Service providers are finding themselves a bit mixed up as they make plans to upgrade their optical transport networks from 10-Gbit/s to 40-Gbit/s -- and eventually to 100-Gbit/s.

"What's causing the confusion is you have 40-gig today, which is just coming out as a viable technology. But 100-gig is just around the corner," says Heavy Reading's Sterling Perrin. According to Perrin, 100-Gbit/s products are expected to come to market in 2010 and some pre-standard 100-Gbit/s gear will hit a year earlier.

As a result, many service providers are unsure about what strategy to take in expanding network capacity. Do they begin deploying 40-Gbit/s technology now, or wait?

Network operators might not have a choice. "With the way the market is shaking out, it looks like even if service providers are wary of it, they're going to have to do 40-gig," Perrin says.

Perrin notes that the overall driver to leap to 40-Gbit/s transport technology is that carriers are running out of network capacity. This capacity crunch, caused by an increase in consumption of broadband video, among other things, caused carriers to start deploying 40-Gbit/s equipment even though 100-Gbit/s gear is just a few years away.

To get to what carriers are thinking on the subject, Perrin put together a survey of 105 service providers and he details his results in a new report called The Future of Optical Transport Networks: 40G & the Road to 100G.

In the report, Perrin notes that about 15 percent of operators surveyed are already deploying 40-Gbit/s equipment in their backbone networks, with just over 10 percent rolling out 40-Gbit/s gear in metro/regional networks.

That number will only increase as time goes on: Two thirds of operators surveyed said they plan to have 40-Gbit/s gear in their backbone networks by 2010, with just over half expecting to deploy 40-Gbit/s technology in their metro/regional networks by that time.

While that provides some market opportunity for vendors pushing 40-gig gear, Perrin says, "It looks like 40-gig is going to have a short-term lifespan, from 2008 until 2010, because carriers will begin deploying 100-gig as soon as it becomes available."

Even though a number of service providers have plans to deploy 40-Gbit/s equipment -- if they aren't already -- there's still a good deal of confusion over how to do so. Despite the fact that most service providers surveyed said there was an immediate need for 40-Gbit/s technology in their networks, one third of respondents said they were still undecided on the best approach for migrating to 40-Gbit/s technology over the next five years.

"It might have been better for the market if it had settled on a strategy to move forward," Perrin says. "But because operators are still unsure of what to do with 40-gig, many are stalling the market and waiting to see how things play out."

Price Matters
There's also the matter of pricing of 40-Gbit/s products. "There are a lot of questions about 100-gig and about 40-gig in terms of pricing. Service providers are looking for 2.5 times the pricing for 40-gig as opposed to 10-gig, but we're not there yet," Perrin says.

He notes that while some service providers are deploying 40-Gbit/s gear now out of necessity, the market probably will not take off until it hits that price parity. "Prices aren't right yet, so operators are stalling."

Service providers are also hoping that future 100-Gbit/s solutions will be priced more competitively than 40-Gbit/s equipment is now. Part of the reason for that optimism comes from the amount of technology that will be re-used in the jump from 40-Gbit/s to 100-Gbit/s.

"The leap to 100-gig from 40-gig is not as big of a leap as it was to 40-gig from 10-gig. That's because one of the ways vendors try to get things right economically is to re-use as much of the installed plant as possible," Perrin says.

Even so, he says that's no guarantee that 100-Gbit/s prices will be at the 2.5x price parity that operators expect when equipment becomes available. "It may not be 2010 when the market hits the price points that service providers want," Perrin says.

— Ryan Lawler, Reporter, Light Reading