By Meghan Fuller Hanna
Estimates that the undersea equipment market will exceed $2 billion over the next five years have piqued the interest of traditional terrestrial system vendors offering 40G technology.
In May 2010, the submarine optical networking community will once again gather for the quadrennial SubOptic Conference. One topic likely to receive its fair share of buzz is 40-Gbps technology. Ovum (www.ovum.com) forecasts the market for submarine optical networking gear will exceed $2 billion by 2014, a sum large enough to pique the interest of several vendors with 40-Gbps offerings, even those who traditionally play only in the terrestrial segment.
The submarine market is known for being cyclical. The latter half of the 1990s was marked by tremendous growth—which came to a screeching halt in 2001 when the telecom bubble burst.
“The submarine business took a very exceptional beating,” recalls Bob Hadaway, submarine solutions marketing lead at Nortel (www.nortel.com). “They were, at that time, about 15% of the market in terms of terminal equipment sales and, a couple of years later, were down to about 3%.”
Thus, when the last SubOptic Conference touched down in Baltimore in 2007, attendees were only cautiously optimistic. New builds were underway—to the tune of $1 billion—but only to underserved areas and to fill gaps in existing capacity. At that time, subsea networks were only being upgraded from 2.5 Gbps to 10 Gbps, and many questioned whether 40-Gbps transmission was even feasible undersea.
Fast-forward three years, and many of the networks that were deployed in the late 1990s and early 2000s are suddenly facing capacity exhaust. In its “Global Bandwidth Forecast Service,” released in June, Telegeography (www.telegeography.com) analysts note that the transatlantic market, in particular, faces a capacity shortage; bandwidth requirements on transatlantic networks will experience a compound annual growth rate (CAGR) of 33% between 2008 and 2015. At that rate, transatlantic networks will run out of capacity by 2014.
Submarine network operators are faced with two options: Overbuild with new, higher-capacity systems or find a way to increase the initial design capacity of their existing systems. Ron Kline, research director of optical networks at Ovum (www.ovum.com), says the former is “almost out of the question. It’s time consuming, and it’s really expensive. But if you could go to the end points and swap out electronics and optics to upgrade capacity, it’s almost a no-brainer,” he contends. “And that is the premise behind 40G.”
It is, as Kline calls it, “a total-cost-of-ownership argument.” Installing a new system can cost upwards of $1 billion, and resources, including cable ships to lay the fiber, are scarce. It is far less expensive to upgrade to a higher line rate even though 40G cards are more expensive than 10G cards.
Qian Zhong, managing director of product management at Tyco Telecommunications (www.tycotelecom.com), is quick to note that demand is not being driven by true 40-Gbps traffic. “We go out and talk to a lot of our customers,” he says, “and not a single one of them has told us that [they] don’t have any 10G traffic anymore, that everything is running at 40G. From what we can see, most of the traffic is still running at 10G. But the capacity increase, the potential of realizing the cost savings, is good enough motivation for the carriers to embrace 40G.”
Demand for 40G is one thing, but technology availability has to follow suit. Over the last few years, suppliers have developed two critical pieces of the high-speed networking puzzle that apply to both terrestrial and undersea networks: more efficient modulation schemes and the ability to compensate for dispersion, optically or electronically.
Moreover, says Zhong, economical high-speed components are starting to appear. “The barrier to 40G or 100G back a few years ago was largely the lack of interest [among component suppliers] and the extremely high price for those high-tech components,” he says. Now that demand is there from the end customer, the component suppliers are beginning to embrace the submarine market as well.
A more competitive market
With a potential $2.2 billion up for grabs, the top four submarine system vendors—Alcatel-Lucent, Tyco Telecommunications, NEC, and Fujitsu, according to Ovum—are now facing competition from terrestrial system suppliers, including Nortel and Infinera.
“Terrestrial technology has just gotten better in terms of optical reach,” reports Serge Melle, vice president of technical marketing and development at Infinera (www.infinera.com), “so expanding to a submarine application isn’t a quantum leap anymore; it’s just an incremental improvement.”
When asked why Nortel entered the submarine line terminal equipment (SLTE) market, Hadaway cites the sizeable revenue potential as one factor, but he also notes that “Nortel is and has always been a long-haul optical network organization. This is an adjacent market for us and one that we can step into fairly easily from a technology and product perspective,” he says.
In August 2009, the company announced that it would leverage its existing 40G Adaptive Optical Engine in SLTE applications. In the terrestrial world, Nortel’s 40G offering is based on dual-polarization quadrature phase-shift keying (DP-QPSK) with coherent detection. In the submarine world, the vendor still uses dual-polarization technology and coherent detection, but it has changed the modulation scheme to binary phase-shift keying (BPSK), which enables it to achieve twice the distance for 40G traffic.
Nortel has backed up these claims with several 40G trials, including an 8,000-km demonstration on Southern Cross’s longest route, which links Auckland, New Zealand and Hawaii. The vendor also worked with Reliance Globalcom on a 6,000-km segment of its FA-1 transatlantic system, linking the U.S. and the United Kingdom. In this case, says Hadaway, the traffic was actually looped back to create a 12,000-km segment.
Infinera has also announced a high-speed networking trial on Global Crossing’s Mid-Atlantic Crossing (MAC) and South American Crossing (SAC) networks, comprising 26,000 total km. Like Nortel, Infinera is leveraging existing equipment, in this case its large-scale photonic integrated circuits (PICs). The PICs are implemented in Infinera’s Submarine Line Modules (SLMs), which provide 100 Gbps of capacity per card.
When asked whether terrestrial system vendors like Nortel and Infinera could really compete head-to-head with the incumbent submarine suppliers, Kline maintains that the market for all telecom equipment is “in the cards. The annuity is in the line cards at the end, so when these carriers are looking for an upgrade, if they’re going to go to someone else, that’s going to hurt [the incumbent submarine suppliers].”
One of those incumbent suppliers is Tyco Telecommunications, which touts its own 40G product suite. Tyco offers different products for each of the three market segments it has identified: regional (up to 3,000–4,000 km); transatlantic (6,000–7,000+ km); and transpacific systems (typically around 12,000 km). The transpacific product, which is currently available, uses an inverse multiplexing approach. Last March, Tyco Telecom successfully transmitted a 40-Gbps signal over an 11,000-km transpacific link between Toyohashi, Japan and Los Angeles on Tata Communications’ TGN-Pacific submarine system—without the need for regeneration.
Zhong regards the growing crowd in the space as “healthy competition.”
“Realistically, when you look at some of the potential opportunities, if it’s a regional activity, perhaps that is more characteristic of a terrestrial system, and hence some of the terrestrial suppliers are more competent to compete in that particular space,” he offers. “But if you look at the transatlantic, transpacific [opportunities], it’s likely to be more challenging to apply a terrestrial technology to ultralong distance. At the end of the day, it’s the physics.”
Looking further ahead, Zhong says conversations with Tyco Telecom customers about 100-Gbps undersea networking have yielded “a mixed bag of responses. Carriers may have different considerations. They may embrace 40G for the benefit of capacity and cost, and they may go to 100G as a true transmission need. I think the debate is still out there.
“But from our perspective, we look at the 100G versus 40G as a clock rate difference,” continues Zhong. He believes shorter, regional distances will most benefit from 100-Gbps technology when it becomes commercially available. He confirms that Tyco Telecom aims for a late 2011/early 2012 release for a regional 100-Gbps subsea offering.
“We believe it will be there,” he says. “It’s just a matter of when.”
Meghan Fuller Hanna is senior editor at Lightwave.
Links to more information
LIGHTWAVE ONLINE: Tyco Telecommunications Completes 40-Gbps Demo on Live Undersea Cable
LIGHTWAVE ONLINE: Infinera Enters Submarine Market with New Product, Global Crossing Deployment
LIGHTWAVE ONLINE: Nortel and Southern Cross Achieve 40G at 8,000 km on Submarine Cable