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Thanks to iPhones (s aapl), tablets and Netflix (s nflx), the demand for bandwidth is back, and that’s drumming up interest in expanding and building out fiber networks. Today we think 1 Gbps fiber networks are enough, but soon we’ll need 100 Gbps, and a host of infrastructure companies are gearing up to provide it. Unnoticed by Silicon Valley, telecom is on the move again.
Equipment and network companies such as Ciena (s cien) and Adtran (s adtn) are reaping the rewards in their stock prices: Ciena’s stock has risen more than $14.74, or 117 percent in the last six months, while Adtran’s has risen by $14.46 — or 47 percent. Other industry players such as Infinera (s infn) and Tellabs (s tlab), however, have seen their stock prices fall. But Infinera is about to announce new products aimed at ushering in “The Terabit Age,” which may offer a boost. Corning (s glw), which provides the actual glass that goes into the ground for fiber networks, has seen its share prices rise by $6.70, or almost 42 percent, in the last six months.
Meanwhile, cloud computing and connecting data centers to faster and fatter networks has led to a new round of investment in fiber providers. From Allied Fiber –which launched last year — building a new type of network that combines the pipe with the processing capacity at data centers along the fiber pathways, to GE Capital providing $230 million in available credit to Lightower Fiber Networks, a dark fiber provider that has purchased three different fiber companies in the last six months.
Jimmy Yu, Sr., director of optical transport research at Dell’Oro Group, said in a report released earlier this month that:
“[T]here is a need to increase deployments of higher speed optical wavelengths such as 40 and 100 gigabit. We, therefore, raised our forecast and now project that in the total WDM market, which includes both metro and long haul, 40 gigabit wavelength shipments will grow at a CAGR of over 40 percent and the recently available 100 gigabit wavelengths will grow at a CAGR over 200 percent. By 2015, the combined 40 and 100 gigabit wavelengths may contribute up to $4.7 billion of optical revenue.”
Fiber Inside the Cloud
As fiber between data centers makes wired networks faster, the onus is on the networking providers inside data centers to boost their speeds. This means innovations such as Fujitsu’s creating of an all-optical switch that will keep packets that come into the network at light speed in their optical format as long as possible before converting them to electronic signals. This keeps the packets whizzing around the network faster and saves on energy because the signals aren’t converted.
Obviously, as interconnect technologies such as Intel’s (s intc) Light Peak and all-optical chips advance, the future computing and web world will be based on light as opposed to circuits, but that’s further out than I’m willing to go here. For now, the rise of fiber is occurring in the ground and will soon reach the switches inside data centers.
Fiber will also play a role in wired broadband for municipalities. Last week, the FCC issued a National Broadband Map that showed how lacking many hospitals, schools and libraries are in the U.S., with two-thirds of schools not having access to 25 Mbps or higher connections. Joe Freddoso, president and CEO of the North Carolina MCNC, a non-profit fiber network serving universities, told me demand at universities increases by up to 20 percent a year. Right now, his network “is barely scratching the surface” of its 40 Gbps capacity, but he estimates that by the end of this decade, the network will need 200 Gbps capacity.
The Mobile Ecosystem: Fiber on the Run
Wired communities aren’t the only consumer demand driving faster fiber (also known as more wavelengths). Mobile operators are seeking faster backhaul to support their 4G networks. Two weeks ago, I talked to Stefaan Vanhastel, director of product marketing from Alcatel-Lucent (s alu), who said the company’s 10 Gbps technology is aimed more at mobile operators than residential consumers. That makes sense given that LTE networks of today are seeking to provide speeds of up to 12 Gbps, while those of tomorrow may provide 10 times that amount. Once a bunch of individuals at a cell site are sharing those speeds, the pipe taking the traffic back to the larger web has to grow as well. From a DB research note issued this morning:
Carriers are looking to pull fiber to all of their base stations, and 1GB systems may not be sufficient. This is good news for Ciena who remains in the lead for supplying 100GB and OTN systems. More 1GB and above base stations means more traffic and this should be lead to solid demand for Cisco’s and Juniper’s carrier business.
Indeed, Cisco’s ASR-9000 router (s csco), introduced in 2009 to deliver terabytes of capacity at the edge, has seen a lot of success despite naysayers questioning the need for that much bandwidth. This latest fiber build out is showing how we’re taking advantage of connectivity to improve our products and our lives. As a platform for innovation we still have a long way to go with broadband and we’re going to need a lot more bandwidth to do it.