While there’s been a lot of buzz about 100G fiber optic deployments, it’s been the smaller network operators that to date have acutally built out such fiber optic networks. Those include: XO Communications, DukeNet Communications, ARSAT, Kansas City Fiber Network, ORION in Canada, Intercontinental Transmission Links for Research and Education Community (Internet2, NORDUnet, ESnet, SURFnet, CANARIE, and GÉANT) and others.
But many industry analysts and vendors believe the time for 100G is now here. That is, for telcos, cableco’s, governement agencies, and e-commerce companies to move to 100G OTN and/or 100G Optical Ethernet networks. Note that SONET/SDH topped out at 40G so is not an option for 100G PHY layer.
1. Alibaba Group has just announced a 100G network for China
ZTE’s ZXONE 8700 100G OTN series will be deployed to build Alibaba’s 100G transmission network. The first phase of the project will cover four MANs in Hangzhou, Tianjin and Beijing respectively. The ultra-large bandwidth, high capacity, and robust reliability of ZTE’s solutions, and the ability to provision a comprehensive range of services will serve the enormous networking needs of Alibaba, and support the continued high-speed growth of Alibaba’s operations. Alibaba is one of the world’s largest e-commerce companies, operating more than 10 platforms including Alibaba.com, Taobao Marketplace, Tmall.com, eTao, Alipay, Juhuasuan, Alibaba Cloud Computing and China Yahoo! When the construction of the broadband network is completed, it will carry most of Alibaba’s data traffic.
2. Market Research firms Ovum and Frost & Sullivan say 100G is growing rapidly
“Growth in 100G remains a bright spot in the optical networking industry, as annualized revenues exceeded $1bn for the first time ever. 100G port shipments in 1Q13 grew 41% and revenues grew 24% versus 4Q12, with annualized revenues surpassing $1bn for the first time. Twenty vendors shipped 100G for revenue in 1Q13 and more are slated to enter the market throughout the year. Even with the growth of 100G, 40G shipments were holding; however, 1Q13 was the first time the market declined versus the year-ago quarter and the rolling 4Q average declined 2%, indicating perhaps the 40G market is starting to slow.”
Frost & Sullivan Estimates Global 100G Market to Continue to Grow, Reaching $4.8 Billion by 2016
Enterprises and data centers are fueling the global 100G optical network market, which is predicted to increase at a 52.2 percent compound annual growth rate (CAGR), reaching $4.8 billion by 2016, according to market research firm Frost & Sullivan. Since its inception in 2010, the market has growth by 210 percent in 2011 and 387 percent in 2012, according to the research firm.
Alcatel-Lucent, Huawei, Infinera, Ciena and ZTE are the top five 100G vendors, accounting for over 76.2 percent of the market share by unit shipments. The research firm expects these firms to continue to dominate the market because of high barriers to market entry.
3. Ciena – a leading vendor of 100G optical networking equipment (selected quotes related to 100G)
During Ciena’s June 6th earnings call, CEO Gary Smith said, “the 100G (network) scale and beyond (is needed) to handle the sheer volume of connections and software-defined networking to make those connections as flexible and as valuable as possible.”
In answer to questions on 100G market and the competition, Mr Smith replied:
“I describe the 100G as one of the essential components for this next-generation architecture, along with OTN, converged packets and very tightly aligned software architectures as well, so I think it’s one of the key components. We clearly have market leadership in that space in terms of revenues and Tier 1 (carrier) wins and overall capacity that we’re now deploying on a global basis. We’re seeing a strong uptick in 100G. We expect to see that continue and also spread into other areas of the architecture. We’ve got WaveLogic 3, which is our third-generation platform. Many of our competitors are struggling to get their (frankly) first generation fully operational in the marketplace. We’ve got a lot of features and functionality and in fact, software intelligence that is part of WaveLogic 3, so increasingly more smart photonics there that we’re able to leverage, so we feel very positive from a competitive position around 100G, particularly when you encompass it with the complete solutions you’re putting together around OTN, control plane, converged packets and then the software architecture approach that we have.”
“We’re now seeing finally the Ethernet business services, and it’s the fastest-growing part of the enterprise data services market. And we expect the percentage of revenue coming from this business, Ethernet services, to increase. Our position is pretty strong in the marketplace, certainly, with the — even with wireless backhaul. And I think we support about 50% of the fiber-fed U.S. towers for backhaul actually, which we’ve been able to deploy over the last couple of years.”
In response to a question on what constitutes the non-telco portion of Ciena’s customers: “It’s cable operators, government, research and education. Some very large research and education networks around the globe, clearly a big requirement to move very, very large amounts of capacity around the enterprise space. There’s a lot of very high-end enterprises who want carrier-class interconnectivity lodged in between their data centers. We’re increasingly seeing opportunities in that space and also the content delivery network folks as well. So all of that together is about 25%.”
Thomas Mock – Former Ciena Senior Vice President of Corporate Marketing & Communications- added, “We’re now seeing 100G across all domains in the (optical) networks. And one of the ways you can get to those other domains in the network is to have the bigger architectural components. So that’s really what’s let us move from the core into the metro and also into the ultra long haul and undersea markets.”
Long time Ciena Network Architecture Executive Joe Berthold (PhD-Physics) wrote this author, ” Many network operators are making the transition to 100G. Many of our customers were waiting for our WaveLogic3 cards, which went GA at the end of last year. These cards support longer distances for 100G, are denser and more power efficient, and have the new ASICs capable of supporting multiple modulation formats.”
4. Analyst Opinion on the 100G Upgrade Cycle and Ciena
FBR’s Scott Thompson wrote in an email, “Ciena management made clear that it believes that the company is in the early stages of what is likely to be much more than a 100G upgrade cycle. On the earnings call, management emphasized that it thinks the industry is in the beginning stages of a significant shift in network architectures that will propel Ciena’s business into a much larger opportunity. We believe that the industry analyst community has not fully realized the scope of this opportunity.”
“Ciena will likely prove more strategically positioned than most in the communications space for what is likely to be one of the most significant transitions in the networking sector in more than two decades.”
5. Another Analyst Opinion on Competition in 100G Network Gear
Note: Huawei, ZTE, Alcatel-Lucent, Ciena, Fujitsu, Cisco, Infinera, Xtera, NSN Optical (owned by Marlin Equity Partners), and other network equipment vendors are all competing in this space.
Raymond James Financial analyst Simon Leopold notes that Ciena is strong in the 100Gbit/s equipment and carrier Ethernet markets but he believes there is “evidence of 100G price competition and maybe discounts for larger Ethernet projects.”
According to Frost & Sullivan, the 100G market is mainly driven by the demand for high quality broadband network services, especially by the growing IP traffic and number of broadband subscription during recent years and in the future. Implementing a 100G optical network results in high network efficiency and reduced per byte transmission costs for data, the research firm noted.
Future 100G applications include: interconnection of cloud resident data centers, 4G LTE wireless backhaul, metro optical networks, submarine and ultra-long haul optical networks.