Market Report - Buying the Lightwave M-DWDM / DWDM System Cost Considerations

Market Studies
Buying the Lightwave
Buying the Lightwave
M-DWDM / DWDM System Cost Considerations

Published: August 2000

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Comments from "Buying the Lightwave"
"When DWDM was introduced the need was so apparent and enormous (to rapidly increase the available bandwidth of our long haul fiber routes), that little consideration was given to the normal concerns accompanying the introduction of so important a new communications infrastructure. Now as the technology has begun to mature (things happen fast on ‘Internet time’), more consideration is being given to OAM&P, flexibility, optimal designs, and costs."

"This list presents a good list of the different cost categories that result in a high proportion of the costs on a typical DWDM system. As we will see later, different approaches to the entire system problem will result in different cost components and indeed very different costs."

"The cost distributions presented in the following are based on actual systems (designs) from the author’s consulting experience. These are typically systems with five or more terminals; SONET-based; many hundreds to many thousands of miles long; and topologically, protected rings."

"Because of the nature of the traffic on these systems, they are designed with the very best components in their component parts. For example, the lasers used in these systems must be of the highest quality. (The quality of lasers can cause as much as a $25,000 variation in the price of a single wavelength transponder card.) In addition the approach to the use of the lasers must be designed to provide the long haul capabilities inherent as a requirement in this class of equipment. This means that the lasers must be externally modulated (as opposed to being directly modulated by the drive signal), which can increase the cost of the component by as much as 40%. (From Types of DWDM Systems."

"In addition to being much shorter, the Metro systems have other unique characteristics. One of these is the nature of the traffic. Traffic on these systems tends to come from a large number of customers (ISPs, CLECs, Enterprises, major institutions, etc.) Also, because of the nature of many of these customers, the traffic tends to be data (IP) oriented. In addition, because these systems are located ‘near the customer,’ i.e., the end customer, they tend to have highly volatile service change and rearrangement requirements."

"The secret to understanding the savings claims is in looking past drawings such as Figures 14 and 17 and looking at the way the standby (failure backup) facilities are deployed. The mesh arrangement will allow for sharing of backup facilities, and thus it offers savings on facility costs (maybe not in the very significant route development costs, but certainly savings in the optical and electrical equipment). To see how this can be, we are re-drawing Figures 15 and 18 to illustrate the method under which these savings can be achieved."



"The time has come," the Walrus said,
"To talk of many things:
Of shoes—and ships—and sealing wax—
Of cabbages—and kings—
And why the sea is boiling hot—
And whether pigs have wings."

Lewis Carroll (1832–98). Through the Looking-Glass, Ch. 4 (1872).

The telecommunications industry has so rapidly adopted DWDM technology that it is hard to keep forecasts up to date. It is even harder for the vendors of DWDM, many of whom have announced multiple fold increases in capacity in the last few months after experiencing record shattering last few quarters in 1999. The most recent forecast (by B & C Consulting for IGI Consulting, Inc. in "Riding the Lightwave") shows the results of the spectacular 1999 sales and the projected US growth for the future.

As can be seen, this graph projects a market of over $10B for a product that didn’t exist only a very few years ago. The installed base is beginning to be big enough to claim one of the most significant technology spots in the overall communications infrastructure, with well over 4000 systems installed world wide.
Given this frenzied pace, some of the normal applications groundwork for so important a technology has been left undone. As the Walrus said, "The time has come to talk of many things…" This report is an attempt to rectify the omission of this fundamental work in the area of costing tools, economic analysis of optional approaches, and basic understanding of competing design application alternatives in the new IP/DWDM networks.

If you are involved in any way in the DWDM market place – as a financier, as a entrepreneur, as a system operator, as an investment banker, as a system designer, as a system vendor, CELCs, ILECs, IXCs, ISPs, telecom hotel owner, etc. – "Buying the Lightwave" will become the most used reference on your bookshelf.


This report provides:

This report is based largely on detailed case studies from the author’s consulting business with the addition of theoretical work added to allow the reader to individualize results. The report provides:

  • Identification of ‘Cost Causers’ in DWDM systems.
  • Basic descriptions of DWDM and M-DWDM systems, highlighting the important differences.
  • Estimates of the distributions of costs in DWDM and M-DWDM systems.
  • Nominal figures for quick estimates for DWDM and M-DWDM systems.
  • Analysis the Metro-DWDM economic justifications.
  • Models for calculating the relative economics of M-DWDM placements.
  • Quantitative and Qualitative rationales for M-DWDM.
  • Extensive listing of M-DWDM vendors, with individual product line description, and contact information.
  • Straightforward descriptions of ring vs. mesh architectures.
  • Identification of major cost factors in ring vs. mesh selections.
  • Economic Analysis of Rings vs. Mesh architecture.
  • Extensive, original drawings that illustrate how optical cross-connect switches and terabit routers fit in mesh architectures, and the associated economic trade-offs.
  • Discussion of the latest DWDM system developments (ultra long optics, new technologies, optical switching, etc.) and the cost factors associated with them.
  • Discussion and identification of the various ring technologies.
  • A segmentation scheme that will help understand the entire optical network market.
  • A matrix of vendors in each of the areas of the market segments.

This material is all presented in a manner that is intended to be most useful to the reader. While the material is of a technical nature, the presentation is such that the reader can get full benefit of it without a strong technical background.


Table of Contents






  • Physical Components
  • Typical Cost Distributions
  • Distribution of Costs


  • Long Haul
  • Metro


  • Long Haul DWDM
  • Metro DWDM
  • Costs of the Systems Summary


Metro DWDM vs. Multiple Fiber

  • Metropolitan DWDM Systems – Economic Analysis
  • Cost Factors for Metro DWDM Systems
  • Derivation of M-DWDM Breakeven Model
  • Using the M-DWDM Models
  • Variations
  • Other Considerations Regarding the Selection of M-DWDM
  • ‘Growth’ Reasons
  • Competitive Reasons

Vendors of M-DWDM Systems

  • Alcatel
  • Alidian
  • Astral Point Communications
  • Centerpoint Broadband Technology
  • Chromatis Networks (Lucent)
  • Ciena
  • Ericsson
  • Fujitsu
  • Kestrel Solutions
  • Lucent
  • Marconi
  • New Access (Zaffire)
  • Nortel
  • Optical Networks
  • Osicom Technologies Inc. (Sorrento Networks)
  • Pirelli (Cisco)
  • Qeyton (Cisco)
  • Siemens
  • Sorrento Networks Inc. (Osicom)
  • Sycamore
  • Tellabs
  • Tellium
  • Zaffire (New Access)

Mesh vs. Ring Systems

  • What is a Ring Topology?
  • What is a Mesh Topology?
  • The Economics of Mesh vs. Ring
  • Cost Factors for Mesh vs. Ring

Very Simple DWDM Systems

Very Long Haul DWDM Systems




Cross-Listing of Companies



Buying the Lightwave

M-DWDM / DWDM System Cost Considerations

Table of Figures

  • Figure 1, Typical DWDM Layout
  • Figure 2, Expanded DWDM Typical System
  • Figure 3, List of 'Cost Causers' in DWDM Systems
  • Figure 4, Table of Cost Distributions
  • Figure 5, Typical System
  • Figure 6, Metro DWDM System Characteristics
  • Figure 7, Summary of System Costs Estimators
  • Figure 8, CO-to-CO Route Using Multiple Fibers
  • Figure 9, M-DWDM CO-to-CO Route
  • Figure 10, Table Comparing Cost Components of Fiber vs. M-DWDM
  • Figure 11, Model for M-DWDM Economic Advantage
  • Figure 12, Model for M-DWDM Breakeven Point
  • Figure 13, Breakeven Chart for M-DWDM
  • Figure 14, Two-Fiber UPSR Model
  • Figure 15, SONET Rings
  • Figure 16, Through Lambdas at an ADM
  • Figure 17, Ring Drop Equipment Example
  • Figure 18, Mesh Layout of Previous Example
  • Figure 19, Terabit Router Example
  • Figure 20, OXC Example
  • Figure 21, Combined TR and OXC Example
  • Figure 22, Ring Topology with Protection Facility
  • Figure 23, Mesh Network with Protection
  • Figure 24, "Riding the Lightwave" Rationale