August 26, 2010Skype’s planned initial public offering doesn’t directly call to mind the travails of the optical component industry. But the hope of raising $100 million by an over-the-top telephony company does make one wonder about the value of optical component vendors, the enablers of the underlying infrastructure.
Ovum analyst Ron Kline recently noted how hard life is for optical component players, especially wavelength-selective switch (WSS) players that make the core building blocks used for ROADMs. The likes of Finisar, JDS Uniphase, and Oclaro are in a tough spot, said Kline, in that they have to invest heavily in R&D for carriers and system vendors that “ask for the world.”
He was referring to the vendors having to add variable channel widths to their WSSs to accommodated future line speeds above 100 Gbps. Such speeds will require channels wider than the 50-GHz channels used now. Having variable-width channels will allow operators to maximize capacity by efficiently packing lightpaths whatever their width and to avoid wasting precious fiber spectrum.
WSS makers are thus developing fine pass-band filters that when combined in integer increments form adaptive channel widths. According to Finisar, such a “gridless” scheme has gained much operator attention over the last six months. Yet gridless will only be needed in several years’ time. After all, so far only a handful of 100-Gbps wavelengths are deployed.
The operators’ and system vendors’ wish list does not stop there. WSS vendors such as JDS Uniphase are developing 1x23-degree WSSs even though most eight-port ROADMs (served using 1x9-degree WSSs) are more than adequate for now.
Contentionless -- non-blocking -- ROADMs that drop multiple versions of the same wavelength carried by different fibers are also under development.
And after gridless and contentionless, operators want faster switching speeds to reduce overall network latency, says Oclaro. Requests for proposals are enquiring about switching speeds under 100 ms, whereas until recently 2 s was the norm.
But is the fact that optical component vendors must invest heavily in R&D an issue? And hasn’t this always been the case?
One could even argue the need for such investment is beneficial. At least firms have scope to differentiate their WSS products, a task far harder for optical transceiver makers. And as component vendors add more core networking features, they gain system know-how. Integrating such system elements, component vendors gain value and revenue as they become subsystem vendors.
But the concerns are whether optical component vendors have deep enough pockets -- and whether they are adequately rewarded -- for their R&D endeavors. This is an issue only if the financial health of optical component players is such that the R&D needed to keep driving down the cost of transporting traffic becomes at risk. So far there are no signs of such a development
Optical component firms aren’t helped by being so remote -- almost the outer solar system -- from the sunny service layer that basks in attractive gross margins.
It is unrealistic to expect that a successful Skype flotation -- and all in the industry should hope it is -- will benefit directly the photonic-layer enablers. But it is worth considering how much economic value rides on the work of a select few.
Roy Rubenstein is the editor of the blog Gazettabyte
