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Do multi-source agreements benefit the optical industry?

Transceiver feature: Part 1

System vendors may adore optical transceivers but there is a concern about how multi-source agreements originate. 

Optical transceiver form factors, defined through multi-source agreements (MSAs), benefit equipment vendors by ensuring there are several suppliers to choose from.  No longer must a system vendor develop its own or be locked in with a supplier.


“Personally, the MSA is the worst thing that has happened to the optical industry


Marek Tlaka, Luxtera




Pluggables also decouple optics from the line card. A line card can address several applications simply by replacing the module. In contrast, with fixed optics the investment is tied to the line card. A system can also be upgraded by swapping the module with an enhanced specification version once it is available. 

But given the variety of modules that datacom and telecom system vendors must support, there are those that argue the MSA process should be streamlined to benefit the industry.

Traditionally, several transceiver vendors collaborate before announcing an MSA. The CFP MSA announced in March 2009, for example, was defined by Finisar, Opnext and Sumitomo Electric Device Innovations. Since then Avago Technologies has become a member.

“The industry has an interesting model,” says Niall Robinson, vice president of product marketing at Mintera. “A couple of companies can get together, work behind closed doors and announce suddenly an MSA and try to make it defacto in the market.”

Robinson contrasts the MSA process with the Optical Interconnecting Forum’s (OIF) 100Gbps line side work that defined guidelines for integrated transmitter and receiver modules.  Here service providers and system vendors also contributed. “It was a much more effective and fair process, allowing for industry collaboration,” says Robinson

Matt Traverso, senior manager, technical marketing at Opnext, and involved in the CFP MSA, also favours an open process. “But the view that the way MSAs are run is not open is a bit of a fallacy,” he says.

“Any MSA that is well run requires iteration with suppliers,” says Traverso. The opposite is also true: poorly run MSAs have short lives, he says.  Having too open a forum also runs the risk of creating a one-size-fits-all: “One vendor may want to use the MSA as a copper interface while a carrier will want it for long-haul dense WDM.”

Optical transceiver vendors benefit in another way if they are the ones developing MSAs. “Transceiver vendors will not make life tough for themselves,” says Padraig OMathuna, product marketing director at optical device maker, GigOptix. “If MSAs are defined by system vendors, [transceiver] designs would be a lot more challenging.”

Avago Technologies argues for standards bodies to play a role especially as industry resources become more thinly spread.

“MSAs are not standards; there are items left unwritten and not enough double checking is done,” says Sami Nassar, director of marketing, fiber optic products division at Avago Technologies. There are always holes in the specifications, requiring patches and fixes. “If they [transceivers] were driven by standards bodies that would be better,” says Nassar.

Organisations such as the IEEE don’t address packaging and connectors as part of their standards work.  But this may have to change. “The real challenge, as the industry thins out, is ensuring the [MSA] work is thorough,” says Dan Rausch, Avago’s senior technical marketing manager, fiber optic products division. “The challenge for the industry going forward is ensuring good engineering and more robust solutions.”

Marek Tlalka, vice president of marketing at Luxtera, goes further, questioning the very merits of the MSA: “Personally, the MSA is the worst thing that has happened to the optical industry.” 

Unlike the semiconductor industry where a framer chip once on a line card delivers revenue for years, a transceiver company may design the best product yet six months later be replaced by a cheaper competitor. “The return on investment is lost; all that work for nothing,” says Tlalka.

“Is it a good development or not? MSAs are out there,” says Vladimir Kozlov, CEO of optical transceiver market research firm, LightCounting. “It helps system vendors, giving them a freedom to buy.” 

But MSAs have squeezed transceiver makers, says Kozlov, and he worries that it is hindering innovation as companies cut costs to maximize their return on investment.

“There is continual pressure to reduce the price of optics,” adds Daryl Inniss, Ovum’s practice leader components. If operators are to provide video and high definition TV services and grow revenues then bandwidth needs to become dirt cheap. “Even today optics is not cheap,” says Inniss. Certainly MSAs  play an important role in reducing costs.

“The transceiver vendors’ challenge is our benefit,” admits Oren Marmur, vice president, optical networking line of business, network solutions division at system vendor, ECI Telecom. “But we have our own challenges at the system level.”


Reader Comments (3)

An exchange on the Yahoo! Finance message board

If I remember correctly, you could have read that on this board for over 5 years.... online_trader2000

December 30, 2009 | Registered CommenterRoy Rubenstein

gazettabyte's response

Well, the MSA has been around a few years so I'd argue it is interesting that these views are being expressed. And were people calling for the OIF or the IEEE to get involved 5 years ago? And was the industry so stretched as it is now?

Thanks for flagging up the article.

December 30, 2009 | Registered CommenterRoy Rubenstein

Online_trader2000's response:

Mainly, it was the last three or four paragraphs that I was referring to.

The optical component companies, and especially their shareholders, have ended up with a raw deal. Whereas everyone can recognize the technological achievements of these companies and their contributions to high speed networking and long distance communications, the value of this effort has been siphoned off by the system vendors, and MSAs have been a big facilitator for this.

In the past, there have been several transceiver MSAs with wide industry participation. The extent of which appears directly proportional to its addressable market, i.e. niche vs. widespread, as evident with X2, XFP, and SFP MSAs in contrast to say, XFP-E, or XLMD, the CFP, etc.

Many times, when a nifty feature, such as Digital Diagnostics for example, (SFF-8472 MSA) was developed, the systems folks only became interested (meaning possible industry adoption) when the developer found three or four other vendors to join them and form a MSA. In essence, the MSA defeated the rewards of innovation and the ROI by forcing the OCs to share propietary technology.

It is difficult to see how IEEE standards, or OIF's involvement would help improve this situation. For years, we have discussed the effect of the MSAs as being a huge reason why these firms have never been able to excel, even when demand growth for their products indicate otherwise, and nobody has been hit as hard as their shareholders.

Thank you for your website and articles. They are a very valuable resource for investors and potential investors in OCs.

December 30, 2009 | Registered CommenterRoy Rubenstein

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