Dispersion compensation markets: Paths to opportunity
by Lawrence Gasman
In the past year or so, developments at many levels of the network suggest that significant new revenues will be generated for dispersion compensation by the next wave of optical networking. This “next wave” encompasses more WDM, an accelerating shift to 40 Gbits/sec, a movement to birth 100-Gigabit Ethernet, and the mainstreaming of 10-Gigabit Ethernet in the enterprise network-all trends promoting demand for sophisticated dispersion compensation technology. In a recently published study, CIR determined that there are four paths to opportunity in the dispersion compensation business.
At the same time, our analysis indicates that significant business will continue to be derived from the old ways of doing dispersion compensation via dispersion-compensating fiber (DCF). We believe that by 2012, total revenues from dispersion compensation modules and components will reach $755 million.
Roll back the clock a few years. No one would have treated the idea of electronic processing of optical signals seriously; everything was supposed to be going optical. From a business perspective the arrival of electronic dispersion compensation (EDC) does more than anything else to change the “rules of engagement” for the dispersion compensation business.
With EDC, suddenly dispersion compensation becomes about silicon chips-and in mass quantities. This means that an entirely new group of players-chipmakers-can capitalize on the growing opportunities in dispersion compensation. The potential of mass-market dispersion compensation components is exploited in the LRM standard for 10-Gigabit Ethernet, which in turn points to a similar use for EDC in the 100-Gigabit Ethernet market some years from now. With EDC embedded in the Ethernet concept it becomes possible for the first time for a business development manager at a component or chip company to look at the dispersion compensation market and see a clear product roadmap and volumes that could ultimately be measured in the millions of units.
EDC also offers opportunities in the long- and ultralong-haul space. However, our research suggests that some established optical suppliers are biased toward an all-optical approach and avoid EDC simply because it is not optical. And the volumes are undeniably smaller, making it harder to build a business case for silicon development.
More WDM and 10-Gbit/sec transmission systems are going into the metro. How much this will create a need for dispersion compensation and how such dispersion compensation will be deployed are open questions. One view is that after about 60 km, dispersion compensation is a must on metro systems running 10 Gbits/sec or more over traditional singlemode fiber.
Once again, EDC would seem to have an important role to play here. But will it be used as an adjunct to traditional dispersion compensation units or as an alternative? And how much will tunable dispersion compensation be used in the metro, or, indeed, anywhere else?
Tunable compensation is a small market right now. As system speeds increase to 40 Gbits/sec-or as 2.5- and 10-Gbit/sec DWDM channel spacing decreases-tunable dispersion compensators will become increasingly necessary. Even at 10 Gbits/sec, tunable dispersion compensation is needed in some long-haul systems.
Compensation is also required to address residual dispersion. Here tunable technologies are valuable, especially since in “set and forget” mode, they maintain the necessary dispersion without the need for further attention.
When it comes to tunables each manufacturer has its own story to tell. One firm favors fiber Bragg gratings, pointing to their low insertion loss. Another favors etalons. (For more details, see “Tech Trends” on page 13.)
Some believe that deepening concerns with compensation issues may also open opportunities for network management software vendors. Dynamic dispersion compensation is new. So new network management software must be adapted to manage all this new tunable capability. One interviewee told CIR researchers that he wanted to ask the carriers, “You want low-cost solutions, tunable dispersion compensation, you want reconfigurable optical add/drops, you want a flexible network-but are you ready to manage it?”
All of this is most exciting. And yet, and yet... none of the carriers CIR has spoken with have any intention of abandoning DCF and dispersion compensation modules (DCMs). Carriers, like individuals, are risk averse, especially when a global network full of customers is at stake. None of CIR’s bullishness about new ways of doing compensation should be read as sounding the death knell for DCF or DCMs.
The consensus opinion is that fixed dispersion compensation will, in the near-term, work alongside the new compensation devices that will provide functionality that cannot be supplied by mere fiber. The newer techniques will be embraced by the carriers as the need arises; and arise it will. Only the oft-predicted (but yet to take hold) large-scale carrier migration to 40 Gbits/sec and higher will set off the decline of DCF/DCM as the technology of choice.
Meanwhile, the number of firms in the tunable dispersion compensation space is growing, but it is really too early to measure success or pronounce who the leaders-or leading technologies-will ultimately be. So this exciting part of the dispersion compensation market is exactly what one would expect an exciting part of the telecom market to be: risky.
Lawrence Gasman is president of Communications Industry Researchers (CIR; www.cir-inc.com).