Optical Networks and the Future of Broadband Services

The evolution of broadband services will depend on the widespread deployment of optical networks. The deployment of such networks will, in turn, help drive increased demand for additional capacity. In this world, service providers will have a growing need to be able to flexibly adjust capacity to accommodate uncertain and growing demand. In this article, we present a cost model that highlights the advantages of new optical networking technologies such as Dense Wavelength Division Multiplexing (DWDM) over traditional architectures for optical networks. This analysis highlights the increased flexibility and scalability of DWDM networks, which lowers the deployment costs of such networks in light of growing and uncertain demand. The DWDM architecture holds the promise of allowing the emergence of wavelength markets, where traffic could be switched between service provider networks at the optical layer (without the need for multiple costly and wasteful electronic/optical conversions). While the DWDM and Optical Cross-Connect (OxC) technologies provide a technical infrastructure for supporting wavelength markets, additional developments are also likely to be required. This paper also considers some of the impediments to the growth of wavelength markets, namely the need for secondary markets and standardized contracts. ∗ Pedro Ferreira is a graduate student in the Technology and Policy Program at the Massachusetts Institute of Technology and is a research associate of the Center for Innovation, Technology and Policy Research at Instituto Superior Tecnico, Portugal. William Lehr is the Associate director of the MIT Program on Internet and Telecoms Convergence ("ITC") and an Associate Research Scholar at the Graduate School of Business at Columbia University, USA. Lee McKnight is an Associate Professor at the Fletcher School of Law and Diplomacy at Tufts University, USA. The three authors are affiliated with ITC (http://itc.mit.edu).