The CATV market is our largest and most established market, for which we supply a broad array of products including lasers, transmitters and turn-key equipment. In 2012, we were the leading provider of optical components and the second largest provider of subsystems to the CATV industry, according to research firm Ovum Limited, or Ovum. Sales of headend, node and distribution equipment have contributed significantly to our growth in recent years as a result of our ability to meet the needs of CATV equipment vendors who have begun to outsource both the design and manufacture of this equipment. While equipment vendors have relied upon third parties to assemble portions of their products, within the past four years certain of our customers have accelerated the outsourcing of both the design and manufacturing of both headend equipment and node equipment to third parties. The shift is due in part to the sophisticated engineering expertise needed to perform this work. We believe that our extensive high-speed optical, mixed‑signal semiconductor and mechanical engineering capabilities position us well to benefit from these industry dynamics.
An internet data center is structured in a layered format, with rows of servers within multiple racks, and each server and rack connecting through a switch. These rack switches then connect to each other, and ultimately to the service provider’s network. The connections between these top-of-rack switches, and to the service provider’s network, are increasingly done with higher‑capacity optical networking technology. Legacy copper cables can carry signals at distances adequate to meet most needs within an enterprise or internet data center at speeds up to about 1 gigabit per second. However, at speeds of 10 gigabits per second and above, the signals sent over copper cables experience increasing attenuation and dispersion over distances common in large internet data center environments, making copper much less effective as a transmission medium. According to a 2013 Infonetics report, 10 gigabit ethernet enterprise port shipments in 2012 were 14.7 million and are projected to grow to 110.6 million in 2017, representing a 49.7% CAGR.
In recent years, a number of leading internet companies such as Amazon.com Inc., Facebook, Inc., Google Inc. and Microsoft Corporation have begun to adopt more open internet data center architectures, using a mix of systems and components from a variety of vendors, and in some cases designing their own equipment. For these companies, compatibility of new networking equipment with legacy infrastructure is not as important, and as a consequence, these companies are more willing to work with non‑traditional equipment vendors. Non‑traditional equipment vendors generally permit companies to source optical modules from any vendor, thus creating an open and growing opportunity for optical device vendors.
The FTTH market generally refers to the Passive Optical Networks, or PONs, that telecommunications service providers are deploying. PONs take their name from the use of passive splitters to divide the optical signal provided to each residential user over a shared fiber-optic cable from a service provider’s central office. The equipment in the service provider’s central office is called an optical line terminal, or OLT, and the equipment at the end user is an optical network unit, or ONU. A PON supports significantly greater bandwidth than does the legacy copper wire network, although the connection speed to a user (the “downstream” speed) is higher than the connection speed from the user (the “upstream” speed). In the U.S., Verizon’s FIOS service and AT&T’s uVerse offering are examples of PON deployments, and PONs have been widely deployed in Japan, Korea and selected cities in Europe as well. According to a 2013 Infonetics report, worldwide FTTH subscribers are expected to grow from 57 million in 2012 to 149 million in 2017, representing a CAGR of 21%, with the growth of higher speed FTTH connections among those subscribers being greater than the overall growth of FTTH connectivity.
Over time, the technology used in PONs has evolved to meet the increased bandwidth demand from users. At present, the most commonly deployed PON technology is GPON, or Gigabit PON, which delivers up to 2.5 gigabits per second of data downstream, split among subscribers, and 1.5 gigabits per second upstream. Due to the splitting of the bandwidth among multiple users—often as many as 32—the actual bandwidth delivered to an individual subscriber is far less than the 2.5 gigabits per second supported by the GPON equipment. To deliver more bandwidth to a subscriber, a service provider can reduce the split ratio or change the PON technology. Reducing the number of subscribers supported by a single OLT may be less expensive for modest, incremental upgrades, but may not be the most economical solution to deliver the significant increases in bandwidth needed to support 1 gigabit per second service to the home, as encouraged by the FCC’s Gigabit Challenge.
One approach that does support 1 gigabit per second service to the home connection is WDM-PON, or wavelength division multiplexing PON. Well-proven in other areas of the network for decades, WDM technology enables the transmission of multiple wavelengths of data over a single fiber-optic strand, thus significantly increasing the bandwidth of the physical fiber connection. Due to this significant increase in bandwidth supported with WDM-PON, the cost per bit delivered to a subscriber is lower than that for GPON—at faster connection speeds. In addition to providing more bandwidth, WDM-PON offers a subscriber superior privacy and the service provider better scalability because each subscriber has a dedicated wavelength rather than a shared one.
In contrast with transceivers used in data centers and datacom, which are typically designed for shorter reach applications, telecom transceivers are primarily designed for longer reach and often for broader operating temperatures for outdoor installation, and for other telecom-specific applications such as CPRI.
AOI's telecom product portfolio includes SFP and SFP+ MSA-compliant pluggable modules with data rates up to 10G and utilizing TDM, DWDM, and CWDM for use in transport and wireless backhaul in support of modern LTE wireless networks as well as fronthaul applications such as CPRI and OBSAI. AOI also offers pluggable modules and discrete components designed for legacy networks and applications including WCDMA and CDMA.