Despite recent setbacks, suppliers of passive optical networking (PON) gear insist the future of their particular access technique looks bright. Some are even predicting record revenues.

"So far, we've met our financial projections, and we plan to grow revenues by 50 percent this year," says Darryl E. Ponder, CEO of Optical Solutions Inc., widely considered the PON market leader.

But last week, Optical Solutions laid off 35 employees, 25 percent of its workforce. The company now has 106 on staff.

Another supplier, Terawave Communications, says it has more than 10 paying customers and has realized revenues of $5 million so far this quarter -- some of that from unannounced products. But the company is down to about 100 employees after laying off what some claim was a third of its staff last Thursday.

What gives? Is the PON market in good shape or bad? And when, if ever, will this sector's perpetual takeoff act start to accelerate into something substantial?



Analysts say PON, an access technique that reduces the cost of laying new fiber by using passive splitters to divvy up existing bandwidth across multiple endpoints, is bound to make headway as the last mile gains importance (see Optical Access Startups: Roll Call and Optical Oracle: Access is Gold ).

"As soon as telecom operators start spending again, the first thing they'll spend on is access," says Alan Bezoza of CIBC World Markets. But he admits he can't say when that spending will happen, or how big a role PON will play in the telcos' future access purchases.

Suppliers like Terawave and Optical Solutions are willing to hold on and find out. Both view their layoffs as necessary to live through the present downturn. Ponder says he's hoping cuts will help Optical Solutions avoid spending precious funding -- and having to return to a well that's virtually run dry. And Terawave execs say they're intent on a better future.

"The PON market looks as attractive as ever," says Terawave VP of marketing Robbie Forkish. "Timing is the question."

Forkish's thoughts aren't unusual. Despite poor market conditions, PON vendors such as Quantum Bridge Communications Inc. persist in thinking the ship's on its way in. They're being joined by newcomers like Alloptic Inc., OnePath Networks, and Salira Optical Network Systems Inc., which claim their Ethernet-based PONs are the wave of the future. And other newbies like FlexLight Networks are emerging with gear they say will accelerate deployment of the technique by supporting TDM connectivity (see PON at a Crossroads, Salira Prompts PON Questions, FlexLight Intros Access Platform, and Atrica Teams With FlexLight).

Of course, a rosy outlook has characterized PON pushers for years. Still, the recent layoffs, repositionings, and introductions in the PON market indicate that PON can neither be dismissed nor declared a success just yet. Instead, all the news reflects a series of trends that may help revise the outlook and set expectations a bit more realistically:

As ever, it's hard to tell what the outcome will be. But for now, PON is not going away, and its suppliers continue to hang tough, confident of their ultimate success.

— Mary Jander, Senior Editor, Light Reading
http://www.lightreading.com