All-optical networking was supposed to revolutionize telecom, but when will the promise be fulfilled?

January 15, 2002

3 Min Read
All-Optical Smackdown in Secaucus

SECAUCUS, N.J. -- At an optical networking conference held here on the fringes of the Meadowlands, several switching players took the opportunity to pound the all-optical proponents into the cold turf.

The conclusion from a number of participants and audience members in a panel on optical switching held here at the CIROptics 2002 conference: Given the current levels of carrier spending, all-optical switching is years away.

The panel included companies building optical switches with electrical cores (OEO switches) -- Tellium Inc. (Nasdaq: TELM), Ciena Corp. (Nasdaq: CIEN), and Altamar Networks Inc.; and two startups touting an all-optical approach (OOO) -- switch vendor Calient Networks Inc. and MEMS startup Transparent Networks Inc..

The bigger guys promptly pummeled the little guys.

Krishna Bala, CTO and cofounder of Tellium, pointed out several hurdles to the all-optical approach. The first problem has to do with manufacturability. “Cost and integration are cheaper for OEO switches today,” said Bala. “OEO ASICs reuse benefits of CMOS manufacturing. The process is already set up, so we can leverage the manufacturing.”

In a rare moment of solidarity, Tellium and Ciena, both currently shipping OEO switches, said that all-optical switches won’t be widely deployed in major carrier networks for three to five years. Altamar concurred.

Mark Lutkowitz, vice president of optical networking research with Communications Industry Researchers Inc. (CIR) and chair of the panel, said he doesn’t expect them to ship in volume for five to seven years. Lutkowitz said that for certain applications, like ultra-long-haul express forwarding, all-optical switching can be cost effective, but in widescale applications it just doesn’t make economic sense.

“On paper, all-optical is a slam dunk,” said Lutkowitz. “As for ultra-long-haul deployments, that is only about 15 percent of the total market. Corvis and Calient are obsessed with all-optical. [Corvis CEO, David] Huber is in denial.”

Corvis Corp. (Nasdaq: CORV), which has already been shipping its all-optical switches to Broadwing Inc. (NYSE: BRW), did not attend the discussion (see David Huber Pipes Up).

Lonely Calient, the only all-optical switch vendor sitting on the panel, tried unwaveringly to convince the audience that all-optical switches are just around the corner.

“To say that all-optical switching won’t be here for another five years is a fallacy,” said Tim Dixon, vice president of marketing for Calient. “I think we’ll see volumes kick up in 2002.”

Dixon argued that the technology helps carriers save on operational costs to such an extent that they cannot afford to ignore wavelength switching. He told the audience that his company would actually be shipping and deploying its product into an unnamed carrier’s network by midyear.

Gabriel Lowy, vice president of technology research at Crédit Lyonnais Securities Inc., said the whole lot may be trompé. After the discussion, Lowy pointed out that the big problem with optical switching in general, whether it be OEO or OOO, is that it doesn’t create new revenue streams for carriers. Lowy, whose bank lends money to carriers, said that service providers are most interested in creating new ways to make money. He felt the discussion missed that point entirely.

“Carriers spent all this money building out networks, and now they need to show shareholders how they are going to justify the expense of the past several years,” he said in an interview after the discussion. “Yes, reducing cost is important, but finding new revenues is their priority. I didn’t hear that here.”

At any rate, the slowdown in capital spending does not spell out a particularly bright future for all-optical switching, at least in the near term. The real answer of when all-optical becomes viable may not be apparent until carriers return to significant capital spending on new networks.

— Marguerite Reardon, Senior Editor, Light Reading

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