40G Reaches a Tipping Point

The adoption of 40G is reaching a tipping point, as evidenced by a recent report from Ovum as well as new customer announcements from Nortel.

According to Ovum, the market for 40G optical communication in the field will be ready for mass deployment in 2009, when it’s expected to be a $600 million market. And by 2013, Ovum said, the market is expected to almost triple.

"After many years of waiting, the 40G market is finally moving to a generalized deployment phase. Consumer demand, mostly driven by video, is stressing network capacities and as long as this dynamic stays in place, 40G deployments will continue to see healthy growth," said Ron Kline, research director at Ovum. "What's most important now is that the industry works to reduce the cost for 40G in order to move the market towards mass adoption."

Already, more than 30 network operators worldwide have spent more than $250 million since 2005 deploying the technology, according to Ovum.

And this week Nortel (NT) added two more service providers to that list.

Mediacom Communications is using Nortel’s 40G gear to expand its network, which will span Chicago; Des Moines, Iowa; and Omaha, Neb. The 40G technology will give Mediacom the horsepower it needs to support its telephone, high-speed Internet and TV services, which include HDTV and video on demand options. Nortel also announced yesterday that TELUS will deploy its 40G optical solution.

Nortel unveiled its 40G solution early this year. The product, which became generally available in May, employs dual polarization quadrature phase-shift keying (DP-QPSK) with coherent detection that allows 40G operation over a 10G network as well as advanced digital signal processing that removes compensation requirements. DP-QPSK allowed Nortel to use 10G laser technologies, which are very reliable for 40G implementations. And Nortel uses the same ASIC technology it uses for 40G to address 100G.

The company is considered a pioneer in the optical space and has accumulated 37 customer wins since launching its 40G product in April 2008. That’s why it was big news when the company this fall announced its intention to sell its Metro Ethernet Networks (MEN) division, which includes the firm’s optical gear.

Responding to an xchange inquiry this week as to the status of this plan, Nortel spokesman Ryan Saxby Hill said: “We continue to explore the potential divestiture of the MEN business. As I'm sure you can appreciate, it would be inappropriate for me to comment during this phase, so I cannot provide any further details.”

According to Ovum, the largest 40G application by volume is for router-to-router interconnect. Comcast and AT&T have the largest commercial deployments, but government-funded defense and research networks have contributed significantly to revenue.

As for market share in the 40G space, Ovum today reported that Nokia Siemens Networks is the clear market leader in the WDM deployment for 40G infrastructure, noting that with a market share of 35 percent, the company is 12 percentage points ahead of the nearest competitor.

In addition to NSN and Nortel, other players in the 40G and 100G space include Alcatel-Lucent, Ciena, Fujitsu and OpVista.

At NXTcomm, OpVista unveiled the OpVista CX8, based on the company’s technology known as dense multicarrier technology (DMC), which combines multiple carrier photonics, lambda stabilization and multilevel modulation to deliver 40G and 100G bandwidth per wavelength.

As for 100G, conventional wisdom is that we could see 100G trials and early deployments in the 2009-2010 timeframe.

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