WDM Economics

One study on the economic benefit of WDM in a point-to-point system [MePD95] was highlighted in Section 1.4.1.

Another recent study provides a quantitative analysis of the economic benefits of using WDM in a telephone company's Local Exchange Carrier (LEC) network under traffic demands projected for the year 2000 [Bala96]. An aggressive traffic demand model was used which multiplied the normal traffic projection by 10, assuming that heavy deployment of high-speed networking technology will occur by the year 2000. Synchronous Optical Network (SONET) terminal equipment was assumed to operate between OC-3 rate (155 Mbps) and OC-48 rate (2.5 Gbps).

The cost of introducing WDM in the terminal electronics -- i.e., the cost of WDM transmitters and receivers -- was assumed to be negligible. Costs for electronic equipment was averaged over several vendor-supplied data. The following costs were modeled: optical amplifier cost = 35% of a OC-48 terminal's cost, WADM cost = 40% of a OC-48 terminal's cost. Only a moderate cost decrease was modeled for WDM devices over the next few years. Two fiber cost models were employed: one considered cost for fiber material and cabling only; the other assumed structure exhaust and computed costs for new conduits and trenching, whenever required.

The above model, further details of which can be found in [Bala96], was applied to three metropolitan-area networks belonging to various telephone companies. Using fiber cost model 1 (no conduit exhaust), the cost savings of using WDM (vs. no WDM) ranged from 16% to 36%, with the actual ``dollar values'' of the savings ranging from $86,000,000 to $151,000,000. Fiber cost model 2 (which models extra cost for conduit exhaust) was applied to only one of the three networks, and it yielded a cost savings of 33% for using WDM (relative to no WDM), with the actual ``dollar values'' of the savings equalling $224,000,000.

It is therefore safe to predict that WDM is here to stay! WDM standardization efforts, e.g., to set up a standard set of wavelengths to facilitate WDM equipment interoperability, are currently in progress under the watch of the International Telecommunications Union (ITU-T Study Group 15/WP4 Q.25) [HaSo96].