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Infinera Declares WDM War

Light Reading
News Analysis
Light Reading
5/3/2004
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It's here. After three years of secrecy, hype, and rumors, Infinera Inc. is pulling back the curtain today (see Infinera Claims Breakthroughs).

Will the startup change the world? Probably not. But its long-haul WDM system, starting its first carrier trials in the third quarter of this year, just might uproot the current thinking surrounding optical networks.

Infinera's system, called the DTN, can do both Wavelength Division Multiplexing (WDM) and add/drop multiplexing (ADM). The radical part is that Infinera does this by forcing every wavelength through an optical-electrical-optical (OEO) conversion.

That's a break from mainstream WDM thinking, where OEO is considered cumbersome. "The fundamental assumption of this industry for the last seven years has been that OEO was expensive," says Infinera CEO Jagdeep Singh. "The whole industry has been organized around trying to get rid of OEO."

To cheapen OEO -- in a good way -- Infinera designed two densely packed indium phosphide (InP) chips, one for transmission and one for receiving. Each crams 10 channels of 10-Gbit/s OEO processing into a space less than 5 mm2 -- in the case of the transmitting chip, that's 10 lasers, 10 modulators, waveguides, and an optical multiplexer.

The integration saves money by throwing out the packaging of each element. A laser chip, for example, costs $20 to $50. But the packaging and assembly to complete a discrete laser can raise the price to $1,000, Singh says.

"The reason OEO is expensive is that you have lots of discrete components, each one of which has a significant packaging cost," says Singh. "If you take all those elements and integrate them onto a single monolithic piece of indium phosphide, it dramatically reduces the cost."

Wielding these chips on its linecards, the DTN can pack 40 channels of 10-Gbit/s traffic into a half-rack chassis, Infinera officials say. That means 80 channels per rack. By contrast, the basic version of the CoreStream Agility from Ciena Corp. (Nasdaq: CIEN) takes two racks to handle 80 channels (see Ciena Launches CoreStream Agility).

The compactness is nice, but why obsess about rescuing OEO? Because the alternative, purely optical transport, is a headache.

Digital electronic signals don't have to hit precise levels; all that matters is that the voltage is in the right ballpark for a "0" or a "1." Optical signals aren't like that. They're processed in analog form, meaning metrics such as the power level must be controlled to precision. And a wavelength that gets added or dropped at one node can affect power levels on channels throughout the network.

That means a WDM network has to be planned meticulously, and it takes torturous fine-tuning to install. Moreover, the network has to include components to control the light: dispersion compensators, gain-flattening filters, and the like. OEO avoids the tweaking and the extra components, making for a simpler network.

But what really makes the DTN interesting is one side effect of its OEO nature. Carriers using the DTN can change add/drop assignments at will, simply by swapping out linecards, without having to do the planning or tweaking associated with all-optical WDM. That could be Infinera's trump card, because it means DTN is not only cheap, but gives carriers a level of flexibility they've never had.

Life Underground
Infinera's mystique comes from keeping all this a secret for so long. The 200-employee company raised $150 million and a priceless amount of buzz since launching as Zepton in 2000. (See Infinera's Amp-less Ambition, Infinera Shoots for the Moon, and More on Infinera (née Zepton).)

Infinera has the credentials to make a change in WDM. Singh was formerly head of Lightera Networks, the startup whose acquisition turned Ciena into a WDM powerhouse. He's surrounded himself with bigwigs from the components world, such as Dave Welch, the CTO of SDL Inc., which was sold to JDS Uniphase Corp. (Nasdaq: JDSU; Toronto: JDU); and Fred Kish, who headed the InP semiconductor efforts at Agilent Technologies Inc. (NYSE: A).

It's hard to fully predict the DTN's impact, because Infinera won't discuss prices, and no carrier has tested the system outside of Infinera's labs. But it doesn't take Columbo to figure out who stands to be hurt from all of this.

"Ciena's got to be afraid of it," says Scott Clavenna, chief analyst for Heavy Reading, Light Reading's paid research arm. "If [the DTN] works, the economics are so radical that it would be hard to come up with a reason why someone would buy a traditional WDM system."

That's trouble for anybody in the WDM camp, but it gets worse for Ciena. Because the DTN's chips include crossbars, the system can do wavelength switching, bringing it into partial overlap with Ciena's CoreDirector. CoreDirector does STS1 (51 Mbit/s) switching as well, but it's being used for wavelength switching about 70 percent of the time, Clavenna says, "so it sort of hits Ciena in two directions."

Certain components could be affected, too, because the DTN doesn't need dispersion compensators and similar devices. And its OEO nature means the signal can be regenerated at every node, which could spell trouble for amplifiers and ultra-long-haul equipment.

Singh downplays all these effects and lays no claim to usurping anyone. "It's not a battle of technologies. What we're doing is a new tool that, when coupled with the network that's already available, will allow carriers to build more cost-effective networks."

It should play in Peoria
In fact, the DTN will probably be used as an add-on at first, exploiting its ability to make add/drop decisions easy. That's going to make it useful for delivering services to second-tier cities, the kind that weren't otherwise economical for traditional WDM drops, Infinera officials say. Carriers can use a DTN to drop just one wavelength to a place like Albuquerque, adding more if demand for services grows.

Those kinds of incremental changes might be Infinera's best business for a while. The company's product arrives at a time when long-haul sales are relatively slow and not likely to explode. Moreover, long-haul isn't price elastic; a carrier won't stock up on WDM nodes just because someone holds a Memorial Day sale.

Then there's the question of competition. Singh might be correct in claiming no one else has achieved Infinera's level of chip integration, but some companies are trying. Clavenna says he's heard of projects put on hold during the recession that are thawing now.

"There's a lot of work that's been going on, integration that is sort of lying fallow for some catalyst to get it going. This could be that catalyst," Clavenna says.

Companies would be hard-pressed to match Infinera's achievement, particularly since InP is a difficult material to work with. But if Infinera is that radical, then a close alternative should be enough to nibble away some market share at the low end.

"I've heard there are some other [attempts] out there to build integrated circuits as cheap and as functional. Maybe not quite as compact. So you could still build a system that has hundreds of Gbit/s of capacity," Clavenna says.

— Craig Matsumoto, Senior Editor, Light Reading

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truelight
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truelight,
User Rank: Light Beer
12/5/2012 | 1:52:06 AM
re: Infinera Declares WDM War
Reads boring and not that interesting. The price will be the telling point. If they are selling system's that cost 100K's base then there is no breakthrough here just a lot of over engineering.
JoeBagadonuts
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JoeBagadonuts,
User Rank: Light Beer
12/5/2012 | 1:51:59 AM
re: Infinera Declares WDM War
Let's see, the last few years have shown us that start-ups have little to no chance of buying gear from start-ups, especially ones with concepts invented back in 2000/2001. Yet, the LR employee quoted heavily in this story believes that if they can get the product to market that established companies should fear them. My message, Wake Up and check the date on your calendar pal.

The total cross-connect market is well under a billion dollars, Ciena is maybe doing $100 million per year in CD sales and they and Alcatel are the market leaders. Ciena thinks so much of this space that they are buying every company out there with a few buck in revenues in order to prop up their quarterly earnings. There is also maybe $500-600 million in WDM sales happening. Again, why do we need to get worked up about this?

I will say that Mr. Clavenna is right in saying that Integration needs something to spur the market but it won't be due to technological innovations but rather a need for telcos to spend money and we ain't there yet.
JoeBagadonuts
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JoeBagadonuts,
User Rank: Light Beer
12/5/2012 | 1:51:59 AM
re: Infinera Declares WDM War
Correction, carriers have little to no chance of buying gear from start-ups....

Coffee buzz has run out, must find more....
Steeler
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Steeler,
User Rank: Light Beer
12/5/2012 | 1:51:58 AM
re: Infinera Declares WDM War
Staying in "stealth" for three years was not part of the plan for this company. This has turned into one of Kleiner's most frustrating telecom investments, especially after the VC firm's failed effort to sell it to Juniper.

The IRR on this investment is going to be atrocious, regardless of what 2000 era spin they try to put on this POS.
pig3head
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pig3head,
User Rank: Light Beer
12/5/2012 | 1:51:58 AM
re: Infinera Declares WDM War
I think nothing but cisco's acquiring Infinera is the start point for the WDM war.

rjs
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rjs,
User Rank: Light Beer
12/5/2012 | 1:51:57 AM
re: Infinera Declares WDM War
Infinera and all the rest of component vendors
should not bother with the regulated Telecom
market and are better of focusing on the deregulated
markets like datacom. Telecom is basically dependent on the large incumberts for capex and
as such due to regulatory policies the telecom
market is not price elastic. The price and technological advantages are attenuated as there
are other factors which are political and organizational nature and which end up being the deciding factor.

As long as we have this problem with regulation there will be no price elasticity and all these debates are moots.


-rjs
particle_man
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particle_man,
User Rank: Light Beer
12/5/2012 | 1:51:57 AM
re: Infinera Declares WDM War
Doing regeneration at each node does radically simplify network design. It also allows you to optimize transponder costs which is a big deal. With Moore's law marching on, OEO continues to get cheaper. In the long run this is a good idea, however in the long run we'll all be dead.
BlueWater66
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BlueWater66,
User Rank: Light Beer
12/5/2012 | 1:51:56 AM
re: Infinera Declares WDM War
Sounds like the buzz around the next Rock "Supergroup." The music is usually "okay" and the sound engineering great, but not a lot of inspiration and that sharp edge that drives real innovation.

With $150M a group can force a lot of functions into an InP chip. But, as we all know, there is alway a number of limitations. Cramming that much into a small chip really limits what can be done. If it isn't perfect, then there is a problem.

I'll have to find an old ASIA album...
AutoDog
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AutoDog,
User Rank: Light Beer
12/5/2012 | 1:51:54 AM
re: Infinera Declares WDM War
Is it just me, or does this sound like Calient all over again?

Let's recap the Calient story:

The Plan
--------
- Super funded startup with a pile of cash & buzz
- Core technology (MEMS all-optical switching) was going to change the world
- Build a huge system around core technology to sell to carriers
- Went it alone (no big OEM partners)

The Result
----------
- Burnt through almost all cash & credibility
- Laid off all but skeleton crew
- Couldn't sell full system to carriers
- Had to scrap full system in favor of packaged bare-bones core technology
- Made some nice embroidered shirts & jackets


What makes Inifinera different? Why won't they follow Calient's delusions of grandeur?

And how nice are their shirts?
whyiswhy
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whyiswhy,
User Rank: Light Beer
12/5/2012 | 1:51:50 AM
re: Infinera Declares WDM War
Mega-PHY is dead, long live (cheap as shix) IP on (also cheap as shix) MM fiber.

-Why
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