Resilience through innovation: Top optical predictions for 2025 and beyond

Mattias Fridström / Arelion

As AI/ML, cloud applications and rapid data center growth transform the global technology landscape, operators are under pressure to innovate the optical layer of their networks to keep pace with soaring capacity and data transfer demands. 

From the further deployment of coherent pluggable optics and C+L band technology to continued network disaggregation, 2025 holds immense opportunities for operators who pursue optical innovation. 

However, operators still face myriad challenges in 2025, including a volatile economic climate. Thoughtful optical investment is crucial in helping operators provide value to various customer segments despite these uncertainties. So, which trends will likely shape the optical landscape in 2025 and beyond?

#1. Shannon’s Limit spurs continued evolution: As capacity demands rise with the exponential growth of data traffic, we’ve already reached fiber’s physical capacity constraint (also known as Shannon’s Limit). The industry may continue experiencing minor capacity improvements as we contend with this bottleneck amid the proliferation of bandwidth-heavy technologies. In the past, a 200G coherent system was considered twice as powerful as a 100G coherent system. Due to Shannon’s Limit, recent improvements in fiber throughput typically total approximately five percent, even if you jump from 400G to 800G.

This results from optimizing wavelength grouping and spectrum efficiency rather than focusing solely on traffic capacity. By optimizing other optical networking qualities, our industry is proving its adaptability in the face of Shannon’s Limit. Coherent pluggables will remain vital as optical equipment manufacturers constantly innovate to increase capacity and reduce energy consumption. The latter is crucial amid power-hungry AI/ML applications. But how might Internet carriers evolve even further to improve capacity?

Operators can expand with C+L band technology or purchase more fiber pairs to double capacity. However, these options still increase costs, particularly amid fiber scarcities in specific markets, including the U.S. This conundrum may spur the rise of hollow-core fiber by 2030, although production scalability and other economic barriers currently challenge its commercial viability. Still, while the industry is exploring various fiber types, hollow-core fiber seems to be the best option for the coming years. Hollow-core fiber may eventually help operators serve the demands of emerging technologies by increasing efficiency and lowering latency as Shannon’s Limit persists.

#2. More standardization to unlock network disaggregation’s full potential: Coherent optical networking is projected to grow exponentially, with experts estimating the market will reach $27 billion by 2027. As our industry increasingly deploys coherent pluggable optics, including 400G ZR and 400G ZR+ modules, we must leverage these solutions through disaggregated network architectures that utilize open line systems to enhance flexibility. Disaggregation is not a novel concept, but it is gaining new impetus due to its potential for enhancing modularity. These pluggables perform well over shorter distances within metro networks, but challenges still exist when routing traffic over distances exceeding 200 km.

Standardization is the critical linchpin for realizing disaggregation’s full potential. However, some operators may encounter increased disaggregation complexity from non-standardized interfaces and parameters across more significant numbers of infrastructure sites in long-haul applications. In 2025, we may see even more collaboration among optical equipment manufacturers and network operators to overcome these obstacles. Industry groups such as the Open XR Optics Forum, the Optical Internetworking Forum (OIF) and others are already doing excellent work to improve interoperability and standardization, so these efforts will likely escalate in 2025, enabling network operators to capitalize on disaggregation’s advantages in long-haul scenarios.

#3. Managed optical fiber networking will reappear, providing economic opportunities: The telecommunication industry’s financial challenges have persisted through 2024 and will likely remain in 2025. However, there are plenty of opportunities amid these realities. Managed optical fiber networks (MOFNs) have been a part of most operators’ business models since the early 2010s. However, we may see a resurgence of customer interest in MOFNs as hyperscalers and smaller cloud providers require massive capacities on single routes to serve AI’s requirements. This reappearance of interest in MOFNs from hyperscalers and others may help operators serve new customers who require higher capacities, greater reach and lower latency to support their business needs, aligning with the overall industry shift toward Network-as-a-Service (NaaS) solutions.  

MOFNs can empower customers with scalable “pay-as-you-go" pricing models aligning with their connectivity usage and current business needs. Operators can couple these pricing models with scalable bandwidth on demand, helping customers adapt faster to real-time connectivity requirements. By outsourcing their optical network management, customers can also reduce expenditures related to operating and maintaining complex optical networks. While MOFNs can help operators enter new markets, they can benefit customers similarly. By working with a MOFN provider, customers can accelerate their time-to-market in new regions while bypassing the prohibitive costs of time-consuming optical network buildouts, resulting in quicker business growth.

Lighting the path forward

Despite our industry’s recent challenges, one aspect has remained constant: optical innovation is the skeleton key to unlocking new market opportunities and serving the massive capacity requirements of emerging applications, no matter which difficulties we face next.