My techie pals showed me the feature on Enron in the most recent version of 
eCompany.  What a great feature.  Congratulations.

Best,
Jeff



	Karen Denne
	02/09/2001 09:12 AM
		 
		 To: Jeff Dasovich/NA/Enron@Enron
		 cc: 
		 Subject: eCompany Now Brief

This is in today's online "Future Boy" column in eCompany Now -- we had a 
great meeting with them on Wednesday!


Future Boy

Bringing Opto-Electronics Out of the Stone Age

By Erick Schonfeld at http://www.ecompany.com


Optical networks. It sounds so cutting edge. Billions of bits of
data riding on beams of light. The most important, most urgent,
information in the world encapsulated within photonic pulses. Yet
the components that go into optical gear are often still assembled
by hand. Go into a factory where optical equipment is made and
you'll find acres of work benches manned by technicians in white
lab coats. There is not even an assembly line. It's labor-intensive
and practically preindustrial.

If optical networks, and ultimately optical computing, are ever
going to rival their electronic predecessors, the companies that
manufacture the components that make them possible must first
master the art of mass production. As simple as this may sound, it
is in fact extremely challenging. Photonic components -- such as
laser pump diodes, specialty fibers, and optical chips with
so-called waveguides that direct light through controlled channels
-- are typically made from materials that are not well understood,
in contrast to the silicon-based chips used in computers, routers,
and switches. "Every industry has to go through an evolution of
materials knowledge and an experience curve that just takes time,"
explains Rick Tompane, CEO of Gemfire, a startup that is figuring
out how to make optical-integrated circuits using standard
semiconductor equipment.

There's a big difference between making components that are
designed to move electrons, and manufacturing components that move
pulses of light. An electronic chip, for instance, consists of
circuits of metal etched onto silicon. In contrast, an optical chip
is usually made from more exotic materials, such as lithium
niobate. And instead of metal circuits, it has channels, or
waveguides, that guide light passing through it to a desired strand
of optical fiber. Rather than etched grooves, these tiny channels
are solid veins with a different refractive index than the
surrounding material. Learning how to adapt electronic chip-making
techniques to produce waveguides and other components in mass
quantities has been difficult -- and yet optical-networking
companies have to figure this out, if only because the current
system is so arduous and antiquated. Many pieces of optical
equipment require dozens of laser diodes, which often have to be
manually connected to other components. For instance, dense wave
division multiplexing (DWDM) boxes, which allow telecom companies
to send 32, 40, or even 96 wavelengths of light down a single
fiber-optic strand, require different laser diodes that each emit
light at slightly different wavelengths. If each of these diodes is
inserted by hand, too many opportunities exist for things to go
wrong.

But companies such as Gemfire and U.K.-based Southampton Photonics
are beginning to automate the manufacture of key optical
components. Gemfire has figured out a way to combine diode arrays
and waveguides into optical integrated circuits that can be
produced using automated equipment. Theoretically, these circuits
could be used in DWDM boxes, eliminating the need to have 40
separate laser diodes and to connect each one by hand to a
waveguide chip. For now, Gemfire is trying to get these chips into
the optical amplifiers that regenerate fading light signals after
they've traveled long distances. Gemfire has developed a diode
array integrated with eight waveguides that would replace eight
separate amplifiers, and thus could amplify eight separate strands
of fiber. Over time, Gemfire will combine even more elements into
its optical integrated circuits, including traditional electronic
circuitry, so that conversion from the optical to the electrical
domain can happen right on the chip. It is this approach that has
allowed the private company to attract heavyweight investors such
as Cisco Systems, Corning, Intel, and Kleiner Perkins. Floyd
Kvamme, a partner from Kleiner who sits on Gemfire's board, was one
of the founders of National Semiconductor. "So much of what we are
doing reminds him of what they did in the early days of National
Semiconductor," says Tompane.

Southampton Photonics offers a similar amplifier product. It, too,
has invented an amplifier that can handle eight separate strands,
except that its shares diodes between them. But Southampton is also
branching out into some more daring pursuits -- as one might expect
from a company co-founded by David Payne, who 15 years ago led the
team that invented the erbium-doped fiber amplifier, the basis of
most of today's optical amplifiers. Payne is now looking into other
ways to control and manipulate light. One of the more intriguing
solutions is a specialty fiber, known as a Bragg grating, that acts
as a filter because its index of refraction changes along its
length. Working with these fibers, equipment-makers might no longer
have to build DWDM boxes with 40 specialty diodes. Instead, they
could simply stock a box with a product from Southampton that
combines standard, off-the-shelf diodes with these Bragg gratings,
which are stuck in front of the diodes to get whatever wavelengths
may be desired. Southampton Photonics makes these fiber filters
through an automated, computer-controlled process that can create
custom filters for clients in a matter of days rather than weeks.
And the process is so fine-tuned that it will allow DWDM
manufacturers to reduce the separation between the wavelengths
going down a single fiber to 25 GHz, as opposed to the 50 to 100
GHz intervals that are considered state-of-the-art today.
Wavelengths must be separated by intervals because when they are
too close together, the signals can get confused and distorted; by
reducing these intervals, DWDM boxes will be able to cram 160
different light beams down a single fiber.

In a way, it's appropriate that Southampton Photonics is based in
England. It was there, after all, that the Industrial Revolution
took hold, first introducing the notions of automation and mass
production. Thanks to Payne and his ilk, the optical-equipment
industry -- a high-tech sector trapped in a low-tech method of
production -- is about to be dragged into the 21st century.


Lagniappe:

Last month, I wrote a feature on Enron in the January/February
issue of eCompany Now titled "The Power Brokers." So guess what
Business Week's current cover story on Enron is called? "The Power
Broker." Now, you'd think the editors at Busy Week could come up
with their own headline -- sorry, dropping the "s" does not count
as an original thought.

Anyway, Enron's soon-to-be CEO, and Busy Week cover boy, Jeff
Skilling stopped by our San Francisco office Wednesday. And one of
the things that really stood out from the conversation (after I
just barely beat him at a game of foosball) is that he is
particularly gloomy on the economy's prospects. Not a good sign
coming from the guy who runs one of the 20 largest companies in
America (Enron's 2000 revenues totaled $101 billion). "I think we
are headed for a recession," he says. "Look at credit spreads for
companies. You can't get money. That says the marketplace expects
big defaults." If companies can't get money, Skilling reasons,
"what you will see is a big slowdown in the deployment of
technology." And he does not think this slowdown is a mere
inventory correction that will pass in a couple of quarters. The
situation reminds him of the bust in the oil and gas industries
during the 1980s, which followed a similar boom in capital spending
to produce more oil. "It took decades to chew through all that
extra capacity," he remembers. This time, the capital spending has
been on routers, servers, and telecom equipment. And the companies
who make that Internet plumbing may not have seen the worst of it
yet. "All of these guys are going to hit the wall," predicts
Skilling. The smart thing to do would be to cut back production to
match lowered demand. But the danger is that, just like the oil and
gas companies of yesteryear, "instead of producing less, they will
produce more to keep their creditors at bay. And it will feed on
itself."

Skilling also fears that there is little the government can do.
"Even if the Fed continues to lower interest rates, that only
decreases the cost of good credit. The spreads on bad credit [i.e.,
the kind most companies need to purchase more Internet equipment]
continue to rise. And tax cuts go to consumers' pockets. The one
thing that could help is if the government changes the depreciation
rates it allows companies to recognize for capital equipment."
Washington, are you listening?


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