The document discusses network transformation and the state of the optical networking industry. It provides a history of the industry in the 1990s and 2000s, analyzes growth drivers and challenges, and envisions the future of optical networking including a transition to software-defined networks. It calls for industry innovation and developing solutions that capitalize on trends like cloud services, mobility, and big data.

1. Network Transformation
Brian Protiva
Anaheim, March 19th, 2013

2. Why am I here today?
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3. Is this a garage?
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4. ADVA Optical Networking‟s founding site 1994
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5. … and today‟s award winning R&D site and factory
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6. So why are you all here?
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7. And where do you want to be?
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8. Do we have our Mojo?
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9. What Was Our Framework in the „90s?
Millions >50,000 engineers Tens of
of Users in the optical Thousands
industry of Applications
Internet
LAN Client Server
PC
The Network
What defined our industry?
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10. What Was in Our Toolbox?
Components Systems
• 2.5/10 Gbit/s
• FOADM SONET/SDH
• Fixed wavelength • Point to point
lasers long haul 16/32
channel WDM
• Discrete designs solutions
and proporietary
modules • DSLAMs with
ever increasing
• ASICs with data speeds
millions of gates
• ATM and IP
systems
And what did we build?
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11. Who Were the Innovators in the „90s?
16 x 2.5Gbit/s
DWDM
OC-192 CWDM
Internet
LAN Client Server
PC
The Network
And what happened to our fantasy world?
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12. What Happened in the New Millenium?
The burst of the dot-com bubble made many names disappear
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13. 1997 Did the Class of 1997-99 Graduate?
1998
1999
Atmosphere Alidian Appian
Cerent (Cisco) Astral Point Centerpoint
Chromatis Brightlink Coriolis
Corvis Cyras Laurel
Kestrel Siara LuxN
ONI (Ciena) Sycamore Ocular
Monterrey Xtera Metro Optix
Tellium Sirocco
Turin
White Rock
Source: Ovum/RHK
Where are they now?
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14. A Right Hook With a Left Uppercut?
China‟s national icons become industry leaders
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15. So Where Are We Today?
Components – Systems – Operators
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16. What Is in Our Optical Toolkit Today?
Components Systems
• 100G coherent
• Integrated and express layer
Tunable solutions
pluggables
• Control planes
• Switching to provision
fabrics for networks and
>10Tbit enable
restoration
• DSPs with 100
million gates • Rudimentary
multilayer
• Wavelength solutions
selectable
switches
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17. What Happens in One Internet Minute?
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18. What Macro Environment Do We Face?
Financial sector and Fiscal consolidation Reduced growth rates
governmental debt in high-income in the developing
restructuring countries countries
“Telecommunications is a facilitator of socio-economic
advancement and is a critical utility for economic
development, much like water and energy. This fact is
reflected in its growing share of world output and of
household spending.”*
2012
1990
2.8% of global GDP*
2.5% of global GDP*
Global telecommunications spending as a share of global GDP
*Source: The Insight Research Corp.: “The 2013 Telecommunications Industry Review:
An Anthology of Market Facts and Forecasts”, December 2012.
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19. What Is Coming Our Way?
Billions Trillions Millions
of Users of Things of Applications
• Consumers Industry solutions • Content
• Enterprises • Services
• Service providers • Gaming
• … • Commerce
• …
Mobility
Cloud Services Social Media
Big Data Analytics
The New Network
Mobile devices and applications drive network requirements
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20. What Are the Growth Drivers?
Mobility 7
6
5
4
Subscribers (billions)
3
2
1
Accessing
the cloud 0
08 09 10 11 12 13 14 15
anywhere
any time Mobile Mobile Broadband Fixed Broadband
Fiber-based mobile backhaul w sync and caching
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21. What Are the Growth Drivers?
HD Video
“Verizon’s wireline group now has
8.8 million broadband subscribers,
a 2.6 percent year-over-year increase.
All of those gains, however, come from
its FiOS fiber-to-the-home markets
[…] accounting for 5.1 million, or
Personalized,
on-demand 58% of its broadband connections.”
HD content GigaOM, July 2012
Scalable energy-efficient residential broadband
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22. What Are the Growth Drivers?
Enterprise 70 $5
Cloud 60
$4
50
Price per port per Gbps (US$k)
$3
40
Exabytes/month (trillions)
30
$2
20
$1
CIOs and CFOs 10
Will Move to 0 $0
"Zero Capital" 2009 2010 2011 2012 2013 2014
and Transform Exabytes/month Cost of SP equipment change per year
the IT Financial
Model
SLA-based, secure, high-performance access to the cloud
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23. What Are the Growth Drivers?
566
Mega
Peak requests
Data Center 370,000k+
per second
262
All applications
always on 102
Q4 ‘11
Q4 ‘10
40
2.9 14 ‘09
‘08
Total number of objects stored in Amazon S3, in billion
Low-latency, encrypted data center connectivity
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24. What Is the State of Our Industry?
Content
Cloud
high
Service
Services
Providers
Profitability
Carriers IP Routing
medium
Relative
Component Transport technological
low
Systems differentiation
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25. What About Our Customers?
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26. Carriers – Karma or Drama?
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27. What Is Wrong With Growth?
U.S. PROFESSIONAL CONTENT
CONSUMPTION OVER THE INTERNET
GB VOLUME CAGR: 59%
192.6B GB
REVENUE CAGR: 9-27%
10X
19.2B GB
2012 2017
Sources: VZ Internal Analysis, comScore June 2012, other sources
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28. What Is Wrong With Growth?
Unit Revenue & Unit Cost Trends
Revenue
Network cost
$ / GB
Demand cost
Moore‟s Law
Sources: VZ Internal Analysis, comScore June 2012, other sources time
Disparity of OTT traffic demand and revenue generation for the
network provider is making the internet a zero sum game
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29. Do Enterprises Differ From a Carrier?
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30. What Pain Do Enterprises Feel?
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31. Where Do We Go From Here?
?
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32. Quo Vadis Networking?
2020: ICT = $5 trillion
$1.7 trillion larger than it is today
1
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33. Quo Vadis Networking?
80% of the industry's growth will
be driven by the
cloud & mobility applications
No new structural changes are
needed
2
Mobility
Cloud Services Social Media
Big Data Analytics
The New Network
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34. Quo Vadis Networking?
Rapid expansion of emerging
markets start to dominate our
opportunity
3
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35. Quo Vadis Networking?
We are in the social networking era
supported by the Steve Jobs mobile device
vision and an application for everything
concept.
Why would this not infiltrate networking?
4
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36. Quo Vadis Networking?
Within this context what do we have to
do in order to get dramatic growth
back into Optical Networking?
What can we do to get our Mojo back?
?
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37. Quo Vadis Networking?
Programmable application • Dynamic services
aware networking? • Customer apps
• Full plug & play
• Virtualized network resources
Network
Open source agents and controller
• Extendible control & virtualization framework
FSP SW Suite Open northbound APIs
Network control at your finger tips
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38. Quo Vadis Networking?
Components Systems
• Best of breed fully
• Software defined
flexible WDM Systems
transceivers
• Flexgrid ROADMs • Optical component
dominated switches
• Robust amplification and routers
• Highly scalable software • Further integrations
frameworks with on multilayer network
structured North-bound elements
interfaces
• Software Defined
• Active optical cables
Networks (SDN) being
• Silicon photonics run on commercial off
the shelf hardware
• Silicone based polymer
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39. Innovation
From Static Networks to Dynamic Services
Multi-rate SW-defined transceiver High-performance amplification
x-Pol y-Pol
Flexible grid ROADMs Control Plane/Openflow
Fixed WDM Grid
Flexible WDM Grid
Increased spectral
link efficiency
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40. Innovation
From Static Networks to Dynamic Services
Silicon Photonics Silicone-Based Polymer
Active Optical Cables Graphene on Polymer
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41. Quo Vadis Networking?
Monetize
New network services
Bandwidth Database Resource Network-based
management analytics virtualization applications
Network
Applications Big data Policy Optimize
management Operations
Network utilization
Service performance
Transforming the network into a programmable, virtualized resource
41 © 2013 ADVA Optical Networking. All rights reserved.

42. Quo Vadis Networking?
What Optical SDN/Openflow (OF) model
should we use?
Use OF only to
provision packet Use OF to provision
flows over existing packet flows and
optical paths optical layer resources
Use OF to control
each network element
42
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43. Quo Vadis Networking?
We are the foundation for a green networked society
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44. Quo Vadis Networking?
Buffers, 5%
Concentrate L3+ in high
Switch
Power driver: IP look- fabric density routers/switches
up/forwarding engine 10% (data centers)
Power / Heat
I/O optical transport: Control management Use wired (optical)
much lower in power Plane 11% 35% access/backhaul incl.
consumption than than point-to-multipoint
switch fabrics I/O 7% solutions (WDM-PON)
Wireless access power Implement real time
IP look-up and
consumption: 10-20 monitoring and dynamic
forwarding engine
times higher than wired adjustment of power
32%
solutions consumption
Source: G. Epps, Cisco
A transport-centric network is the most energy-efficient architecture
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45. Quo Vadis Networking?
Scalable, efficient capacity
1
Centralized intelligence
towards network apps 7 2 Service assurance
Network functions
virtualization 6 3 High energy efficiency
Network optimization
5 4 Application-aware networks
The future is wide open!
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46. Quo Vadis Networking?
Vision
Speed Success Innovation
Flexibility
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47. Which Solutions Do We as an Industry
Need to Offer?
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48. Which Solutions Do We Need to Offer
Within This Environment?
48 © 2013 ADVA Optical Networking. All rights reserved.

49. Which Solutions Do We Need to Offer
Within This Environment?
49 © 2013 ADVA Optical Networking. All rights reserved.

50. Which Solutions Do We Need to Offer
Within This Environment?
50 © 2013 ADVA Optical Networking. All rights reserved.

51. Which Solutions Do We Need to Offer
Within This Environment?
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52. A Call to Action as Performance is
Relative
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53. How Will Our Competitive Landscape
Evolve?
Further consolidation is likely, ultimately leading to higher industry margins
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54. Are We Being
Recognized For Our Work?
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55. Are We All Working in a Commoditized
Business?
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56. R&D Spendings
Company 2011 Change from As of % of
M US$ 2010 Sales
Alcatel Lucent 3207.17 -5.22% 16.34%
Tellabs 324.10 8.14% 25.20%
Infinera 127.12 7.26% 31.39%
Ciena 379.86 8.62% 21.80%
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57. Bandwidth is Growing
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58. Barriers to Entry
Components
Systems
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59. Gross Margin 2009-2012
60
Gross Margin %
50
40
2009
30
2010
2011
20
2012
10
0
Tellabs Infinera Ciena ADVA ALU
Optics
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60. What Are We Going to Do About This?
http://www.google.com/finance
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61. Are We in a Position to Brag?
Content
Cloud
high
Service
Services
Providers
Profitability
Carrier IP Routing
medium
Relative
Component Transport technological
low
Systems differentiation
Transport
Systems
Up and to the right – we have a lot of work ahead of us
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62. My Five-Point Plan
Mojo
New Market
Verticals
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63. … and are we having fun while the pain lasts?
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64. Are We Having Fun While the Pain Lasts?
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65. Thank You
bprotiva@advaoptical.com
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