Novera's first product is the Dynamic Gain Equalising Processor (DGEP). This is an all-fibre device using acousto-optic technology to dynamically filter signals on an optical network. Presently, ten system vendor companies are evaluating and testing Novera's device.

Novera Optics was founded by Dr. Byoung Yoon Kim in 1999, following his extensive experience researching optical communications at both Stanford University in the U.S. and the Korea Advanced Institute of Science and Technology. Research work conducted whilst at Stanford focused on the use of in-the-fibre solutions to optical networking problems. Such solutions were seen as preferable, in terms of simplicity and cost, to the use of expensive bulk optics and also equate to lower insertion loss. It was research in this field that led Dr Yoon Kim to found Novera Optics in order to exploit the resulting technologies.

Additional members of Novera's senior management team bring comprehensive industry experience to the company. CEO Kirk Flatow has previously worked with Harmonic's Broadband Access Group and prior to that was with Flextronics. Mr Flatow founded nChip in the 1980's.

Commenting on his experience, Kirk Flatow said, "Previous roles have provided an excellent grounding for my work here at Novera. At Flextronics I gained valuable experience on the manufacturing side - it taught me that with manufacturing processes everything is in the detail. When founding nChip in the 1980's I learned how to raise funding in a difficult environment."

Novera currently employs 100 staff, approximately 80 of whom are based in the U.S. There are no plans at present for expansion. The company has two sites: a 50,000 square feet facility in San Jose, plus a 5,000 square feet site in Korea. The U.S. facility, which, Mr Flatow stated, is "more than adequate for the company's current needs" is engaged in manufacturing and product testing - occupying roughly half of the area - and all other company functions. The Korean site is primarily devoted to research and development work.

Funding

Funding of $65 million has been raised to date through two rounds of financing. Investments were forthcoming from a number of sources, including Agilent Technologies and a number of venture capital companies including Octane Capital Management, Enterprise Partners, Redpoint Ventures, Amerindo Investment Advisors, Essex Investment Management, Intel Capital, KLM Capital Group, Meritech Capital Partners and Van Wagoner Capital Management.

Mr Flatow said that a substantial portion of this funding is still 'in the bank', and added that the company is in good financial shape. It is projected that present funding will be sufficient to take the company into the first or second quarter of 2003.

These issues may be addressed by the use of static optical filters, however, such filters are not able to compensate for all aberrations in signals, and cannot adjust for changes over time. Novera has developed a dynamic filter designed to meet these requirements and aims to be one of the key suppliers of these dynamic solutions.

Acousto-optic tuneable filter

Novera's solution is based upon all-fibre acousto-optic tuneable filter (AOTF) technology. The fundamental concept behind the device is the employment of an acoustic wave, generated by a transducer, to alter the optical signal going through the fibre. This component is threaded along a section of single-mode fibre in the device carrying the optical signal. The acoustic wave interacts with the optical signal, in effect creating a long-period grating. This allows selective coupling of narrow-band optical wavelengths from the core into the cladding of the fibre. The effect is similar to the functionality given by a notch filter derived from a long-period grating, except that with Novera's device the filter changes dynamically and can be tailored to specific network characteristics. The result is dynamic gain equalisation of the system.

Discussing the operation of Novera's device, and what it brings to the optical networking field, Kirk Flatow commented, "A dynamic equaliser is analogous to a graphic equaliser in a hi-fi system, which allows you to adjust acoustic frequencies. Our dynamic equaliser product performs a similar role with light frequencies. Each wavelength of light, or channel, has a different power level; the dynamic equaliser allows this spectrum to be shaped in the most effective way for transmission over the network on which it is installed. The device compensates for such factors as switches and uneven gain in amplifiers, the effects of channel loading, and the aging of fibre. The device is also able to make adjustments for failures and protection switching in the network."

In the past optical networks were built without dynamic equalisers as there was not a critical need for them - there was enough margin, or 'slack', in the system to discount irregularities in signals. With higher data rates and longer transmission distances, these margins are reduced to a point where the inclusion of dynamic equalisers becomes essential to maintain effective operation of the network. The incorporation of dynamic equalisers also means that lower precision, lower cost components can be used with field customisation inherent in the equalisers.

According to Mr Flatow, "An example would be temperature fluctuations affecting EDFA performance - with higher loading on the network it could become something that it is necessary to adjust for."

Dynamic Gain Equalising Processor

Novera's device is all-fibre, and as such does not impair the system optically. The device also offers very low insertion loss. Response times for the device are very fast.

"Basically, the device responds in the time that the acoustic wave takes to travel along ten centimetres of fibre - measured in tens of microseconds."

Reliability is also high, due to the all-fibre nature of the product - a factor proven through the successful completion of Telcordia GR-1209 and GR-1221 testing. Devices continue in test with no failures noted in over 5,000 hours of stress testing. Kirk Flatow added, "We see proven reliability for our products as a core strength, something that we see as our responsibility and that we have worked very hard at ensuring. We see this as an investment, given that it is an expensive proposition to attain Telcordia qualification."

Next steps

Novera sees further applications for its technology, one area under investigation being its use for add-drop multiplexing. The company has published a white paper on this subject, which was released at OFC 2000. The company also has a number of further products in the pipeline that at this time remain confidential.

Summing up the application of Novera's devices in the optical network, Kirk Flatow said, "We do not see our product as replacing existing components in a network, they are really an add-on. Novera devices enable the network operator to increase efficiency - and thus profitability - of the network by effectively increasing the capacity of the network. They enable more traffic to be transmitted over an installed network. When designed into a network, our devices could reduce infrastructure costs - for example, by allowing the deployment of lower specification EDFAs than would normally be the case. Dynamic equalisers will compensate for looser tolerance, lower cost, EDFAs. In addition to these features, our product will support all-optical switching."

Intellectual property

According to Mr Flatow, much of the IP employed in the development of Novera's products to date originated from Dr. Byoung Yoon Kim's extensive work in the optical communications field. Novera has therefore not needed to buy in technology from external companies.

Considering this position, Kirk Flatow remarked that the licensing out to third-party companies of Novera's IP was a possible course of action - "This is certainly a strategy that Novera would not dismiss out of hand."

To this end, the company is keen to promote alliances and partnerships with systems vendors and other component manufacturers. As an example of Novera's forays in this area, it recently announced a collaboration with Nortel Networks' components division, based in Boston, which demonstrated interoperability with Nortel's optical channel monitoring systems. Kirk Flatow noted that alliances with switch and network monitoring equipment manufacturers are a 'natural fit' for Novera.

Regarding the manufacturing side of the business, Novera will seek to outsource these processes in the future. Mr Flatow has previous experience with contract manufacturing company Flextronics and is thus familiar with this aspect of the business. Increasing production volumes will make outsourcing of manufacturing an increasingly attractive option.

"Current market conditions in the optical sector are a cause for concern. Carriers are minimising or delaying investment, but at the same time cannot afford to simply stay where they are. It really comes down to a question for the system vendors - can they afford to delay a move to the next-generation of products in order to dispose of current-generation inventory?"

"It is a trade-off between reducing inventory against the risk that a competitor will break ranks and gain first-mover advantage in the next-generation equipment space, which will then compound the inventory problem for everyone else. One vendor may be prepared to either write-off inventory, or simply not have an inventory problem in the first place. I believe that the introduction of next-generation products is vital for the system vendors, and that they need to be aggressive in introducing these to the market. In the current climate this is even more critical, given that such systems will offer more cost effective, higher performance, solutions."

Long-haul and metro sectors

Mr Flatow noted that initial customers were anticipated to be the long-haul and ultra long-haul system manufacturers, as this sector of the market would clearly be expected to have the most critical need for the company's product. However, Novera now sees significant opportunities in the metro market, a sector which is designed to be dynamic, to accommodate such changes as adding or subtracting end-user customers and implementing new services.

Traditionally, provisioning a new customer or service and then reconfiguring the network to accommodate for the changes has been a largely manual process. A technician will need to visit the appropriate node on the network and manually make adjustments for the effects that these changes will have on the system. This is a time consuming and costly process for the carriers, and one that Novera's devices can implement automatically.

While Novera foresees long-haul and ultra long-haul networks as the early market for its devices, the company anticipates that the metro sector will ultimately become the largest in terms of revenue.

Customers

Mr Flatow stated that Novera now has ten customers, including European as well as U.S. companies, but has not yet publicly announced them due to the need to maintain confidentiality regarding relationships with third-party suppliers. Mr Flatow noted that he was hopeful that it would be possible to name at least some of these customers in the near future, perhaps within the next six months.

Novera has to date followed a direct sales approach but expects to sign up distributors in the future as the company ramps up its operations. Kirk Flatow remarked, "Our sales so far have been accomplished in a highly targeted way, basically we have concentrated on companies that we know will be interested in what we have to offer."

It was noted that there are a very limited number of potential customers for devices such as Novera's. Mr Flatow commented, "I see this as a positive for us, in that it allows the development of very close relationships with our customers. Novera is a very customer focused company." The counterpoint to this view is that Novera is competing for a small number of customers, and stands to lose out if other companies or technologies beat it to the tape.

Market size

The market size for Novera's products is very difficult to estimate, particularly as the device is an add-on rather than a replacement component, plus the fact that its primary market is in yet-to-be rolled-out next-generation networks.

Mr Flatow cited estimates for the number of devices that will be installed. Long-haul customers have given estimates ranging from one DGEP device for every 2-3 amplifiers to one per 5-6 amplifiers. One DGEP device costs slightly less than one amplifier. Extrapolating these estimates gives an approximate market size for Novera's product of one quarter that of the long-haul amplifier market.

Kirk Flatow did state that Novera had internally calculated market size and forecast data, and that the company is "currently happy with its situation." He was not able to reveal these figures.

Commenting on market estimates from industry analysts, it was noted that these had seen drastic revisions over the past six months. Mr Flatow said that he was still not confident that the figures were reliable; furthermore, he did not necessarily view the revised figures as being too high. He added that messages received from Novera's discussions with the carriers did not bear out data coming from industry analysts.

Many of these companies are taking different technological approaches to Novera. The most common technologies being developed are bulk optics or Arrayed Waveguide Gratings (AWG).

Commenting on these approaches, Kirk Flatow said, "At Novera, we do not feel that AWG is the appropriate technology for addressing this problem. The alternative - bulk optics - is an expensive and complicated solution, which is why we sought to develop an all-fibre device. Customers really like the low insertion loss of Novera's dynamic gain equalisation filters."

Mr Flatow said, "I do not wake up worrying about the company failing, my thoughts centre on how to optimise the company in order for it to become the leading company in our sector - how to be as successful as possible. I, together with the management team, am driven to achieving this."

Novera's strategy for addressing the market environment issue is to run the business well and maintain the focus on product development. Lesser issues that could affect success derive from factors such as a lack of a global support organisation, and a general lack of brand recognition arising from the youth and small size of the company - all of which are key areas of concern for the large system vendor customers.

Summing up his vision for the company, Kirk Flatow commented that in today's market situation it was necessary to ensure that all areas of a company operate optimally. He added, "A few years ago it may have been possible to launch a successful company whilst focusing on a single aspect of the business, nowadays failing to concentrate on a single aspect could mean that the company does not survive. Novera has that focus."