Components that help carriers make the most of installed fiber will succeed in the coming months, while those aimed simply at boosting raw capacity will collect dust for at least another two years.

So says a report titled "Component Conundrum," published this month by Light Reading's subscription service, Optical Oracle.

The report posits that carriers want equipment that lets them carry more data on installed fiber. Because of this, arrayed waveguide gratings (AWGs), interleavers, and some types of tunable components are likely to sell relatively well over the next 12 to 24 months. In contrast, 40-Gbit/s transport chips are "at least two years away" from market penetration of any significance.

"What carriers want and need right now are lower costs and improved efficiencies," says Chris Bulkey, Optical Oracle research analyst and author of the report. That means more channels carved out of existing fiber, not faster pipes.

AWGs are key to creating these channels. AWGs have succeeded in dominating today's 40-channel DWDM market because, according to the report, they offer lower losses than thin-film filters for this application. To reach 80 channels and above, however, AWGs will need a boost from interleavers. Companies that make these components include Avanex Corp. (Nasdaq: AVNX), JDS Uniphase Inc. (Nasdaq: JDSU; Toronto: JDU), and Oplink Communications Inc. (Nasdaq: OPLK).

Tunable components also are hot, because they promise a way to make the growing number of DWDM channels more manageable. Specifically, tuning can be used to add, drop, or switch channels via software. And some forms of tunable components open the possibility of routing by wavelength -- a dramatic improvement over today's routing methods, which rely on electronic mechanisms.

But tunable components will likely grow more slowly than AWGs in the near term. According to the report, carriers need to be shown that systems based on tunable lasers and filters can be deployed cost effectively and meet performance expectations.

A number of manufacturers, including Agere Systems (NYSE: AGR), Bandwidth9 Inc., Fujitsu Ltd. (KLS: FUJI.KL), Marconi Communications PLC (Nasdaq/London: MONI), and Nortel Networks Corp. (NYSE/Toronto: NT), are working to convince carriers (via system OEMs) that tunable gear is viable. What's more, integrated optical add/drop multiplexers equipped with tunable filtering capabilities are starting to emerge in products from the likes of Bandwidth9, Cidra Corp. (Nasdaq: CIDC), and Solus Micro Technologies Inc..

While these components are likely to flourish, others, especially 40-Gbit/s transport chips, will be delayed. Carriers are seeking to mine the capacity they've already built out, and the falling cost of 10-Gbit/s systems is convincing them to focus on that data rate as the backbone standard. According to the report, it will be at least two to three years before carriers seek to up the backbone ante with new baseline speeds.

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

Editor's Note: Light Reading is not affiliated with Oracle Corporation.