Coherent optical networking to cause a tectonic shift

Yu said multiple things in play will facilitate this shift. “The drivers are coming from the fact that the idea got kicked off with the idea of small form factor plugs,” he said. “And once you can get it into the QSFP form factor and fill up the face plate on an Ethernet switch or router, it becomes more viable as a solution.”

ZR, ZR+ optics a catalyst

The shift to coherent pluggable Foptics was initially driven by hyperscaler data center operators, who pushed for shorter spans and point-to-point high-capacity links. A key catalyst was the emergence of ZR optics. 

400G ZR optics define an economical and interoperable standard for transferring 400 Gigabit Ethernet over a single optical wavelength using DWDM (dense wavelength division multiplexing) and higher-order modulation such as 16 QAM. The Optical Interoperability Forum (OIF) developed this low-cost standard for data transmission as one of the first standards to define an interoperable 400G interface. The ZR+ represents a series of coherent pluggable solutions holding line capacities up to 400 Gbps and stretching well past the 120km specification for 400ZR.

“This is why ZR optics is one of the catalysts,” Yu said. “ZR optics are specified to work under 120 km. They are smaller, have lower power consumption, and have a lower price point than a traditional method such as a line card or a CFP-2 module.”

Microsoft, for instance, was interested in doing regional data centers where they only needed up to 80 km. The technology company wanted something that was lower cost and gave them greater flexibility. “Providers said, so why pay more? They also said it would be great if these were standardized, so I don’t have to buy the optics from vendor A, but I can buy from vendors A, B, C and D and pick and choose who I want to use."

Disrupting DWDM

Using coherent transceivers on DWDM systems will continue contributing to the largest market revenue share. However, using coherent optics on router and switch platforms will reach material levels quickly.

Yu said this shift would likely cause some “cannibalization” between the traditional way with a conventional DWDM system and converging to a router and switch. “We expect to affect the traditional WDM market in the near term,” he said. “Whenever you go through a transition like this, there’s always more evident a shift, but eventually, it stabilizes out, and it finds its place where one technology is best suited for something.” 

He added that service providers and hyperscalers get out of the hype cycle, and reality sets in where one operator finds ZR plugs suitable for situations A and B and the traditional architecture is best for situations C and D. 

Cignal AI said Metro WDM equipment agreed that spending will soon be disrupted by transitioning to pluggable optics used in routers.

“In terms of cannibalization, it will take a chunk out of it,” Kyle Hollasch, lead analyst for transport hardware at Cignal AI. “Some of it will be replaced by the pluggable themselves going into routers, but that's tracked as a different bucket; when a four and coherent pluggable is sold within a router, it no longer is included in the market share for optical transport systems.”

A tectonic shift

As the coherent optics market makes small form factor pluggables more readily available, more of the coherent market will focus on routers and switches. Dell’Oro revealed that over half of the annual shipment increase will be on routers and switches.

Coherent optics deployed on router and switch platforms will account for more than 50 percent of the annual increase in transceiver shipments throughout the forecast period. This will be due to the availability of ZR Optics, beginning with 400ZR and carrying through to 1600ZR.

“Historically, most coherent optics have predominantly found their application in DWDM systems,” said Sameh Boujelbene, VP for Ethernet Switch market research at Dell’Oro Group. “However, with vendors making strides in developing smaller and more energy-efficient coherent transceivers, the scope of their use is rapidly expanding.”

He added the “expansion encompasses not only the range of platforms they can support but also the diversity of applications to which they can cater.”

The research firm said that the coherent optics market is undergoing a “tectonic shift” with the availability of small form factor pluggable optics that will increase the use of coherent technology in routers and ethernet switches.

Yu said there will be three main trends that will drive the market. “We’ll see more coherent optics on a router and switch,” he said. The second is shifting to small plugs and using more standardized DWDM platforms.” 

Cignal AI’s Hollasch said it will either go to the router vendor or if a hyperscaler is buying directly from an Acacia or now from a coherent vendor. “This alone will take a bite out of the $16 billion optical systems market,” he said. “Those pluggable devices are less expensive than what they're replacing. So, from a 10,000-foot view, it will probably shrink the metro optical systems market.”

Yu said that IP over DWDM was a term that Cisco coined and put a coherent 40G optical module on their big router CRS-1. “They kicked this off, but each time, it had limited adoption and one reason was the size and power profile was not designed for large-scale metro applications,” he said.

Traditional operators benefit
Hyperscaler data center providers had traditionally adopted the advent of coherent optical platforms. However, how and when will traditional service providers adopt these? 

Service providers will also benefit from using coherent pluggables and IP over DWDM on various fronts. Like the hyperscalers, there will be situations where a traditional provider will have short network segments.

“As a technical solution, cable MSOs, telecom operators and wholesale carriers will have situations with a short span length,” Yu said. “Tier 3 providers don’t need a backbone network could also benefit.”

Another critical element is driving network standards. Groups like the Optical Internetworking Forum have developed programs like the 1600ZR project to define a power-optimized solution for a multi-vendor interoperable 1600 Gbps coherent optical interface, focusing on Data Center Interconnect (DCI) scenarios. This Implementation Agreement (IA) will create a comprehensive electrical/protocol/optical framework that facilitates realization into pluggable modules.

However, Yu and others point out that providers have faced various challenges to embrace these new technologies. 

“The idea of standardization has been kicked around for DWDM tech and never stuck because if you want the best performance, it’s hard to standardize,” Yu said. “With the advent of ZR, you don’t have to bookend the same vendor because you can use two different vendors as a supplier.”

Cignal AI’s Hollasch said cost has always been an issue for traditional providers. As part of his OFC 2023 preview, he cited Geoffrey Moore’s 2014 book Crossing the Chasm. Moore describes the adoption lifecycle of new technologies through the preferences and characteristics of different types of consumers. 

While some technologies find relevance with early adopters, they can’t gain widespread market success. Moore said this gap between early and mainstream adoption is “The Chasm” and how there have been new technologies that were never able to get to the other side.

In the case of IP over DWDM, 400ZRx optics are being used by cloud operators, enterprises, and early adopter service providers. Still, Hollasch said that for IP over DWDM to become adopted in the broader optical transport market, “it must win over the slow-moving and notoriously conservative Telcos.”

He cited ROADM compatibility, long-haul capability, and transport-friendly management as key advancements needed. “A lot of technologies are adopted by early adopters right in a niche application,” Hollasch said. “There’s this enormous chasm that technology has to cross to get mainstream adopted. And that chasm for service providers is that they have different IP and optical organizations in most cases, and they have brownfield networks."

Unlike the hyperscalers, which are building Greenfield networks, carriers have layers of network and operational methods. “Carriers have these networks that live for decades and decades, and they evolve and carry old stuff and new stuff and old platforms,” Hollasch said. “So, it's just a much more difficult environment."