40G Still An Artificial Market

Implications: 1.      Despite assertions to the contrary heard in the industry, the 40G market has still not taken off. 2.      Despite implementing 40G with some sort of 10G streams right now, with 10-gig optics continuing to drop, the cost of these systems is still above 4 X 10G.   3.      The only reason that the space has gotten to its current position remains that Cisco Systems has been pushing it.

Analysis:  Cisco Systems has successfully used 40G as a differentiator.  It is still the only factor driving 40G volume.   Cisco is telling the world that 40G interfaces perform better on routers.  However, a router is a logical device.  Cisco could just treat groups of four 10G ports as a logical port – and base all of its routing algorithms on groups of four.  

Essentially all of the vendors are implementing 40G with some kind of combination of 10G streams right now – they are polarization muxing them into a 40G stream.  The expectation is that they will ride the economies of scale as those applications are rolled out – resulting in cost reduction.  But the polarization mux givers up a little bit of the performance characteristics of the 10G.  Also, there is not a good migration path from 10G to 40G – with all of the new implementations, they cannot sit next to 10G waves without disrupting/interfering with them.  Therefore, guard bands between the 10G and 40G are necessary – in other words, providing large empty spaces in the spectrum to protect the 10-gig waves.  Of course, that just winds up wasting wavelengths.  Moreover, there continues to be the problem of not getting a full 40G worth of capacity in using four 10Gs.