent of the survey) identified 40 Gbit/s as the
most common new wavelength deployed. This was not corroborated in our interviews with major
service providers, so it is likely that these respondents are from specialized operators, and not
reflective of the overall market. The 40-Gbit/s market is certainly growing, but it remains a niche
market, representing less than 10 percent of new wavelengths deployed, and is driven almost
exclusively by 40-Gbit/s router port installations.
This assessment, however, is somewhat contradicted by the results of our next survey question,
regarding the drivers for deployment of 40-Gbit/s wavelengths. While we see 40-Gbit/s interfaces
on routers as the primary driver, the survey responses are split: Of the 32 percent of respondents
whose companies are deploying such wavelengths today, nearly half identify the need to interconnect with 40-Gbit/s interfaces on new core routers as the strongest driver, while the other half
point to the superior economics of 40-Gbit/s over 10-Gbit/s wavelengths. (The 7 percent of respondents who identify wholesale requests as the top driver could be counted in either camp.)
Figure 3.6: Primary Drivers of 40-Gbit/s Wavelengths Today
IF YOUR COMPANY IS DEPLOYING 40-GBIT/S WAVELENGTHS TODAY,
WHAT IS THE PRIMARY DRIVER?
NUMBER OF
RESPONSES
PERCENT
OF TOTAL
Need to interconnect with 40-Gbit/s interfaces on new core routers
10
12%
Superior economics to 10-Gbit/s wavelengths
10
12%
Wholesale service request from customers
7%
Other (please specify)
1%
We are not deploying 40-Gbit/s wavelengths.
54
67%
Total
81
Based on both our carrier interviews and data from technology suppliers, we continue to believe
that the 40-Gbit/s market remains tied to router deployments with 40-Gbit/s interfaces. While 10Gbit/s transponders on long-haul DWDM systems typically cost about $12,000 to $15,000 each,
40-Gbit/s transponders today cost three or even four times as much, offering no economic advantage. In addition to that price tag, 40-Gbit/s wavelengths also add cost throughout the network, in
the form of more sophisticated and costly dispersion management solutions, newer amplifiers,
and in some cases new fiber: Nearly all fibers deployed before 1994 are unsuitable for 40-Gbit/s
wavelengths, and many operators have such poor inventories of their fibers that they can't be
certain which are 40-Gbit/s-ready without field testing adding further cost, design complexity,
and delays. In contrast, the costs of supporting 40-Gbit/s router interfaces are more easily justified because of the savings on the router, while the limited volume of these connections allows an
operator to "cherry-pick" specific fibers to use for an IP backbone.
The prevailing wisdom in the market today is that 40 Gbit/s will start in the very core of the network and slowly make its way towards the edge, following the pattern 10 Gbit/s established when
it overtook 2.5 Gbit/s. Our survey, however, does not support that thinking, at least at first glance.
When asked to identify where in their company's network 40-Gbit/s interfaces are required today,
the most common response was actually metro DWDM networks, followed by the more predictable "ultra-long-haul/express DWDM core." In addition, the survey showed equal responses for
long-haul DWDM and regional DWDM networks; thus, the results are spread almost evenly
throughout the regions of operator networks in our survey. This data may or may not be in conflict
with our observations that 40-Gbit/s deployments are currently tied to core router deployments, as
DWDM systems of varying reaches are presently deployed to create backbone IP networks, depending the type of carrier and the geography in which they are deployed.
Figure 3.7: 40-Gbit/s Interfaces Requirements in Operator Networks Today
WHERE IN YOUR COMPANY'S NETWORK ARE
40-GBIT/S INTERFACES REQUIRED TODAY?
NUMBER OF
RESPONSES
PERCENT
OF TOTAL
Ultra-long-haul/express DWDM core
24%
Long-haul DWDM network
15%
Regional DWDM network
15%
Metro DWDM network
27%
No current need for 40-Gbit/s interfaces
18%
Total
33
3.4
100-Gbit/s Ethernet & Core DWDM Networks
The drive to achieve 100-Gbit/s Ethernet transport has recently grown quite intense, driven by
pressures from the data center to support aggregation of 10-Gbit/s Ethernet servers and clients;
and from the transport network to achieve speeds well above 40 Gbit/s in the core. Based on data
from our service provider survey and our interviews with major network operators, the average
growth of bandwidth demand across the core today is between 50 and 100 percent per year a
rate nearly impossible to maintain economically with current 10-Gbit/s transport solutions.
Most operators today deploy transport technology with an eye toward replacement in five years
the lifespan of particular technology generation. Given that bandwidth demand will be increasing
between 16 and 32 times over that five-year lifespan, operators are becoming increasingly concerned that without a new high-speed line rate, optical systems won't be able to accommodate
the growth in demand by simply adding new 10-Gbit/s channels. Adding whole new line systems
to accommodate growth can be quite costly and disruptive to network operations.
Yahoo!, for one, finds that at least 60 percent of its data center, 33 percent of its metro, and 8
percent of its wide-area connections are already 10-Gbit/s Ethernet, setting the stage for 100
Gbit/s as a next-gen solution. According the company's director of network architecture, there is a
pressing need for 100 Gbit/s from major content providers, driven by the following realities:
Their metro networks are 100 percent Ethernet
Internet Exchanges are 100 percent Ethernet
SANs are migrating to Ethernet, away from Fibre Channel, InfiniBand and other protocols
Long-haul transport moving to 10-Gbit/s Ethernet LAN PHY
For long-haul DWDM suppliers, the challenge of achieving 100 Gbit/s on a single wavelength is
the same as with 40 Gbit/s, yet exponentially worse (not just 2.5 times worse). That said, there is
little hope of rapidly migrating to 100-Gbit/s wavelengths for DWDM transport. Instead, the Institute of Electrical and Electronics Engineers (IEEE) and transmission engineers are focusing on
possible solutions that create a 100-Gbit/s virtual port on a transmission system. Examples of
solutions or specifications that enable very high-speed virtual ports include virtual concatenation
(VCAT), link aggregation, multi-link bonding, parallel, and coarse wavelength division multiplexing
(CWDM) optical interfaces such as the Optical Internetworking Forum's VSR-4 and VSR-5 and
the multi-wavelength 10GBASE-LX4 for 10-Gbit/s Ethernet over multimode fiber.
As work proceeds on 100-Gbit/s transport, parallel efforts are underway to achieve 100 Gbit/s in
the LAN and data center. In the electronics world, the challenge is overcoming the limitations of
copper traces on circuit boards and system backplanes. There, parallel approaches that combine
multiples of 6-, 10-, and 25-Gbit/s signals are likely to be more successful than serial approaches.
Whereas radio frequency, power consumption, and heat dissipation are typically the limiting factors in electronics, in optical transmission it is non-linear effects, which contribute to chromatic
and polarization mode dispersion (PMD), greatly reducing transmission distances of high-speed
optical signals. Though 40-Gbit/s wavelengths have finally arrived that are capable of traversing
typical DWDM routes, it is unlikely that pure 100 Gbit/s will achieve this cost-effectively in the next
decade. Instead, most observers believe a multi-lane/multi-wavelength approach will be necessary one in which ten wavelengths of 10 Gbit/s are virtually bonded (using VCAT, for example)
to travel the network as a 100-Gbit/s signal. Figure 3.8 illustrates this solution.
Figure 3.8: Virtual Concatenation for 100-Gbit/s DWDM Transport
Source: Alcatel-Lucent
Other proposals include 5 x 20 Gbit/s or 4 x 25 Gbit/s. The attractiveness of these solutions lies in
their use of lower-cost, lower-power optoelectronics and their ease of deployment across existing
fiber networks. The 10 x 10 Gbit/s solution using VCAT is perhaps the most attractive, as it uses
existing 10-Gbit/s technology as its unit of currency, leveraging the installed base of DWDM systems for transmission, limiting the need for new 100-Gbit/s-capable equipment at endpoints only.
Figure 3.9 compares Ethernet Link Aggregation (LAG) to the transport network's VCAT technique as a solution for transporting 100-Gbit/s Ethernet. The VCAT solution is attractive because
of is its wide use in Sonet/SDH networks today for lower-speed Ethernet transport, as well as its
ease of integration with the OTN standard, which is becoming increasingly common in provider
transport backbones.
Figure 3.9: Inverse Multiplexing for 100-Gbit/s Ethernet: Ethernet LAG vs. VC
ETHERNET LINK AGGREGATION: DISTRIBUTE
TRAFFIC TO LANES AT PACKET LEVEL
Each lane is an independent MAC
Must choose same lane for every

packet in a flow to maintain ordering,
but then latency differences between
lanes are irrelevant (need not be compensated by the receiver)
Large aggregate flows create load balancing problems must try to parse individual flows from inside various tunneling mechanisms
Individual flows may be hidden, e.g.,

with IPSec
VIRTUAL CONCATENATION: DISTRIBUTE TRAFFIC

TO LANES BY BYTE/COLUMN SLICING
Inverse multiplexing done below the packet

layer in the protocol stack
No packet awareness within an individual

lane
Receiver buffers traffic to align with highest

latency lane
Never a load balancing problem N

bit/second data stream is distributed evenly
into X bitstreams of N/X bits/second.
Remultiplexing reconstitutes the original bitstream from which packets can be extracted
Source: Alcatel-Lucent
Most participants in the standardization process today believe a fully approved 100-Gbit/s standard will be adopted by the IEEE in 2010, leaving a rather short window of opportunity for 40Gbit/s DWDM networks and perhaps squeezing that solution out of the market.
Figure 3.10: Network Operator Approaches to 100-Gbit/s Wavelengths
WHAT IS YOUR COMPANY'S APPROACH TO
100-GBIT/S WAVELENGTHS?
NUMBER OF
RESPONSES
PERCENT
OF TOTAL
Under investigation
39
45%
Trialing
3%
Planning for deployment when available
11
13%
No interest
11
13%
Don't know/Not sure
22
26%
Total
86
Surveyed operators were predictably quite interested in this technology: Most claim to be investigating 100-Gbit/s DWDM and even planning for its future deployment. In response to carrier interest, most DWDM vendors are developing 100-Gbit/s technology today. In nearly every case,
vendors are looking first to multi-wavelength solutions, as attempts at single-wavelength 100Gbit/s transmission (often using differential quadrature phase shift keying [DQPSK] encoding) has
not proven technologically or economically feasible for long-haul DWDM in the near term.
IV.
Core DWDM Architectures & Operations
4.1
"Alien Wavelengths" & the Integration of WDM Optics on Client Equipment
One of the most interesting changes in the DWDM market over the past three years has been the
development and positioning of architectures and solutions that support "alien wavelengths" or
the implementation of DWDM optics on clients of the DWDM network. The goal of this architecture is network simplicity and capex reduction, as it reduces a set of transponders in each network connection by placing DWDM optics on a router, switch, or multiservice provisioning platform (MSPP), which then interfaces passively to the DWDM network. The DWDM network, in the
logical extreme of this architecture, is made up of passive mux/demux units, managed optical
amplifiers, wavelength switches, and signal-conditioning equipment.
Vendors have approached this vision in two ways. Neither solution has fared terribly well in the
market today, although some operators find deploying this architecture in a limited fashion to be
workable and economic:
Router vendors such as Cisco position this architecture as a complete fulfillment of the
IP-over-DWDM vision, tying IP equipment more tightly to the transport network and reducing overall network cost.
Transport vendors such as Nortel position this architecture as a lower-cost, more flexible
way to deploy end-to-end optical networks, with metro MSPP and DWDM equipment interfacing to an agile, multi-haul photonic layer.
In our interviews with operators, most expressed an interest in this type of solution as a means of
reducing network cost, but found that ultimately their vendors could not deliver solutions that radically lowered cost without imposing additional management and operational burdens on the network. Our online survey found more than 60 percent of operators positive about the value of integrating DWDM optics on routers and switches to reduce transponders in a DWDM network, with
most of the balance undecided.
Figure 4.1: Value of Integrating DWDM Optics on Client Equipment
DO YOU SEE VALUE IN INTEGRATING DWDM OPTICS ON ROUTERS AND
SWITCHES TO REDUCE TRANSPONDERS IN A DWDM NETWORK?
NUMBER OF
RESPONSES
PERCENT
OF TOTAL
Yes
54
62%
No
8%
Not sure
26
30%
Total
87
However, our one-on-one interviews with operators and suppliers revealed a deeper skepticism
about this solution. Most suppliers told us they sold very little gear in this configuration, though
they are continually asked to prove that it is an available option. Carriers and suppliers have often
discussed and even trialed such solutions, but by and large operators have ultimately chosen to
continue as they have, with a classic DWDM terminal and transponder as the hard demarcation
point between the transmission network and the data network.
Moving some of the transport functionality onto data gear raises many issues about network control and management, and often does not reduce capital costs as much as advertised: Because a
transponder moved from a DWDM terminal to a router or switch typically only replaces two pluggable short-reach XFPs (if it's a 10-Gbit/s connection, for example), the resulting savings per link
averages only $1,000. Given the additional management burdens, most operators choose to
forego the cost savings in favor of operational certainty.
As shown in Figure 4.2, operators gave fairly equal weight to a variety of concerns around integrating DWDM optics on client gear, with "adds complexity to wavelength planning and management" as the only standout in the group. This echoes what we observed from our industry conversations, which we believe will continue to put negative pressure on the success of this type of
deployment for years to come.
Figure 4.2: Concerns About Integrating DWDM Optics on Routers & Switches
WHAT ARE YOUR CHIEF CONCERNS WHEN CONSIDERING
INTEGRATING DWDM OPTICS ON ROUTERS AND SWITCHES?
NUMBER OF
RESPONSES
PERCENT
OF TOTAL
Poor/limited interoperability with DWDM system management
11
13%
Adds complexity to wavelength planning and management
28
33%
Loss of end-end control/management plane information and control
13
15%
Inferior support from router/switch vendors for DWDM transport
15
17%
No opinion/Don't know
19
22%
Total
86
4.2
Switching in the Core DWDM Network
Core DWDM networks have incorporated some level of switching for the last six years, serving
the functions of protection, restoration, service initiation, and wavelength routing. Switching at
core nodes is typically accomplished via wavelength switches and Sonet/SDH switches. Wavelength switches tend to be all-optical, in that optical signals are not electronically regenerated;
rather, they are switched via an optical mechanism from one port to another, most often for simple protection purposes. Sonet/SDH core switches are more complex systems that sit at major
junctures in a core optical network and perform line-rate and subrate switching to support all
switching functions in the core including bandwidth grooming, aggregation, protection, and restoration. The core switch has emerged as an important product category for most transport network vendors, and is presently undergoing a transformation of its own.
The amount of wavelength-level traffic traversing any core node continues to rise, and the need
for switching, bandwidth management, and automation continues to increase as operators look to
protect valuable core facilities and provision customer wavelengths rapidly and cost-effectively. In
addition, many operators are beginning to consider the value of integrating some level of packet
switching at these core nodes, offloading much of the basic switching function from expensive
core routers onto a transport-optimized switching system.
There is also an ongoing transition to OTN. This standard (ITU-T G.709) is similar to Sonet/SDH
in that it defines a range of interfaces to the optical network, is built on a layered structure, and
supports in-service performance monitoring, protection, and management functions, yet also
adds management of optical channels in the optical domain and forward error correction (FEC) to
enable longer optical spans. The use of OTN on the line side of long-haul DWDM networks is
common worldwide, while the adoption of more sophisticated OTN networking features has thus
far been limited to operators in Western Europe and select others.
That said, our interviews with operators provided evidence that the use of OTN is expanding,
driven in many cases by a parallel transition to Ethernet-based transport. Ethernet's lack of a true
multiplexing hierarchy, end-to-end performance management, and Sonet/SDH-like operations
make it an ideal match for OTN, and many operators already foresee a future in which Ethernet,
WDM, and OTN are married to create a fully functional packet transport network, without requiring any Sonet/SDH.
Figure 4.3: ITU-T G.709 OTN in the Network
Source: Verizon
In our survey, we asked respondents to consider what type of switching their companies require
at their core optical network nodes. The results were surprising, but there is ample evidence to
suggest they reflect an emerging sentiment that Ethernet and some form of packet switching
(rather than full Layer 3 routing) has its place in core transport switches. Today, most core
switches perform STS1/VC4 switching and can also act as wavelength switches either by
switching a full wavelength of traffic through an electronic fabric, or through an optical switching
fabric such as a ROADM, WSS, or a simple optical protection switch. Some core switches include
Ethernet interfaces, and can at least interface directly to the packet network to perform aggregation in Layer 2 and switching through the transport network; but many operators see a need for
true packet switching in these systems, requiring the addition of a separate packet fabric or a
transition to a full packet fabric at the switch's core.
Figure 4.4: Switching Requirements at Core Optical Network Nodes
WHAT TYPE OF SWITCHING DOES YOUR COMPANY
REQUIRE AT CORE OPTICAL NETWORK NODES?
NUMBER OF
RESPONSES
PERCENT
OF TOTAL
Wavelength
54
62%
OTN/ODUk
18
21%
STS1/VC4
30
34%
VT1.5/VC12
10%
Ethernet/Packet
61
70%
Other
3%
Don't know/Not sure
6%
Total
87
Taking this analysis a step further, it is now becoming more interesting to explore the use of
ROADM/WSS in the network core, as this market has heretofore been largely associated with the
metro, where wavelength provisioning and reconfiguration are more necessary and strategic. In
this case, we refer to pure wavelength add-drop and switching, which can often be integrated directly into the DWDM transport system, and doesn't require a separate switching system.
The results of the survey show no clear preference for a particular number of degrees (referring
to the number of directions in which a ROADM or WSS can route wavelengths) though the
more common two-degree (east-west) ROADM node with dynamic add-drop received the most
votes. In the metro-regional network, operators are beginning to determine which nodes would be
ideal for four-degree operation or more, to support larger junctions and mesh-based restoration.
In our conversations with operators, many tell us that around 60 percent of their ROADM nodes
will remain two-degree, 20 percent three-degree, 10 percent four-degree, and 10 percent more
than four-degree. The core seems likely to follow these ratios. The final determination will come
as traffic patterns are better understood and the economics of multi-degree ROADM and WSS
become more favorable as volumes increase.
Figure 4.5: Wavelength Add-Drop/Switching Requirements on DWDM Backbones
FOR WAVELENGTH ADD-DROP AND SWITCHING, WHAT WILL YOUR COMPANY
REQUIRE FOR CORE NETWORK NODES OVER THE NEXT THREE YEARS?
NUMBER OF
RESPONSES
PERCENT
OF TOTAL
Two-degree nodes with fixed wavelength add-drop (OADM)
14
16%
Two-degree nodes with dynamic add-drop (ROADM)
24
28%
Four-degree nodes with dynamic wavelength-selective switching (WSS)
17
20%
Full optical crossconnect (8 degrees or greater)
14
16%
Don't know/Not sure
18
21%
Total
87
The final element in any switched optical network is management and control. Optical networks
have long promised to evolve from rather static arrangements of high-capacity connections to
more dynamic architectures where bandwidth and connectivity are more fluid, and under software
control. In our survey, we first asked operators where network-level automation would be most
beneficial to their company. The leading answer by a significant margin was "provisioning wavelengths" not a real surprise, given the current acceleration in the market and increased competitiveness. Core network operators have long found service delivery times to be a key differentiator,
while other, more traditional, network operations features can be improved with automated control, but don't necessarily add immediate competitive value.
Figure 4.6: Network-Level Automation Values in the Optical Core
WHERE IS NETWORK-LEVEL AUTOMATION MOST
BENEFICIAL TO YOUR COMPANY?
NUMBER OF
RESPONSES
PERCENT
OF TOTAL
Provisioning wavelengths
37
43%
Channel/wavelength upgrades
14
16%
Software upgrades and maintenance
12
14%
Troubleshooting
13
15%
Don't know/Not sure
10
12%
Total
86
The most important part of this slow and steady evolution to a more dynamic optical network is
clearly the ITU-T's standardization effort called ASON, or the automatic switched optical network. GMPLS is the protocol suite most commonly referred to as an enabler of the ASON archi-
tecture, and is currently in use in many optical systems as a kind of "ASON-lite" implementation,
enabling enhanced control and management of that particular vendor's gear.
Based on our survey results, as well as our interviews with carriers, it appears that a slim majority
of network operators are planning to make use of GMPLS/ASON in their core DWDM networks.
Many certainly do so today on their core optical switches, and as DWDM systems become more
automated in their wavelength-provisioning features, many are relying on at least some of the
ASON/GMPLS tools to enable these advanced features. That said, a number of operators did tell
us that in most cases GMPLS/ASON would be used to support particular services or features, but
would not soon be implemented network-wide, or in any multi-vendor fashion, as their vendors
have yet to prove that is realistic in the near term. There is also an ongoing debate within many
operators around the idea of network control that is, whether the packet network can be
charged with controlling facilities in the transport layer, or if there should remain a hard demarcation between the two layers, with GMPLS/ASON focused primarily on network protection and
bandwidth provisioning.
Figure 4.7: Operator Plans for GMPLS/ASON
GMPLS/ASON IN ITS CORE DWDM NETWORK?
IS YOUR COMPANY PLANNING TO MAKE USE OF
NUMBER OF
RESPONSES
PERCENT
OF TOTAL
Yes
44
51%
No
14
16%
Don't know/Not sure
29
33%
Total
87
The next survey question sought more specific information on operator interest in GMPLS/ASON
for their core DWDM networks. Asked to identify the primary value of the technology, the leading
choice was overwhelmingly "transport service provisioning" a longstanding challenge in the optical network, where wavelength setup can be a labor-intensive, error-prone process requiring
weeks, if not months, to accomplish. A more dynamic optical network enabled by GMPLS/ASON
at least promises to reduce setup time and reduce errors, and operators clearly see value in that.
Mesh networking is another feature often associated with GMPLS/ASON, and another that has
taken much longer for operators to implement than was first advertised. The reasons for the delay
are myriad, but all relate to the difficulty of transitioning from a transmission layer that is so well
established along one paradigm ring-based protection and network design to another, particularly one that is reliant on a dynamic, distributed control plane. Verizon has talked openly about
transitioning to mesh networks in its major regional networks supporting FiOS, but that stance
remains fairly unique in the industry today.
Figure 4.8: Value of GMPLS/ASON in Operator Networks
WHAT IS THE PRIMARY VALUE OF GMPLS/ASON
FOR YOUR COMPANY'S CORE DWDM NETWORK?
NUMBER OF
RESPONSES
PERCENT
OF TOTAL
Optical layer network inventory/management
11
16%
Transport service provisioning
28
40%
Protection
16
23%
Support for migration to mesh networking
15
21%
Total
70
V.
Network Operator Interviews and Analysis
5.1
AT&T Inc.
AT&T (NYSE: T), having merged with both SBC and BellSouth, is now the largest operator in
North America, and has laid out ambitious goals for its core network. It has begun consolidating
several distinct networks onto a common IP/MPLS/Ethernet/OTN/DWDM backbone. Its global
network comprises 535,000 fiber route miles, with 30 major Internet data centers on four continents. AT&T offers dedicated MPLS access from more than 1,600 nodes in 137 countries, and
wired Ethernet from more than 1,600 access points in 17 countries. Its network carries an average of 7.0 petabytes of traffic per day, and is reportedly growing by at least 75 percent per year.
AT&T's express backbone in the U.S. is currently based on Siemens ultra-long-haul DWDM systems, supporting 40-Gbit/s wavelengths over 20,000 route miles and 27 major backbone router
POPs, shown in Figure 5.1 below. Below this express layer, AT&T operates more than 1,300
long-haul DWDM systems to serve the second tier of core POPs.
Figure 5.1: AT&T U.S. Domestic 40-Gbit/s OTN/DWDM Express Backbone
Source: AT&T
According to AT&T, the OTN/DWDM express backbone serves both its converged IP backbone
and its enterprise customer base, connecting major U.S. cities with express wavelengths mainly
10 Gbit/s today, but with potential for growth to 40 Gbit/s. The network complements AT&T's extensive long-haul and metro networks for optical connectivity. Key features of the network include:
40-Gbit/s G.709 OTN framing over 80-channel DWDM for most efficient multiplexing utilization and to support ultra-high-rate client services such as 10-Gbit/s Ethernet.
Ultra-long reach for rapid provisioning
ROADM-based reconfiguration and wavelength setup from core to metro. Both twodegree and multi-degree ROADM
Tunable lasers for inventory and spares management
Automated provisioning of bandwidth
Growth path to tunable drops and ASON/GMPLS for agility in wavelength provisioning
AT&T's domestic express and metro-regional backbones employ common technologies, such as:
C-band G.692 DWDM line-haul with 80 channels (50GHz grid) or 40 channels (100GHz
grid); both 10-Gbit/s and 40-Gbit/s client payload rates per channel.
G.709 OTN OTU2/ODU2/OPU2 (10 Gbit/s) OTU3/ODU3/OPU3 (40 Gbit/s) client payload multiplexing.
Longitudinal, single-span, multi-supplier interoperability of G.709 adapted client signals

across intra-domain interfaces.
Optical modulation format is NRZ (10-Gbit/s channel signaling) or advanced (duobinary,

DQPSK, etc.) modulation (40-Gbit/s channel signaling).
OC768 packet over Sonet is the framing protocol used for aggregated IP/MPLS/Ethernet
client service interface at 40 Gbit/s (STS768c payload capacity is 38.338560 Gbit/s).
At Light Reading's Optical Expo 2006, AT&T Labs' Simon Zelingher said AT&T "will need 100
Gbit/s by the end of the decade," citing the need to adapt to the characteristics of and demand for
VOIP, video, and online gaming, which require low latency and packet loss. Zelingher noted that
a 40-Gbit/s DWDM system in one POP, capable of carrying 80 wavelengths at full capacity, is
already 25 percent full. He described AT&T's single, integrated backbone a model he said will
be deployed globally as a network that operates in four layers: hosting centers; IP routers and
the "global packet layer," based on MPLS; intelligent optical switching; and fiber and DWDM.
5.2
Comcast
Comcast, the largest U.S. MSOs with more than 22 million basic cable subscribers, has recently
become a major player in the core DWDM market. Comcast had previously been utilizing DWDM
in metro networks for capacity relief, but in the past two years it has been deploying DWDM more
strategically, as part of an overall network architecture focused on scaling to meet multimedia
services demands. Its IP network infrastructure is designed around three elements backbone,
regional, and access networks. The backbone provides connectivity among major content nodes,
core Internet POPs, a network operations center, cable maintenance centers, and networked
data centers. Comcast's converged regional area networks (CRANs) are large, ring-architected
networks responsible for most services delivery, distributing broadcast video from head-ends to
local distribution hubs, and voice and data services from various data centers and services POPs.
Figure 5.2: Comcast Regional Area Network Diagram
Source: Comcast
Comcast's new backbone network, supplied mainly by Nortel with its Common Photonic Layer
equipment, interconnects these CRANs into a national backbone. Features include:
19,000 route miles of fiber (acquired from Level 3), over 100 nodes
OC768 40-Gbit/s router ports deployed in 2006 (Cisco CRS-1 routers)
Total transport capability of more than 2,500 Gbit/s in 2006
Consolidates peering and interconnection with other operators
Managed QOS service delivery end-to-end with no third parties involved
Centralized management functions
ROADM and WSS support in Nortel's CPL
Nortel OME 6500 for edge service aggregation
Comcast's VP of backbone architecture and engineering, Kevin McElearney, has noted that the
company's backbone buildout continued throughout 2006, with the East and West Coast rings lit
first, followed by remaining core market connections toward the end of 2006. Comcast has an
ongoing project called the Open Transport Initiative that is focused on fostering interoperability
among router and transport vendors, and today is concentrated on 10-Gbit/s Ethernet LAN PHY
for transponder interoperability, and optical control channel interoperability. As part of this initiative, Comcast and Nortel also pledged to explore next-generation photonic line interfaces that
define power levels, wavelengths, modulation schemes, optical signal-to-noise ratios, and wavelength identification.
The driver for all of this expansion is a shift from narrowcast and unicast services. Today, the ratio of broadcast to unicast is 94/6; Comcast sees this evolving to 80/20 by 2010, which will have a
significant impact on both regional and core network capacity.
5.3
Interoute Communications Ltd.
Interoute has become a major network and data center operator in Europe through consolidation
and aggressive network expansion. The company has invested 2.7 billion in its network, acquired VIA Net.works and PSINet assets to expand its direct customer base to 14,000 enterprises, and recently received a 125 million investment from Dubai Holding to further its development toward the East.
The range of services Interoute presently offers is quite broad, including hosting; media, voice,
and VPN services to enterprise customers; and collocation, bandwidth, and infrastructure services on the wholesale market. Interoute's network consists for a SIP/SS7 peering platform; a
multiservice network for corporate services; a network of data centers for hosting and security
services; and a newly developed Ethernet services network based on 10-Gbit/s Ethernet.
Interoute has observed that the market in which it operates (competitive pan-European) has been
evolving rapidly moving from a simple carrier's carrier model to one of advanced services delivery over a scaleable underlying network. The company sees a major shift going on from 2.5Gbit/s to 10-Gbit/s services, and a welcome bottoming out of pricing for bandwidth in these markets as operators consolidate. This is partly due to the end of bandwidth supplied by distressed
assets in the market, which had a significant downward pressure on pricing. Interoute has seen
demand on its network in 2005-2006 exceed its forecast by a factor of two. This surge has caught
its vendors off-guard, and some of them are struggling to respond, with lead times extending to
around 18 to 22 weeks in many instances.
Interoute is seeing 400 percent year-on-year growth for Ethernet, and is rapidly expanding its 10Gbit/s Ethernet core facilities to keep up. In the face of such rapid growth, the company decided
in 2006 to launch a review of transport technology and systems for optical transport.
According to Interoute, the targets of this study included:
New network had to be built and operational before the end of 2007 (Interoute started the
process in May 2006; the target footprint is 13,500 km)
Reduce the cost of wavelength delivery by more than 50 percent
Provisioning times must be no more than ten days anywhere on the network
Implementation had to be robust to deal with multiple changes on a daily/weekly basis
Interoute ultimately chose Infinera as its supplier, claiming its solution offered easy span engineering, rapid initial installation, and easier network monitoring than traditional DWDM. Interoute
also cited Infinera's use of GMPLS/ASON and a simplified architecture for wavelength routing
versus a traditional DWDM line system paired with an optical wavelength crossconnect.
The new build with Infinera equipment covered most major traffic routes 13,500 km of new network with 39 nodes supporting service add-drop. The Infinera system design is based on 100
Gbit/s of traffic per line card; thus the system was initially deployed with a minimum of 100 Gbit/s
for each route, with upgradeability in 100-Gbit/s increments.
5.4
Level 3 Communications Inc.
Level 3 (Nasdaq: LVLT) operates both metro access networks and an intercity backbone, which
provides high-capacity links between Tier 1 markets and medium-capacity links to Tier 2 and 3
markets, with extensions directly into key traffic aggregation centers. This backbone includes
roughly 47,000 route miles, connecting 16 countries in the U.S. and Europe, and supports both
wavelength services and private-line services (TDM and Ethernet). In its metro access networks,
Level 3 provides a mix of traditional private-line services and Ethernet, and has lately been expanding its metro footprint through acquisition. The metro access networks today serve more
than 120 markets and 6,200 traffic aggregation points, spanning roughly 24,000 route miles.
Level 3 estimates growth in wavelength services demand ranges from 10 to 40 percent per year,
depending on the market, while prices are falling by between 5 and 20 percent. VOIP services
are both Level 3's strongest growth segment and its highest overall revenue contributor. In the
future, Level 3 expects video over IP to be the next-largest contributor to growth.
Level 3's has been rapidly expanding its footprint via acquisitions, the most important of which are
Broadwing, WilTel, Progress Telecom, ICG, TelCove, and Looking Glass Networks. Level 3's
2005 communications capex stood at $298 million, including both transport and IP upgrades;
2006 capex was roughly $400 million, including several significant acquisitions. Level 3 expects
future capex to come in at 12 to 14 percent of total communications revenue.
For core DWDM transport, Level 3 is deploying Infinera gear today, largely because of its ability
to reduce opex and rapidly provision capacity. Level 3 moved forward with Infinera's solution after
concluding that it was cheaper than ROADM technology on both the opex and capex fronts. Level
3 has been rather negative on ROADMs and wavelength crossconnects in the core network,
claiming that wavelength churn in the core is not sufficient to justify the added expense.
The two major platform-level migrations Level 3 has made for its core network over the past two
years are the move to Infinera's "Digital Optical Networking" system; and to Force10's Ethernet
routing solution. Level 3 feels Infinera has dramatically lowered its capex and opex in the optical
core, and that Force10 has lowered capex in the core IP network by at least a factor of ten.
Level 3 has mentioned 100-Gbit/s Ethernet as its next interface focus, rather than looking for 40Gbit/s optical solutions. The company is seeing 20 to 25 percent annual growth in wave services,
much of it driven by corporate customers, rather than wholesale services to operators.
5.5
Verizon Communications Inc.
Verizon (NYSE: VZ) has been showing consistent growth over the past year, with 6.6 million
broadband data customers, 118,000 FiOS video and 522,000 data customers, and 18.3 percent
overall revenue growth reported for the third quarter of 2006. Verizon is targeting 6 to 7 million
FiOS data customers and 3 to 4 million FiOS video customers for 2010, indicating that FiOS will
continue to be the main driver of Verizon's infrastructure upgrades for the foreseeable future.
Verizon's approach to core optical networking is tied to larger efforts to evolve its entire transport
infrastructure around the requirements of FiOS (its fiber-to-the-premises initiative) and its need to
reduce network capex and opex as it transitions to packet-based services delivery. Verizon's
network includes its original backbone (upgraded most recently with Lucent LambdaXtreme product) and MCI's former backbone (now implementing Ciena and Siemens gear for a ultra-long-haul
DWDM express layer), which have been integrated to create a more unified core optical network.
Verizon has a number of high-profile efforts underway to shore up its optical networks, including
an RFP for a next-generation optical transport platform to serve the needs of the FiOS network,
and work on 40-Gbit/s transport, GMPLS/ASON, and wavelength routing in the network core.
For the FiOS network, Verizon was primarily focused on regional DWDM solutions that included
the following features:
Integration of Sonet and DWDM functionality into a single element
ADM-on-a-wavelength eliminates the need for an external Sonet ADM
Larger optical reach allows transparent interconnection of a large number of offices with
minimal regeneration
Optical mesh allows rings to be optically interconnected
WSS for optical switching between rings eliminates back-to-back nodes for ring to ring interconnections
Optical broadcast reduces the cost of video distribution
Simplified equipment operation
Reduced PICS and spares inventory via fewer card types and tunable lasers
This RFP was ultimately awarded to Tellabs, though there remains an ongoing opportunity for a
second vendor. With this new equipment, Verizon claims it will have a much more flexible infrastructure than cable MSOs for the transport of both broadcast and IP-based video. It points to the
use of DWDM and ROADM as key enablers of this transition, particularly features such as:
DWDM on all spans
Video head-end office added to core DWDM ring
Core DWDM ring between routers, video head-end offices, and aggregation offices
Subtending rings to distribute broadcast video, VOD, and IP data to video serving offices
Verizon has been looking at several technological innovations to support its expansion, including:
Bandwidth-on-demand service enabled by metro and core optical systems running

GMPLS/ASON and OTN. In a field trial, Verizon tested elements of an OTN control plane
to demonstrate just in time provisioning and bandwidth on demand, for DS3, OCn and
Ethernet private-line services.
Mesh-based restoration, leveraging ROADM and WSS technologies. Will be used in the
FiOS regional and core networks as well as international and undersea networks.
40-Gbit/s transport: Verizon recently extended Juniper OC768 traffic on its Richardson,
Texas, field trial network to 3,040 km, using Mintera 40-Gbit/s RZ-DPSK and CS-RZ
transponders and Xtera's all-Raman ultra-long-haul system, with 68 x 10-Gbit/s channels.
Exploring 100-Gbit/s transport options.
Figure 5.3: Verizon ROADM-Enabled Network Mode of Operation
Source: Verizon
Verizon is presently focused on consolidating its optical cores, and it appears the DWDM network
for the original Verizon Enterprise Advance backbone network, built with Lucent LambdaXtreme
gear, will be capped in favor of the MCI ultra-long-haul backbone build, commenced in 2004, using gear from Ciena and Siemens. That project is well underway, and will ultimately span 32,000
route miles. According to MCI's paper on this project, presented at OFC/NFOEC 2006, key features of that core network build include:
Strong FEC, which can improve bit-error rates to nearly error-free.
Lower noise-figure amplifiers with span management capabilities, providing automated

spectral equalization to enable longer reach.
Full traffic signal encapsulation incorporated in the G.709 digital wrapper to allow handoffs and manipulation at the wavelength level without affecting bits.
Higher equipment densities mean lower power and cooling requirements.
Route-design tools consider not only the optical signal-to-noise ratio and loss, but also
model nonlinear impairments; these design tools have been verified to match system performance very closely.
Tunable lasers allow for full C-band tunability from a single transponder, drastically reducing sparing.
Electronic equalizers integrated into receivers increase tolerance to residual chromatic

dispersion, PMD, and nonlinear effects.
ROADM technology, which allows for future-proofing MCI's network; fixed OADMs require assigned bandwidths.
Raman amplifiers, in conjunction with EDFAs, add span margin that can be used to turn
down unnecessary equipment sites; Raman also is used to help mitigate nonlinearities.
40-Gbit/s ultra-long-haul routes are fully compatible with 10 Gbit/s using simple planning
and commissioning rules.
This is now part of Verizon's overall backbone upgrade, and will not be tied exclusively to Verizon
Business (the former MCI).
VI.
Vendor Profiles and Strategic Analysis
6.1
Alcatel-Lucent
Now merged, Alcatel-Lucent (NYSE: ALU) is the number one supplier of long-haul DWDM systems in the world, with combined revenues of $310 million in 2005 and estimated revenues of
$400 million in 2006 far outstripping the number two supplier, Huawei, which has estimated
revenues of $282 million for 2006. Alcatel's product, the 1626 Light Manager, has been quite
successful in ETSI markets, while Lucent's LambdaXtreme has landed a few high-profile accounts, including Verizon and Deutsche Telekom, over the past three years, but did not achieve
market leadership status. Alcatel-Lucent has not formally announced its optical product rationalization plans yet, so it is too early to say how these two products will be affected. Heavy Reading
will provide an update of the company's product rationalization in future optical reports.
In its most recent communiqu with analysts, Alcatel reported third-quarter 2006 revenues of
$462.7 million for terrestrial optical networking systems an increase of 27 percent quarterly and
24 percent annually. The company noted the ongoing IP core transformation in fixed and mobile
networks spurred growth in long-haul DWDM, where a significant jump was recorded in ROADM
rollouts. WDM sales accounted for 27 percent of revenues, with strong growth of 59 percent annually and 36 percent quarterly. The Asia/Pacific region showed the strongest growth for optical,
driven largely by the major capacity upgrades in photonic networks, rollout of Ethernet services,
and GMPLS/ASON requirements for network automation and reliability. The Alcatel 1626 Light
Manager is a 96-wavelength platform (at 10 Gbit/s per wavelength), upgradeable to 192 channels; it supports ROADM, 40-Gbit/s wavelengths, and OTN.
Heavy Reading notes that Lucent's LambdaXtreme has not shown similar growth over the years,
and will be difficult to maintain alongside the more successful 1626 Light Manager. LambdaXtreme does offer proven 40-Gbit/s support, extended reach via Raman amplification, and a number of other advanced technologies. Comparing historical revenues for long-haul DWDM sales,
we estimate Lucent's at $140 million and Alcatel's at $170 million in 2005; but in 2006, Alcatel's
long-haul DWDM revenues grew to an estimated $270 million, while Lucent's were flat, between
$120 million and $140 million. The momentum is clearly with Alcatel in this segment.
In our vendor interviews, Alcatel and Lucent both got very high marks for technology innovation
and professional services and support. Combined, they present a formidable challenge to any
optical network supplier, and will likely retain the top spot in long-haul DWDM for years to come.
6.2
Ciena Corp.
Ciena (Nasdaq: CIEN) has long been one of the premier suppliers of long-haul DWDM systems,
and in our interviews with operators Ciena was noted highly in terms of technical innovation and
support. This position may be somewhat in jeopardy, as Ciena continues to reduce its R&D expenditures as a share of revenue and focus on internal cost controls and profitability. Clearly, the
company is facing difficult decisions. That said, Ciena continues to do well with its CoreStream
Agility, part of its FlexSelect architecture, and is adding features and functionality to expand its
market and improve its competitiveness. Key advances to note in 2006 included:
Moving entirely to OTN transceivers, adding OTN options to client-side optics to support
multiplexing of 2.5-Gbit/s OTN signals into a single 10-Gbit/s wavelength and interoperate with its metro 4200 platform. Also migrating its optical switch, Core Director, to OTN.
Enhancements to Core Stream Regional, with the ability to span 1,500 km to 1,600 km
without electronic regeneration, using Raman amplification. This platform is commonly offered outside of the U.S., where it can serve national or regional network requirements.
Adding support for programmable optical interfaces (Flexiport)
Adding pluggable XFPs to all product lines, including CoreStream
Adding 40-Gbit/s support
Full C-band tenability on an individual wavelength basis
Working on 100 Gbit/s
In terms of market share and revenue growth, Heavy Reading estimated Ciena's long-haul
DWDM business at $116 million in 2005, and we believe it will reach $160 million in 2006. ZTE
resells Ciena's Core Director product in China.
6.3
Ericsson AB
Ericsson (Nasdaq: ERIC) became a player in the long-haul DWDM market through its acquisition
of Marconi, which had been selling its MHL 3000 "Multi-Haul" DWDM platform in ETSI markets,
positioned as a platform extending from metro to ultra-long-haul. The MHL 3000 platform is really
a family of products, including a metro and core system, and can be deployed alongside core
switches to create a full optical core network. It includes full OTN support, 40-Gbit/s optics options
(using RZ-DQPSK modulation), and a GMPLS/ASON control plane.
Ericsson's optical products all address broadband networks, along with fixed access, operations
support systems, and some fixed wireless. Ericsson has fully integrated Marconi's optical products, and groups them into WDM, carrier Ethernet, and next-gen optical (MSPP) segments.
Figure 6.1: Ericsson Optical Product Line
Source: Ericsson
Notable customer engagements for Ericsson optical include:
Central China Grid Company, for a large 10-Gbit/s and 2.5-Gbit/s next-gen SDH deployment, complete by 2009.
Telstra, for a three-year deal, evolving inter-capital regional and rural transport network
with significant capacity expansion. Products include: OMS 1600, MHL 3000, OMS 800.
T-Com, for an early 40-Gbit/s trial over a 1,000-km DWDM link. Marconi's MHL 3000 was
also selected for an upgrade of metro and regional networks in Germany.
Telefnica, using Marconi MHL 3000 for a metro WDM next-generation network designed
to support traffic increase for broadband services in Spain.
Telecom Italia, for a two-year deal including next-gen SDH, metro, and core DWDM and
CWDM for support of broadband services such as IPTV/HDTV.
Ericsson's outlook in optical appears to be solid, as it has made rapid and impressive progress
integrating Marconi's optical solutions into its larger product portfolios, which are increasingly successful in ETSI markets, as Ericsson continues to expand through acquisition.
6.4
Huawei Technologies Co. Ltd.
Huawei has been enormously successful in long-haul DWDM, with major backbone wins in China
and emerging markets. For 2005, Huawei was the global leader in the $1.35 billion long-haul
DWDM market with $239 million in revenue. With the Alcatel-Lucent merger, however, Huawei
will fall to second place in this market for the foreseeable future.
Huawei should be given credit for developing an impressively broad, high-quality optical product
line that spans from access to core. As a result, it has gained global market share on all fronts. By
focusing on the Chinese domestic market and emerging markets, Huawei carved out growth
where others weren't looking. Its R&D efforts in optical have also been impressive, ranging from a
small acquisition of privately held Optimight in the U.S. to contributing significant work on the
standardization of the optical control plane and the ASON framework at the ITU-T.
Figure 6.2: Huawei Optical Product Line
CATEGORY
PRODUCT
Long-haul DWDM
OptiX BWS 1600G/400G
Metro DWDM
Metro 6100, Metro 6040
MSPP/SDH ADM
OSN7500, OSN3500, OSN2500, OSN1500
Core Optical Switch
OptiX OSN 9500
Metro MSTP
Metro 5000, Metro 3000
CPE
OSN1500A, Metro 1000, Metro 500, Metro 100, Free-Space Optics
Source: Huawei
Huawei has taken a soup-to-nuts approach to optical, developing more than 20 different ASICs,
several optical modules, and a software/control plane platform that is common to all the OptiX
products and shares common elements with Huawei's core routers, DSLAMs, next-generation
network gear, and 3G infrastructure. Compared to some other areas of its business, optical can
be considered an area where Huawei is a true innovator. Interesting developments here include:
ASON-based control plane Many vendors have this, but Huawei has been actively
contributing to the standards and has implemented ASON across its optical product line.
Multi-reach DWDM Derived from its acquisition of Optimight, which was turned into a
Silicon Valley R&D center, this technology supports transport over distance up to 5,000
km without regeneration, based on a novel encoding scheme that supports higher nonlinear tolerance.
Gigabit Ethernet crossconnect Has been implemented in Huawei's metro DWDM

products and is designed for DSLAM backhaul applications and Ethernet services.
The growth of Huawei's optical business has been consistent and impressive. Starting from
around $800 million in contract sales in 2003, Huawei reached $1.35 billion under contract in
2005. Its forecast for 2006 is $1.6 billion in contract sales (inevitably smaller than actual revenue
booked for the year).
Figure 6.3: Huawei Optical Contract Sales by Region, 2005
Source: Huawei
Huawei has seen more than 100 percent growth in international markets for optical, and can
claim a major success in its win at BT as a supplier of optical transport alongside Ciena. Huawei
is also supplying optical infrastructure to Algeria Telecom's backbone transmission network, Germany's Arcor, Telecom Italia, KPN, and Viatel's pan-European network. In 2005, EMEA contract
sales alone grew more than 100 percent; the region now represents the company's secondlargest revenue generator, after China.
Figure 6.4: Huawei Optical Contract Sales by Product, 2005
Source: Huawei
Long-haul DWDM has been Huawei's biggest success in the optical market. Though the numbers
indicate that the company does big business in MSPPs, upon closer inspection many of those
sales are garden-variety SDH ADMs, and not next-gen MSPPs. Where Huawei has really shined
is in building optical backbones for China and emerging markets. Figure 6.5 lists recent deployments, which total more than 400,000 km.
Figure 6.5: Huawei Optical Backbone Deployments

LOCATION
DESCRIPTION
DEPLOYMENT
France
LDCOM national DWDM backbone
3,311 km
France
Freetelecom national DWDM backbone
5,700 km
U.K.
FiberNet national DWDM backbone
1,500 km
Russia
Rostelecom national DWDM backbone
5,020 km
Russia
Transtelecom national DWDM backbone
18,000 km
Pakistan
PTCL national DWDM backbone
5,000 km
Oman
Oman Telecom national DWDM backbone
4,200 km
Romania
Romania Power national DWDM backbone
5,800 km
India
BSNL national DWDM backbone
4,300 km
China
China Netcom national backbone network (1)
10,000 km
China
China Netcom national backbone (2)
8,000 km
China
China Mobile national backbone
17,000 km
China
China Railcom southwest national backbone
8,800 km
Brazil
Telemar national DWDM network
1,500 km
Telefnica regional DWDM network
800 km
Brazil
Source: Huawei
After these wins in long-haul DWDM, Huawei expects more growth from the metro in 2007 and
beyond, driven by metro bandwidth demand, operator transition from SDH to MSPP, 3G mobile
transport network construction, and DSLAM backhaul requirements.
Huawei has acknowledged a need for a true carrier Ethernet platform that is married to an "OTN
switch," which will have DWDM scaleability, OTN management, and MPLS switching capabilities.
Interviews with Huawei suggest that this is still just a product in development, but it does match
the requirements of carriers worldwide as they evolve their access networks to broadband and
triple play, which requires much more scaleable, packet-oriented transport gear.
Regarding ROADM and WSS, Huawei has stated that it is more interested in leveraging its
strength in ASIC development than in pure optics. That said, it appears Huawei favors the OTNbased switch over an all-optical device that performs wavelength switching. What it calls a "nextgen transport platform" will be built from a mix of OTN, WDM, and MPLS pseudowire technologies, using Ethernet as the bearer layer. Other vendors have also articulated this vision, so it is a
matter of timing and execution that will determine Huawei's success here.
Figure 6.6: Huawei Optical Roadmap
PHASE
TIMING
FEATURES
Phase 1
Current
Channelization, GFP, VCAT, LCAS, Layer 2 switch, RPR
Phase 2
2006-2007
Packet/TDM hybrid architecture, ASON, MPLS

pseudowire, GMPLS signaling, OTN switching
Phase 3
2008+
Next-gen transport platform based on carrier Ethernet,

MPLS, wavelength switching, uniform service management
Source: Huawei
Huawei is in a position of strength in the global optical market today, though it is facing increased
competition on two fronts. First, a combined Lucent and Alcatel poses a stronger threat for optical
wins, particularly those tied to access transformation and IPTV, such as AT&T's Project Lightspeed. Ericsson's acquisition of Marconi has indicated its continued interest in bulking up its wireline offering, and Siemens merging with Nokia will strengthen its play as well.
Secondly, Huawei is now facing a mature Infinera in the global long-haul DWDM market and finding it to be a fierce competitor, particularly on price. Infinera's architecture is radically different
from that of any other long-haul DWDM player, due to its use of photonic integrated circuits (ICs)
to dramatically reduce the costs of the electronics associated with transport, allowing it to do
away with expensive optical amplifiers, dispersion compensators, and advanced optics. Infinera
has already won some high-profile RFPs and is rumored to have a few more Tier 1 customers
ready to announce. Though only a private player, Infinera is shaking up the entire long-haul
DWDM market and Huawei perhaps has the most to lose, as it has been leading the market for
long-haul DWDM worldwide, thanks largely to its competition on price.
6.5
Infinera Corp.
Infinera is without question the most interesting company in the long-haul DWDM market today.
The company's name came up in nearly every conversation Heavy Reading held with carriers or
other vendors. Infinera presents a challenging vision of optical networking to its customers and
competitors alike, and is no longer possible to dismiss as investor folly or a blue-sky science experiment. Infinera has a significant and growing customer base, with 2006 revenues in the $75
million to $100 million range, and it is expected to at least double those revenues in 2007 as
some major deployments ramp up.
Infinera has proven that photonic ICs based on indium phosphide can be reliably manufactured
and integrated into a full transport system. Until the company goes public, it won't be easy to tell
whether this is a profitable venture, but it certainly has the ear of Wall Street as we approach a
time when an IPO is the natural next step for the company.
The technology and details of the DTN (digital transport node) have been widely disseminated
and remarked upon, but in short, this is a metro-regional and core transport platform based on the
following technologies and features:
Photonic ICs that enable 10 x 10 Gbit/s per line card, with full optical regeneration
Distributed electronic ODU1 (2.5-Gbit/s) switch fabric for OTN-based bandwidth management
Sonet/SDH, wavelength and Ethernet-based add-drop
End-to-end GMPLS control plane
Unconstrained reconfigurability at every node
Sub-lambda (2.5-Gbit/s) granularity for grooming, switching, and add/drop
Consolidated DWDM transport and switching in the core
Topology/distance-independent service activation
Support linear, ring, and mesh topologies
Integrated sub-lambda protection and restoration
End-to-end GMPLS control plane enables service automation
Extensive digital performance monitoring and diagnostics
Together, these create a system that differs from traditional DWDM systems in that it functions
more like a Sonet/SDH ADM node than an all-optical node. In this model, networks are not optimized around achieving the fewest number of DWDM transponders relative to overall reach and
network dimension. Instead, a network is optimized around traffic management at 2.5 Gbit/s and
above. In some cases, it may be possible to argue that this kind of system is better suited for
networks where there is significant traffic churn and a need for bandwidth management at most
every node, which does dovetail nicely with most top tier wholesale network operators today.
Looking at the list of Infinera's recent customers, these companies are all likely to benefit from the
ability to provide dynamic networking in regional and core facilities:
Internet2
Integra Telecom
Interoute
Broadwing
Global Crossing
XO Communications
The important challenges Infinera will face in the market in 2007 include: a merged Alcatel-Lucent
that will fiercely guard its Tier 1 accounts; Huawei in China and emerging markets; and the cyclical and somewhat lumpy nature of DWDM sales. These are infrastructure builds, and many are
undertaken each year by the largest carriers in the world, which are used to working with wellestablished suppliers that bring a level of professional services and support that cannot be
matched by a company Infinera's size. These challenges are ones of scale; thus an IPO seems a
natural next step to raise the capital and visibility needed to compete at the level of the top five
suppliers today.
6.6
Nortel Networks Ltd.
Nortel (NYSE/Toronto: NT) is an end-to-end optical networking equipment supplier selling both
legacy ADM and next-gen optical equipment, including MSPPs, metro WDM, long-haul DWDM,
and optical switches. Nortel's next-gen optical networking product lines are as follows:
Long-haul DWDM: OLH 1600, Common Photonic Layer (CPL)
Metro WDM: OM 5200, OM 5100
MSPP: OM 3500, OM 4000, OME 6500
Optical switch: Optical Cross Connect HDX/HDXC
Nortel has recently reorganized its business lines into Mobility and Converged Core Networks,
Enterprise Solutions, and Metro Ethernet Networks. Despite this misleading title, WDM and longhaul optical networks are contained within the Metro Ethernet Networks, along with data networking and security solutions. Nortel is obviously putting a heavy emphasis on Ethernet, and intends
to differentiate itself in the optical networks market by putting forward solutions that are optimized
around Ethernet services and Ethernet as a universal transport layer.
Nortel's Metro Ethernet Networks division had revenues of $1.427 billion in 2005, and was on
pace for 20 percent growth in 2006. Nortel's optical business in total has been performing quite
well, and is primarily driven by the OME 6500, a next-gen MSPP that includes significant packet
and Ethernet features, along with scaleable switching for TDM or packet.
For optical bids, Nortel's most common offer, and what some observers believe will be its ultimate
platform to build from, is a combination of the OME 6500 at the edge, and its modular Common
Photonic Layer in the core. A number of customers have already taken that solution. In addition,
Nortel's carrier Ethernet products, leveraging Provider Backbone Transport technology, have
been succeeding in the marketplace as an alternative to Sonet/SDH-based solutions, most notably in BT as part of its 21CN network build.
For long-haul DWDM, Nortel has two key products: the CPL and the OLH 1600. The CPL is positioned as a flexible solution that relies on modular subsystems that can be deployed to support a
wide range of distances, bit rates and configurations, including ROADM and wavelength crossconnect. The CPL is based on passive multiplexing of client DWDM signals, and so is typically
paired with other Nortel edge or metro products that serve as clients to the system. The 1600 is
positioned as a traditional open long-haul DWDM system, supporting up to 800 Gbit/s of traffic.
Key innovations available on both platforms include:
40-Gbit/s wavelength and transport support, using QPSK on two orthogonal polarizations
(2 x 10 Gbit/s on each polarization), eliminating the need for PMD compensation
Electronic dynamically compensating optics, supporting mixed fiber type applications with
per wavelength real-time automated dispersion compensation. Supports 600 km and
2,000 km reach options with enhanced FEC
Enhanced ROADM options (up to five-degree nodes and the use of tunable filters)
Dynamic optical controller, a software engine for embedded photonic line intelligence
The CPL architecture is designed as Nortel's next-gen WDM layer a true multihaul platform that
could be cost-effectively deployed in metro, regional, or long-haul networks. It does not seem to
have sold as well as Nortel expected to date, but it does have a handful of important wins, including Charter, Comcast, Liberty Global, Silk Telecom, Southern Cross, SURFnet, and Versatel.
However, the CPL has not landed a major Tier 1 operator on the scale of an incumbent PTT or
national operator.
Figure 6.7: Nortel's Metro Ethernet Network & Optical Strategy
Source: Nortel
The impression given at Nortel's most recent analyst event was that work in long-haul DWDM has
been quiet, but big carriers are getting vocal about their need for 40-Gbit/s wavelengths and
even higher speeds (100 Gbit/s is being talked about by AT&T, for example). Nortel has worked
out a new way to solve some of the old problems in 40-Gbit/s transmission specifically, the deteriorating effects of PMD on signals. The Nortel solution is a new modulation for 40 Gbit/s, using
QPSK modems built into an ASIC. The bottom line is that with the new modulation, PMD specifications rise significantly, meaning the 40-Gbit/s transmissions can occur over much longer distances and with much older fiber than the early and value-limiting versions of 40-Gbit/s transmission systems. Nortel says the required ASIC is now done and plans to ship the new products
at the end of 2007. Nortel said that the same technique can be used to build 100-Gbit/s transmission systems, though no timelines have been given for 100 Gbit/s.
6.7
Siemens AG
Siemens (NYSE: SI; Frankfurt: SIE) has a long tradition of excellence in core optical networking,
but until recently did not have significant market share. Major wins at AT&T and Verizon Business
(the former MCI) helped to establish it as a major player in North America, while continued growth
in ETSI markets have resulted in Siemens turning in an excellent 2006, with estimated revenues
of $256 million, nearly doubling its 2005 figure of $132 million. Siemens increased revenue substantially in every region of the globe, with a particularly strong showing in North America, as
AT&T moved aggressively to build out its entire backbone exclusively with Siemens gear.
Key areas of interest and development for Siemens optical today include:
40-Gbit/s wavelength support on all core platforms
100-Gbit/s field trials and lab experiments, targeting commercial availability in 2010-2012
ROADM-enabled long-haul networks already established; expand that into metro DWDM
ROADM and wavelength crossconnect become standard on all DWDM platforms
Fully automated DWDM systems
Ethernet and packet awareness features
Siemens is upgrading its core DWDM transport line, adding the hiT 7300, a product positioned as
a low-cost DWDM platform for metro-regional transport with support for 40 wavelengths, ROADM,
40 Gbit/s, and advanced performance measurement. Over time, however, it appears the 7300 is
meant to replace Siemens's flagship long-haul DWDM system, the hiT 7500. For the next three
years the company will market each product to their "sweet spots" the 7300 to metro-regional
(40 waves this year, 80-wave capability added next year); the 7500 to long-haul/ultra-long-haul
opportunities. The 7300 differs from the 7500 by supporting Gigabit Ethernet and SAN client
ports, in a smaller form factor.
That said, all new transponder development and other technology is focused on the 7300, and
will include a smaller form factor, cost reductions, and some packet capabilities. Siemens claims
it has won nine contracts so far with the 7300, and that five of them were against Huawei so the
company did set out from the start to compete on cost with this platform. Siemens claims the
7300 outperforms Huawei's equipment in both network turnup and performance measurement
and management. Also, of course, Siemens has much better-established professional services.
Siemens is supporting ROADM on both platforms, though it isn't quite as sanguine on the overall
ROADM opportunity as some competitors. The company has implemented ROADM in three out
of its recent nine wins. Regarding ROADM technology, it sees significant demand for two-degree
nodes that can be met with planar lightwave circuit (PLC) blocker-based technology, and very
little need for WSS solutions and colorless ports. Based on network modeling, Siemens believes
it needs no more than five-degree nodes over the long term, and that anything more than fivedegree nodes will create an unacceptable single point of failure in a network so carriers will opt
to install, for example, two four-degree nodes in a region, instead of a single eight-degree node.
Siemens believes it can address five-degree nodes with a PLC-based ROADM, thereby reducing
costs and complexity while continuing to leverage a more mature technology.
Recent DWDM wins for Siemens, from 2005 and 2006, include:
Retelit Italy, regional/national DWDM backbone, for the Surpass hiT 7300
TeliaSonera pan-European and 4+ national backbones
Belgacom International Carrier Service pan-European backbone
Telstra regional networks and national backbone
Siemens claims there are more than 2000 hiT 7500 nodes in operation worldwide today.
6.8
Xtera Communications Inc.
Xtera is a unique player in the long-haul DWDM market, and since its founding has undergone a
few changes and market positioning. Xtera's key technology is its use of Raman amplification and
a 100nm optical bandwidth to support up to 240 10-Gbit/s channels on a single fiber. Today, the
company offers two product lines: the Nu-Wave for telecom, cable or private networks; and the
Nu-Wave XLS for unrepeated undersea applications. The terrestrial Nu-Wave system features:
Scaleable to 2.4 Tbit/s capacity from a single channel
240 10-Gbit/s channels in three 7' bays
10-Gbit/s and 4 x 2.5-Gbit/s client interfaces
Tunable laser transponders
Out-of-band FEC
Error-rate performance less than 10E-15
Integrated performance monitoring
Integrated distributed and discrete Raman amplification
100nm spectrum
Up to 3,000 km reach between regeneration
Integrated dispersion compensation and gain flattening
Automatic and adaptive span and link power equalization
Routed IP optical service channel with Orderwire and user access
Fixed and reconfigurable OADM (ROADM)
Selectable add/drop over 100 percent of the channels
ROADM with single-channel granularity
All in-line sites may be configured as an OADM with no distance or performance penalty
In-service, non-disruptive in-line-amplifier to OADM upgrades
Xtera has announced wins with Global Crossing for its undersea system; and Energis in the U.K.
for its terrestrial system. There hasn't been much activity since then, and Xtera remains a niche
player though an interesting one that has managed to survive in a very challenging market.
6.9
ZTE Corp.
ZTE (Shenzhen: 000063; Hong Kong: 0763) has been operating in Huawei's shadow in the
DWDM market for years, but has recently been showing significant momentum, with important
wins in China. The most important of these was its deal with China Netcom in 2006, by which
ZTE won an exclusive contract to build five national WDM trunk lines as part of China Netcom's
long-haul transmission network improvements. This agreement follows the successful construction of five national trunk lines for Netcom in 2005. ZTE will supply its Unitrans series ZXWM
M900 DWDM equipment to build the five new trunk lines, which will cover ten Chinese provinces.
The ZXWM M900 trunk-line DWDM system features:
160-wavelength platform, supporting 10-Gbit/s wavelengths for a total theoretical capacity of 1.6 Tbit/s.
The system includes mux/demux, interleaver, and C/L passband OMU/ODU for modular
capacity expansion.
FEC/enhanced FEC, Raman amplifier, RZ coding, and dispersion management so that

the system can support unregenerated transmission over 5,000 km (54 @ 27dB).
Supports STM-N, GE, FE, Fibre Channel, Escon, digital video, and Ficon.
Six protection modes for optical and service layers: 1+1 path; two-fiber bidirectional path
shared; two-fiber bidirectional multiplexing section shared; sub-network connection; 1+1
multiplex section; and equipment-side 1:16 OTU protection.
Five networking modes: chain, star, cross, two-ring tangent, and two-ring intersection.
Recent important DWDM wins for ZTE include:
China Mobile
Sinkiang Mobile
China Netcom
China Unicom
Bulgarian national DWDM network
GTS Central Europe
ONE (Morocco)
China remains the strongest market for ZTE, and its wins at China Mobile, China Netcom, and
China Unicom have driven a significant part of its long-haul DWDM revenues which Heavy
Reading estimates at $90 million in 2005 and at least $135 million for 2006, although those numbers are unconfirmed. ZTE also resells Ciena's Core Director product in China.
Appendix A: About the Author

SCOTT CLAVENNA
CHIEF ANALYST, HEAVY READING
Scott Clavenna is the head of Heavy Reading's analyst team and a leading authority on nextgeneration telecom technology. He has 14 years' experience researching the optical networks
and broadband networking markets. His previous reports for Heavy Reading include:
ROADM & WDM Worldwide Market Forecast, 2006-2011

(Vol. 4, No. 16, September 2006)
Remade in China: Huawei & the Future of the Global Telecom Market
(Vol. 4, No. 11, July 2006)
Sonet/SDH-to-Ethernet Migration Strategies

(Vol. 3, No. 21, December 2005)
The Future of Multiservice Switching in Converged IP/MPLS Networks

(Vol. 3, No. 13, July 2005)
ROADMs & the Future of Metro Optical Networks

(Vol. 3, No. 8, May 2005)
Pseudowires & the Future of Transport & Access Networks

(Vol. 3, No. 1, January 2005)
Telco Triple Play: The DSL Imperative

(Vol. 2, No. 17, July 2004)
Telecom Recovery Investment Opportunities

(Vol. 2, No. 7, March 2004)
The Future of Sonet/SDH

(Vol. 1, No. 6, November 2003)
Clavenna's other areas of expertise include GPMLS, Ethernet access, IP VPNs, storage transport
services, and next-gen Sonet/SDH. Prior to joining Heavy Reading, Clavenna was Director of
Research at Light Reading and authored reports on topics including 40-Gbit/s transport technology, Ethernet standards, GMPLS, grid networking, and DWDM.
Prior to joining Light Reading, Clavenna founded two other consultancies, PointEast Research
and Pioneer Consulting, providing market research on domestic and international high-speed
networks to vendors and carriers worldwide. He holds a B.A. from St. Edward's University in Austin, Texas, and a Master's degree from Emerson College, Boston. He currently lives in Massachusetts and can be reached at Clavenna@heavyreading.com.
Appendix B: Legal Disclaimer

SUBSCRIBER LICENSE AGREEMENT between HEAVY READING and SUBSCRIBER
Any Heavy Reading report ("Report") and the information therein are the property of or licensed to Heavy Reading, and
permission to use the same is granted to annual or single-report Subscribers ("Subscribers") under the terms of this Subscriber License Agreement ("Agreement"), which may be amended from time to time without notice. When requesting a
Report, you acknowledge that you are bound by the terms and conditions of this Agreement and any amendments
thereto. Heavy Reading therefore recommends that you review this page for amendments to this Agreement prior to requesting any additional Reports.
SUBSCRIPTION RENEWAL
For convenience, annual subscriptions purchased by credit card will be auto-renewed at the end of the subscription term.
Prior to that auto-renewal you will receive a notice that will include instructions for updating your subscription or payment
information and for opting out of the auto-renewal process.
OWNERSHIP RIGHTS
All Reports are owned by Heavy Reading and protected by federal, state, and international copyright, trademark, and
intellectual property laws, under and by applicable treaties and/or conventions. Subscriber agrees not to export any Report into any country that does not have copyright, trademark, and intellectual property laws that will protect Heavy Reading's rights therein.
GRANT OF LICENSE RIGHTS
Heavy Reading hereby grants Subscriber a non-exclusive, non-refundable, non-transferable license to use the Report for
research purposes only pursuant to the terms and conditions of this Agreement. Heavy Reading retains exclusive and
sole ownership of each Report disseminated under this Agreement. Subscriber agrees not to permit any unauthorized
use, reproduction, distribution, publication or electronic transmission of any Report or the information/forecasts therein
without the express written permission of Heavy Reading.
Heavy Reading Licensing Options:
Single Report purchasers may distribute Reports only to other employees within their entire organization.
Enterprise License Subscribers may distribute Reports only to other employees within their entire organization.
Site License Subscribers may distribute Reports only to employees within their organization at the location specified in
their purchase agreement. If an organization has multiple locations, Reports may not be shared between locations.
For the purposes of this Agreement, an "Organization" is defined as a private or public sector entity that conducts business under a single corporate, organizational, or brand name. It does not include ancillary direct or indirect partnerships,
partial or wholly owned subsidiaries, or other entities that conduct business under a corporate, organizational, or brand
name that differs from the name of the Organization owning the license in question.
In case of any distribution of Reports under this Agreement, Subscriber agrees to retain all copyright, trademark, and
other proprietary notices on the Reports.
DISCLAIMER OF WARRANTY AND LIABILITY
Heavy Reading has used its best efforts in collecting and preparing each Report. Heavy Reading, its employees, affiliates,
agents, and licensors do not warrant the accuracy, completeness, currentness, noninfringement, merchantability or fitness
for a particular purpose of any Reports covered by this Agreement. Heavy Reading, its employees, affiliates, agents, and
licensors shall not be liable to Subscriber or any third party for loss or injury caused in whole or part by Heavy Reading's
negligence or by contingencies beyond Heavy Reading's control in compiling, preparing, or disseminating any Report, or
for any decision made or action taken by Subscriber or any third party in reliance on such information, or for any consequential, special, indirect, or similar damages (including lost profits), even if Heavy Reading was advised of the possibility
of the same. Subscriber agrees that the liability of Heavy Reading, its employees, affiliates, agents, and licensors, if any,
arising out of any kind of legal claim (whether in contract, tort, or otherwise) in connection with its goods/services under
this Agreement shall not exceed the amount Subscriber paid to Heavy Reading for use of the Report in question.
DISPUTE RESOLUTION
This License will be governed by the laws of the State of New York. In case of a dispute arising under or related to this
License, the parties agree to binding arbitration before a single arbitrator in the New York City office of the American Arbitration Association. The prevailing party will be entitled to recover its reasonable attorney fees and costs.
Heavy Reading
32 Avenue of the Americas
New York, NY 10013
United States of America
Telephone: +1 212-925-0020
www.lightreading.com
www.heavyreading.com

LH DWDM HeavyReading

Transféré par

Informations du document

Copyright

Formats disponibles

Partager ce document

Partager ou intégrer le document

Options de partage

Avez-vous trouvé ce document utile ?

Ce contenu est-il inapproprié ?

Droits d'auteur :

Formats disponibles

LH DWDM HeavyReading

Transféré par

Droits d'auteur :

Formats disponibles

Heavy Reading Independent quantitative research and

VOL. 5, NO. 2, FEBRUARY 2007

Long-Haul DWDM: Market &

Use of this PDF file is governed by the terms and conditions

INTRODUCTION & KEY FINDINGS..................................................................... 4

LONG-HAUL DWDM MARKET ASSESSMENT .................................................. 9

Demand Drivers .................................................................................................. 10

OPERATOR DEPLOYMENT PLANS FOR CORE DWDM ................................ 13

Operator Backbone Expansion Plans ................................................................. 13

CORE DWDM ARCHITECTURES & OPERATIONS ......................................... 20

NETWORK OPERATOR INTERVIEWS AND ANALYSIS ................................. 25

AT&T Inc. ............................................................................................................ 25

VENDOR PROFILES AND STRATEGIC ANALYSIS ........................................ 32

APPENDIX A: ABOUT THE AUTHOR........................................................................... 43

Operator Plans for Backbone DWDM Upgrades....................................................5

Evolving Provider Transport Network Strategies....................................................9

Worldwide Network Operator Plans for Backbone DWDM Upgrades .................13

Value of Integrating DWDM Optics on Client Equipment.....................................20

AT&T U.S. Domestic 40-Gbit/s OTN/DWDM Express Backbone ........................25

Ericsson Optical Product Line ..............................................................................33

Introduction & Key Findings

Will growth in the core network be cyclical or linear?

Will 40-Gbit/s transport be squeezed out of the market by 100-Gbit/s Ethernet?

AT&T Inc. (NYSE: T)

Equipment vendors interviewed for and analyzed in this report are:

Alcatel-Lucent (NYSE: ALU)

Figure 1.3: Survey Respondents by Geographic Region

Figure 1.4: Survey Respondents by Job Function

Long-Haul DWDM: Market & Technology Outlook is structured as follows:

Long-Haul DWDM Market Assessment

Traffic growth steady and predictable

Volatile traffic growth onto a

Client access rate is always less

Client access channel rate approaches

Aggregation at ingress to backbone

Greater amount of aggregation

Backbone relatively static

Agile backbone (ROADM, GMPLS)

Separate domestic and global pieces

Seamless domestic/global network

Less than 10%

More than 100%

Don't know/Not sure

Retail private-line services (e.g., T1, T3, OCn)

Wholesale private-line services (e.g., wavelength services)

Dedicated network services (e.g., dedicated ring services)

E-Line retail (over fiber, over Sonet, over switched network)

Dedicated Internet access

Residential Internet access

Storage-area network (SAN) transport/data center extension

Operator Deployment Plans for Core DWDM

Operator Backbone Expansion Plans

We will light more wavelengths on existing

We will overlay new DWDM systems

We will do a complete backbone overlay

Operator Requirements & Impediments in the Core DWDM Market

Transparent support of any protocol

Ease of design, installation, and service provisioning

ROADM, wavelength crossconnect support

Integrated packet aggregation or switching

Network reach "multi-haul" systems that span metro-regional to long-haul

Automated optical control plane (GMPLS/ASON)

Sub-wavelength crossconnect support

Support for 40-Gbit/s wavelengths