When a Standard Isn’t Exactly a Standard

I’ve noted in a couple of posts now that equipment manufacturers charge a lot more for optical modules they sell to end users than what they actually pay for them from transceiver suppliers. Considering the pains OEMs go through to “qualify” their vendors, a healthy markup in the early stages of a new product adoption can be warranted. But, I’m not so sure keeping it at more than 5x the price five years down the road can be justified. And is it sustainable? Some transceiver manufacturers sell products at gross margins in the 20-percent range, while their biggest customers (OEMs) enjoy more like 40 percent.

And guess what, there’s not much the suppliers can do. It is well known that Cisco, Brocade and others purchase modules, and now SFP+ direct-attach copper cables, from well-known suppliers and resell them at much higher prices. And if I’m an end user, I MUST buy these from OEM or their designate or my equipment won’t work. These devices have EEPROMs that can be programmed with what some call a “magic key” that only allow them to work with specific equipment. So the OEM now has a captive market for modules and copper cables going into their equipment, and so they can pretty much charge what they want to. If I try to use a “standard” module or cable assembly – one that is compliant to the specification – it will not work unless it has this “magic key.”

I’ve experienced this first hand. I had a brand new HP ProCurve Gigabit Ethernet switch that I wanted to use for some cable testing I was doing. I had dozens of SFP modules from all of the top transceiver manufacturers, but none of them would work in the switch. I called HP and they said, “You have to buy the HP mini-GBIC.” Well, I knew that wasn’t exactly true. I didn’t really want to pay the $400+ each for four more SFPs that I didn’t need so I tried to work through my contacts at HP to get a firmware patch so I could use my existing devices. Long story short, I never did get that patch and ended up doing my testing with SMC switches instead.

Prime example of when an open standard is not so open. Will data center managers be able to sustain this when they have to move equipment around and need different modules or cable assemblies? Are the OEMs thinking about the aftermarket and the fact that data center managers are used to going to distributors to get these items? And are OEMs going to continue to gouge end users and potentially cripple their suppliers?

One added note - there are at least two equipment manufacturers that I know of that support an open standard:  Blade Networks and Extreme Networks. While they will both supply the modules and cable assemblies, they don't lock out other standards-compliant parts that customers may want to use.

Gigabit Transcievers

In our rush to want to discuss all the new technologies, it seems to me that analysts have forgotten that part of our job is to also point out ongoing trends in existing products. So while talking about Gigabit transceivers might not be as appealing as talking about Terabit Ethernet, it’s also a necessity – especially since, without these devices and the continuing revenue they produce, we wouldn’t have 40/100G or even 10G Ethernet. So what are the important points to make about Gigabit transceivers?

• The market for Gigabit Ethernet transceivers (copper and optical) is expected to be about $2.5-billion in 2010 according to CIR, but it is also supposed to start declining in 2011 when more 10GigE will take its place.
• Pricing for a 1000BASE-SX SFP module is now at about $20 for OEMs. End users still pay Cisco or Brocade or their agents about 8x that much (more about this later).
• Low pricing makes it difficult on profit margins so transceiver vendors hope to make it up in volume.
• While SFP is certainly the preferred form factor, there is still a decent amount of GBIC modules being sold.
• SFP direct-attach copper cable assemblies have become an option for top-of-rack switches to servers instead of using UTP Category patch or fiber cabling, although the majority of implementations today are still UTP patch cords, mainly because the connections within the rack are still 100M with the uplink being Gigabit Ethernet of the 1000BASE-SX variety.
• While 10/100/1000 ports are the norm for desktop and laptop computers, most of these devices are still connected back through standard Category 5e or 6 cabling to 100M switch ports in the telecom room.
• Gigabit Fibre Channel business is pretty much non-existent now. It was quickly replaced by 2G and has progressed through 4G and 8G is expected to become the volume application this year. Look for more on Fibre Channel in future posts.
• Avago Technologies and Finisar top the list of vendors for 1000BASE-SR devices. JDSU has all but disappeared from the scene, mainly because they have de-emphasized this business in favor of their telecom products. In fact, rumor has it that JDSU is shopping its datacom transceiver business and has been for some time.

A note on JDSU: It appears that the optical components giant has taken the technology that was developed at IBM, E2O and Picolight and thrown it away. Picolight was once a leader in parallel optics and, along with E2O, long-wavelength VCSELs. IBM pioneered v-groove technology and the oxide layer that enabled the next leap in speed and improved reliability for 850nm VCSELs. All of these technologies look like they are destined to die a slow, painful death after being acquired by JDSU. The company’s attention is clearly focused on its tunable technology and telecom applications, which is where, of course, it started. JDSU has never had a good reputation for assimilating acquisitions, so none of this should be a surprise. I was optimistic when JDSU bought these companies thinking that now these emerging technologies would be supported by a larger pocketbook. What is the reasoning for JDSU deemphasizing the technologies it acquired? Is it trying to get rid of short-reach competition in hopes that all optical networking would move towards long-wavelength devices? This would have been naïve; the likes of Finisar, Avago, MergeOptics and others would still be supporting 850nm optics and there remains a healthy market for them in enterprise networks and data centers—albeit a very competitive one as stated above.

 

Laser-optimized Multi-mode Fiber (LOMF)

It occurred to me as I was writing the last post that many of you may not be aware of the different grades of multi-mode fiber and that for the purposes of this blog, it would be good to present the differences so many of my points can be thoroughly understood.

Right now, there are three standardized types of LOMF as well as what most of us in the industry call FDDI-grade fiber, which is not laser optimized. So first, what does laser-optimized actually mean? In basic terms, it just means that the fiber was designed to be used with lasers, and in the case of MMF, typically VCSELs. FDDI-grade fiber pre-dated the use of VCSELs so is not laser-optimized - it was intended for utilization with LEDs. Lasers were adopted as the light source of choice when scientists and engineers realized that LEDs became very unstable when trying to modulate them at data rates beyond 100 Mbps. They originally tried to use the same lasers that were being used in CD players, but these turned out to be unstable at Gigabit data rates as well. In the early 1990s, the development of the VCSEL enabled these higher data rates.

As the light sources evolved, the fiber progressed with them. So, for 850nm operation today we have four choices: 

1. OM1 (FDDI):  Minimum OFL Bandwidth of 200 MHz•km; 10G Minimum Optical Reach of 33m
2. OM2:  Minimum OFL BW of 500; 10G Minimum Optical Reach of 82m
3. OM3: Minimum OFL BW of 1500; 10G Minimum Optical Reach of 300m
4. OM4: Minimum OFL BW of 3500; 10G Minimum Optical Reach of 550m

As you can see, the bandwidth of the fiber is intimately tied to what type of light source is used and the optical reach is dependent on both bandwidth and data rate. And, while OM1 fiber wasn’t necessarily designed to be used with lasers, it works fine with them, albeit at a shorter distance than with LOMF. Of note as well is the fact that there are a few cable manufacturers that also provide what I would call OM1+ cable that is 62.5-micron, but is laser-optimized, so may have some improved bandwidth and reach.

All this leads to a very important point – when specifying a cabling system for your networks and data centers, it is important to understand not only the fiber you’re going to install, but also the equipment you’re trying to connect. Just because you're "only" installing Gigabit systems and you've used OM1 fiber for years, doesn't mean it's the best solution (or even the most economical) for today and tomorrow.