Apr 15, 2002
component market will not see a watershed event, but rather continued,
By Greg Blonder
be the next watershed event for optical networking? Everyone with any
perspective in communications can remember Ciena and wave division multiplexing.
It was an enormously important event, one that established optics as a
foundational technology of the Internet Age.
As a venture capital investor in both components and systems and as someone
who considers himself an established futurist, I expect nothing dramatic
in optics nothing at all. Instead, I foresee a gradual spread of
a second wave of optical innovation whose reach will be subtle and incremental.
So beneath our general consciousness will this wave roll on, in fact,
that were going to look back a few years from now and wonder when
all the new optics emerged.
transistors. When first generation transistor calculators and radios appeared,
you actually advertised the number of transistors inside. They were dear
things. Similarly, optical components are considered dear today and, in
many instances, we still try to minimize their use with electronics.
mindset is also changing, partly because a whole generation of engineers
has grown up comfortable with optics.
one of my portfolio companies, for example, is building a metro Ethernet
switch and not even thinking twice about connecting the planes together
with massively parallel optics. Theres nothing novel about it to
the engineers; its just obvious. Yet three years ago we would have
had held absolutely major discussion with teams of engineers forming a
red team for electronics and a blue team for optics and battling out a
of optics is giving way to a believing engineering laity that is ready
to look at, for example, the less expensive MEMs switches emerging into
the marketplace and say MEMs switches arent so bad, and they
will save me a truck roll to reconfigure some cables in a manhole.
Optics has won.
attitude shift, what major changes in optical components can we expect
that will infiltrate our networks over the next two to three years?
about for years, frequency agility will finally happen. Driving the transition
are improvements in what turned out to be surprisingly difficult technologies
of frequency tunable lasers, greatly increased metro traffic volume from
the gigabit Ethernet and the rest of datacomm, and the need for feeds
to finally catch up with optical speeds. Morgenthaler has relatively established
portfolio optics companies in this space Agility Communications
and FiberSpace that are getting major design wins even if actual
shipment volumes during the telecom capex slowdown are still modest. A
third, Inplane Photonics, is just getting started.
of frequency agility in the metro will give carriers enormous flexibility
in provisioning and providing the quality of service that customers require.
Carriers will, in essence, regain the ability, lost converting to glass
fibers, to watch and control each channel, and finally provide wireline
quality in the optics domain.
by 2004, people will become comfortable performing dispersion compensation
and applying electronic error correction code long the norm in
the electronic world to optics. Optics engineers at carriers have
resisted this kind of processing as a contamination of the channel
a case of the optical priesthood, perhaps, staying too holy. But now that
the proof is in that such processing is safely doable and offers great
cost savings, the tide has turned. In talking with the carriers, I find
that they are now comfortable with the idea.
has reached such a pitch that, in one recent week we saw three different
business plans for electronic error correction. Once some of these startups
receive funding, it will take another 18 months for them to complete trials,
and well also need to set some industry standards. But my take on
the situation is that were seeing activity on all the right fronts.
Optical error correction will happen.
When it does,
it will allow carriers to use cheaper devices and still offer the same
level of quality, while tolerating the outage and failure gremlins that
inhabit the real world. If I were to put bounds on the benefits, I would
say its probably worth about 6 dB in system margin and the ability
to hold on to existing fiber for about one or two more generations. And
thats not bad.
True integration of optical functions at the substrate level is probably
another generation away. Most integration taking place over the next two
to three years will be at the systems level power monitoring combined
with error correction coding, for example. (As long as youre watching
bits fly by, you might as well measure the quality of those bits.)
of integration will take place at the assembly level of optical componentry.
in our portfolio, NanoOpto and Inplane, are using lithography to create
different passive components that lend themselves to automated monolithic
assembly. Both will eliminate enormous amounts of hand assembly, with
all its inherent costs and inefficiencies. As an industry, weve
been chasing lower and lower cost assembly countries until weve
run out of countries. Now, for many crucial components, we wont
components company in our portfolio, Ignis Optics, is employing assembly
methods for transceivers that would have been radical to the optics industry
five years ago, but which are now proven (a little too proven, which is
why I can't say more.) The result for Ignis and its customers will be
much lower cost transceivers for the metro
effect of all this non-dramatic optical engineering will be a steady descent
down the cost curve. That curve, in my opinion, will never be as steep
or predictable as Moores Law has been for microprocessors. Optics
still depends too much on fundamental breakthroughs in physics. But the
foreseeable decline in costs will remain more than meaningful to systems
builders and carriers.
So, steadyas-she-goes optical innovation and investing from here
on out? Not completely. First, the data network continues to grow at 50%
per year and seems certain to keep on absorbing new technology. Its
hard to get much more exciting than that. In the current environment,
venture capitalists still cant chance overpaying for a project going
in because we wont be able to oversell it on the way out. But we
still find it financially attractive to make new optical investments and
to support our existing portfolio companies.
see strong signs of high drama elsewhere in communications that will add
to our interest in optical investing. In my view, for example, the next
big communications revolution will come with the rise of public wireless
Ethernet. Based on 802.11 wireless and known popularly as Wi-Fi, this
form of public wireless Ethernet is set to roar past 3G cellular and take
the US by storm.
Just as everyone
expects his or her cellular phone to work in every public building, everyone
will expect to have Internet access wherever they are. Pockets of access
many ad hoc have emerged around the San Francisco Bay area,
in London and Harvard Yard and are proving wildly popular. It shouldnt
be too long before some established carrier recognizes Wi-Fis potential
market value and seriously turns it into a major revenue producer. And
much of that wireless capacity will be backhauled by an optical web infrastructure-
by then it will be the natural thing to do.
Many in the
industry will find this scenario debatable (and requiring at least another
column), but the larger point is this: The spread of optics throughout
the entire communications system with all of optics' advantages of speed,
bandwidth and ever lower costs is now unstoppable. It thus opens the way
to more dramatic innovations from other corners of the communications
could include WiFi or they could include widespread voice-over-data transmission,
or they could include a dozen other major life-and-business-changing technologies.
These will represent new investment opportunities in themselves, but they
will also feed back into optics growth itself and create a virtuous cycle.
So, despite current industry gloom, we continue to be encouraged about
optical component and systems investment.
is a general partner at Morgenthaler and is based in Princeton, N.J.