The optical transport network (OTN) market is poised again for solid growth as operators prepare their infrastructures to tackle a new generation of bandwidth-hungry applications and AI deployments.
“There is a light at the end of this tunnel,” said Jimmy Yu, vice president of research at Dell’Oro Group, citing the OTN market’s strong performance during the last quarter of 2024. “The equipment glut is over.”
Vendors have indicated increased equipment order flows, Yu said, and optical revenue in North America is improving.
Serving Telecom Operators and Data Centers
The OTN market is fueled by cloud computing, 5G deployment and bandwidth-intensive applications, such as video streaming and AI-driven analytics. AI and cloud put massive new demands on data center and network operators. As traffic volume continues to rapidly climb, operators are tasked to overcome challenges by upgrading facilities with advanced optical network devices.
As a result, telecom operators and data centers are investing heavily in system upgrades, according to a report issued by Orion Market Research. Operators are focusing on innovations in wavelength-division multiplexing (WDM) and software-defined networking (SDN) to enhance their OTN capabilities.
The OTN market’s resurgence comes after an equipment overbuying period in which service providers hoarded optical transport products, uncertain of when COVID-19-era supply chains would recover and economic headwinds subside. Additionally, the market is benefiting from the introduction of 1.2 Tbps transmission and more efficient power use. Nokia’s $2.3 billion acquisition of Infinera, meantime, provided another jolt of optimism.
OTN Advancements
In addition to WDM and SDN deployments, OTN and data center operators are assessing other innovations designed to make them more efficient, according to Dell’Oro’s Yu. Those advancement include:
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800 Gbps ZR/ZR+ optical plugs and 1.6 Tbps-capable transponders. Both will improve capacity, lower power consumption and reduce the cost per bit. The optical plugs provide greater reach and can run over telcos’ reconfigurable optical add-drop multiplexer-based line systems.
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Systems designed to reduce power. Dense wavelength-division multiplexing (DWDM) reduces the number of optics devices in the link between data centers. In data center interconnect, the use of IP over DWDM is one way operators can save on power costs in the face of advanced data processing requirements.
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Finding ways to add more spectrum for more capacity. Operators need fiber strands to carry more capacity. With the heightened need for more bandwidth, they might find they need to add more strands of fiber, which isn’t always possible and can cause network congestion along some routes.
The Serious Need for Speed
Meantime, operators continue to test the performance of higher-capacity networks. Cisco and Arelion, for example, recently concluded a trial of an optical transmission system with 1.2 Tbps of capacity. Another Arelion trial, this time with Ciena, completed a 1.6 Tbps wavelength data transmission in a live network feed. Finally, In mid-March, AT&T said it had successfully tested 1.6 Tbps single-carrier wavelength across 296 kilometers of its commercial long-distance fiber network. The wavelength — using a single light frequency — carried two 800 GbE circuits.
Yu said commercial availability of 1.6 Tbps optical equipment could arrive in 2026.
Fresh Players with Big Fiber Network Plans
The OTN market will get another boost from big tech and social media giants linking their far-reaching terrestrial optical networks to subsea fiber cables.
Meta, for example, is planning a 50,000-kilometer subsea network, while Google, Microsoft and others are plotting sprawling optical networks to give their data centers the capacity to process AI and analytic workloads even as they set the stage for quantum computing.
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