UPDATED: Qwest CTO: Optical costs are ‘storm clouds on the horizon’

In planning to deploy 100-Gb/s Ethernet edge networking interfaces as they become available within the next year, Qwest Communications (NYSE:Q) is hoping to leverage the economies of scale that come from using the same technology in its networks that is used in the broader enterprise and data center markets. But the company’s chief technology officer, Pieter Poll, is concerned that, after a few years, optical components could impair its ability to keep its cost per bit in line with customer expectations.

Customers are consuming more than 40% more bandwidth each year and expect to do it for the same price, Poll said, forcing telecom providers to lower their cost per bit by more than 40% each year to stay profitable. Qwest aims to keep pace with that curve in part by migrating to 100 Gb/s Ethernet links.

“Qwest has never been a believer in using 40-Gb/s on routers,” Poll said. “You haven’t reached the economy of scale that’s basically driven by enterprise…Once you hit 10 Gb/s, and the telephony and the computer worlds, if you will -- or the enterprise and carrier worlds -- come together, they won’t separate again.”

The optical components in Qwest’s network, however, ride a different cost curve, he said. “In the optical environment, you have basic physics issues in how you can integrate to bring costs down. There is no Moore’s Law in the optical world.”

That could pose problems for carriers like Qwest and other carriers that don’t buy optical equipment in the same quantities as AT&T or Verizon.

“Over the next three years or so, we don’t see an issue; we see storm clouds on the horizon,” Poll said. “We had a period in the industry where there was a lack of adequate investment in components. That’s more a function of where the economy’s been the last couple years. The concern I have is we are behind as an industry overall in terms of the ability to meet demands a few years out in a cost-effective fashion. You can always create enough capacity to handle demand. The question is can you create capacity so people can have their demand met at a price point they’re expecting.”

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