The recession may have hit jobs, profits and capital spending--but it hasn't choked off innovation. Here are the technologies under development now that are coming to disrupt your business in the next five years

1. Powerful pairing: DWDM and Ethernet

PREDICTIONS ABOUT sweeping

But recently we've noticed visionaries talking about sweeping changes again--this time in connection with the potential of pairing optical Ethernet and dense wave division multiplexing (DWDM).

"The percentage of data traffic on the network will be moving from just over 50% to close to 100%," says Bill Cadogan, general partner with St. Paul Venture Partners. "As carriers come to grips with that, they will realize that the business model has to be changed to support this data traffic. They need a fundamentally more cost-effective way of transporting data. How they'll do that is by extending optical Ethernet into the carrier network and selling an entire wavelength to a customer."

Neither optical Ethernet nor DWDM are truly new ideas. DWDM totally changed the economics of long-distance networks in the late 1990s by enabling carriers to split a single strand of fiber into multiple wavelengths, each capable of carrying the bandwidth that previously would have required an entire fiber. And two or three years ago, a whole new crop of competitive local exchange carriers (CLECs) grew up to build next-generation metro networks based solely on optical Ethernet.

What's new is that established service providers realize that if they bring DWDM to their metro networks, they can offer optical Ethernet services--initially side-by-side with traditional Sonet offerings.

"DWDM is emerging as an access technology, and we have great hopes for it," says Mark Wegleitner, chief technology officer for Verizon. Wegleitner anticipates "using DWDM not as a transport vehicle, but to provide specific services for a customer using CPE managed by Verizon."

Verizon already has begun offering this option to provide transparent LAN service to at least one customer--a large Massachusetts-based enterprise.

Initially, Wegleitner expects to deploy such service offerings in response to requests from customers that already have installed WDM equipment on their premises. But eventually, he expects to put the WDM equipment into the carrier network so that multiple customers can take advantage of that service offering. The biggest challenge to widescale deployment of transparent LANs using optical Ethernet over DWDM may be the lack of suitable network management software, says Cadogan, who believes we're still a couple of years away from widescale deployment.--Joan Engebretson

2. Wireless accessories: virtual keyboard

ONE INTERESTING side effect of the short messaging service (SMS) boom is that it led to the development of thumb typing, just as the PDA boom has produced a generation of mobile screen tappers. Still, the easiest and most familiar input device going is the keyboard. Attempts have been made to bring keyboards to the mobile device experience via clip-on modules, but a tiny keyboard is a tiny keyboard.

Silicon Valley start-up Canesta has something different in mind--a virtual infrared keyboard projected in front of a cell phone or PDA. Press the image for the "T" key, and the character appears on the screen. Type as usual.

What makes this possible is Canesta's "electronic perception technology"--sensor technology with depth perception, allowing sensors to distinguish background from foreground and thus track moving objects within range of the chip in real time. In the case of its Keyboard Perception Chipset, the sensor tracks finger movements in relation to the projected keyboard image. In other words, it knows where each key is, and knows when a finger is "touching" that key.

Canesta adds that one key element of its chipset is its low power requirements, so using the projected keyboard won't put extra strain on precious battery life.

Samples of Canesta's chipsets became available to OEMs in September. Consequently, it's going to take at least nine months of design, testing and trials for OEMs to install this sort of technology into their products. But it's very likely to make a commercial appearance sooner than later. possibly before the end of 2003. Japanese giant NEC was the first manufacturer to publicly chomp the bit in October, saying it is evaluating Canesta's technology for its mobile and wireless devices.--John C. Tanner

3. Powerline: Electric broadband

POWERLINE COMMUNICATIONS (PLC) is the technology from Swiss vendor Ascom that enables broadband data services to be delivered over electricity lines in a manner similar to that of cable modems. This means that power companies can create nodes of broadband connectivity that are then shared among users connected to those nodes. The difference, of course, is that PLC technology uses existing electricity lines that run straight to the power socket. No phone line required--just plug in using a PLC adapter and you're ready to go. Bonus: The same technology allows users to build home LANs, networking their PCs, printers, scanners and whatever else.

That's the idea, anyway. The potential for utility companies to diversify into the telecom space is huge, the regulatory hurdles notwithstanding. PLC and similar technologies are already poised for commercial usage. But then, they've been poised for a couple of years. PLC trials have been ongoing in Europe for quite some time, and several trials began recently in Asia--but North America has lagged behind.

PLC also has the usual array of deployment bugs. Products are already available for home networking, but current consumer complaints include lack of product choice and poor tech support. That's to be expected with any new tech; however, PLC home networking gear is also pricier than Ethernet (provided you already have Ethernet wiring installed) and Wi-Fi.

In the meantime, PLC as a broadband access technology has a few other technical issues to contend with, but at least the industry has seen their like before. Example: PLC, like ADSL, works only as well as the existing infrastructure allows. What bridged taps are to DSL, circuit breakers and surge protectors are to PLC, with data throughput hampered considerably.

Still, most of these problems aren't anything that a few years of trial and error can't resolve. Powerline is arguably in the same position that DSL and cable modems were in around 1997 (only with established broadband competition).--John C. Tanner

4. Devices that rule: Wearable wireless

AS "WIRELESS EVERYWHERE," becomes reality, phones are becoming cameras, mobile games consoles are accessing the Net, and dashboards are becoming a wirelessly enabled control center. This is happening across 2.5G, 3G, 3.5G, WiFi, Bluetooth and other radio interfaces.

Devices will also take fresh directions. One under development is "wearable" communications. Philips and Levis have experimented with wiring jeans.

Juha Kaario, a researcher at Nokia's main lab in Finland, says the advantage lies in the ability to separate the interface from the radio.

We may find ourselves using a wristband user interface to screen calls and manage the device, connected via Bluetooth or radio frequency identification to a radio in our jacket pocket. Or more intriguingly, we may have a screen display on our sleeve or inside our jacket. It's being driven by the reduction in power requirements and in component size, as well as new plastics and other materials. It's convenient, though obstacles lie ahead.

First is power source; if you separate the core device and the display, you will need an extra power supply. Also textiles today aren't routinely built to carry data or low-voltage power currents. And if our phones are going to become part of our clothing, they will need to get used to taking more of a beating.

While the wearable projects aim to make access devices invisible, other initiatives seek to make them transparent--namely context-sensitivity, or being able to know who and where the user is. It's a hot topic, says Kaario, who says it could be as simple as not accepting calls after hours from, say, your boss.

It can mean genuine unification of the customer experience, regardless of the access platform, says Telstra chief technology officer Hugh Bradlow. Platforms such as Java, J2ME or even .Net could emerge as a universal standard operating environment for all online apps.

They can enable recognition of a user through domain or ID, and thus offer the local and customized information. "It means companies that want to service those customers don't have to worry about what device they are using," Bradlow says.--Robert Clark

5. Free-space optics: base-station backhaul

ORIGINALLY TOUTED as a cost-effective option to connect urban buildings to metro fiber rings, or campus buildings to each other, free-space optics (FSO)--fiber-optic transmission sans fiber--has been held back by its own physical limitations of range (1.5 kilometers max, but typically much shorter), line-of-sight limitations and adverse weather conditions like fog, monsoons and blizzards.

However, vendors like LightPointe and AirLink have been finding other applications for FSO, from Sonet/SDH ring closures and storage area network connectivity to disaster recovery and wireless backhaul.

LightPointe expects the latter to be a key issue because 3G requires denser base station coverage, which means more backhaul requirements for the new sites--and existing backhaul links will have to be upgraded to handle the data load. FSO can be cheaper than digital microwave, depending on the deployment scenario.

Holoplex promises to expand FSO's abilities with its wireless optical technology that offers 622 Mbps point-to-point connections--compared to 155 Mbps from most FSO gear--at ranges up to 4 kilometers. Even at around 2.5 kilometers, sustaining an STM-4 FSO link at that distance with no decibel loss is an achievement in itself. Holoplex says its secret is in its proprietary beam-tracking technology, and is currently in trials with Nokia.

Holoplex is eyeing wireless backhaul for medium-range links that could make it a competitive option to microwave.--John C. Tanner

6. Power down: Cutting wireless fuel consumption

THE MOVE TO REDUCE power consumption across wireless networks is not a one-trick pony, despite what chipmakers might boastfully argue.

Smaller, denser chips are endowing mobile devices with unseen performance. That's the comparatively easy part. The bigger opportunity resides in the design of wireless system architecture, potentially shortening hops between source and destination, reconsidering interface design and re-evaluating power demands of middleware. Innovations that accept this broader perspective are especially poised for growth, as the hunger for power--from color screens to streaming media and multiple modes of connectivity--will continue unabated.--Kirk Laughlin

7. Storage components: Quest for efficiency

AS BUSINESSES MOVE toward keeping data in-house, in-sourcing on the data center side and the storage side will be a trend, says David Britts, partner with VC firm ComVentures. "We're spending a lot of time on data centers and storage, and even more on components," he said. The components are mainly semiconductors and the IDE drives, which are less expensive than SCSI drives.

Although companies such as EMC, Sun Microsystems and Hewlett-Packard make their own semiconductors, he says, the trend seems to be that they will start buying components. "Intel is making a big push in this space," he says. Startups in this area include Aristos and Sierra Logic, he says.--Suzanne Sanders

8. UWB: Innovation no match for politics

PLENTY OF COMPANIES have been directing their efforts towards ultrawideband (UWB) technology, which promises high-speed short-range wireless connectivity well beyond the scope and applicability of Bluetooth. Of the lot, Singaporean start-up Cellonics has perhaps the most innovative approach: a wireless modem design based on the unlikely combination of communications between biological cells and Nonlinear Dynamical Systems (NDS), an obscure branch of mathematics used in chaos studies to predict future events, such as weather and population growth. Cellonics' design takes up little chip space and runs at very low power levels and yet still codes and decodes signals at carrier rate.--John C. Tanner

9. Wi-Fi: Local and vocal

WI-FI IS SETTING out to destabilize the local area network (LAN) by smartly harvesting free spectrum, vaulting over wireline's incumbency and fervently working to overcome liabilities that allow for security breaches and throughput-slowing interference.

Yet its emergence as a candidate to replace wired LANs is one of many byproducts of the technology's disruptive presence: 802.11x is attacking cellular's data speed shortcomings on the local level, newly released wireless LAN (WLAN) solutions are outstripping previous coverage area capabilities, and voice over WLAN (VoWLAN) is rising to become the latest potent force.

"As the demand for voice over WLAN increases, more and larger vendors are expected to enter the market, bringing handset prices down, and pushing VoWLAN handsets out to the more mainstream business environments," says Gemma Paulo, an analyst with In-Stat/MDR.

Shipment of 802.11x handsets is expected to surpass 500,000 units in four years, a six-fold increase over current year shipment of 80,000 units, reported In-Stat/MDR in a recent study on wireless IP handsets. Initial demand is expected to come mainly from vertical markets, such as education and healthcare.

Analysts anticipate that low cost and ease of implementation will attract more enterprises over time. Two suppliers, Symbol and Spectralink, dominate the infant voice over 802.11x handset market. Spectralink has established partnering agreements with Cisco and Avaya to sell WLAN packages to enterprises. The service potential of VoWLAN largely depends on improvement of quality of service (QoS) and interference issues that can compromise voice quality. A move is afoot to standardized QoS methodology.

As is frequently the case in the barroom brawling atmosphere of 802.11, new solutions continue to pop up that force the redefinition of the reach, power and implications of next-generation WLAN technology. Startup Vivato is a good example. The company announced last month the application of phased-array antennas and a single switching box to provide Wi-Fi coverage across a 7 kilometer radius, blasting past the previous reach of 300 feet.

"With a single switch, we can cover an entire enterprise, campus or Wi-Fi hot spot with multiple Wi-Fi transmissions, with centrally managed security over the entire collapsed network," says Ken Biba, Vivato's CEO.

Vivato's technology, which integrates Wi-Fi, smart antennas and gigabit Ethernet switching design, is not commercially available. Launch and pricing details are expected by first quarter 2003.

Wi-Fi's most obvious weakness--security--virulently clings to each new 802.11 advancement. Only recently the Wi-Fi Alliance acted to replace the pre-existing wired equivalent privacy (WEP) solution with what is considered a stop-gap measure called Wi-Fi protected access (WPA). WPA is a component of the IEEE 802.11i standard, which is expected to be ready for commercialization at the end of next year. The advantage is that it seamlessly interoperates with existing hardware, giving an extra layer of security protection by bolstering authentication. However, large obstacles still remain. "Wardriving," when hackers cruise to specific WLAN zones to launch attacks or steal high-speed access, will likely continue in more creative forms.--Kirk Laughlin

10. Nanotechnology: Let's get small

NANOTECHNOLOGY--WHICH HAS COME TO DESCRIBE many types of research where the characteristic dimensions are less than about 1,000 nanometers--isn't just for science fiction anymore.

Regardless of the (sorry) hair-splitting, however, the components of telecom technology are getting smaller, and there are more than 900 startups working to make it happen. In the optical space, MEMS is already an inherent part of all-optical switches currently on sale from Ciena, Corvis, Sycamore and Tellium, but that's just the start.

NanoOpto has been generating considerable buzz with its "subwavelength optical elements," which essentially do the same things as simple passive optical components such as filters and couplers, but on the nanometer level.

One reason for the buzz is that NanoOpto's components aren't vaporware. The company introduced its first components in March. In September, NanoOpto began shipping trial samples of its SubWave Phase Management waveplates, which help optical subsystems to compensate for dispersion by slowing down light.

Meanwhile, companies such as Canada's Galian Photonics and University of Southampton offshoot Mesophotonics are developing so-called "photonic crystals" that guide light along a path on a micron distance scale, overcoming design barriers for all-optical components, although actual products are a few years away.

MEMS/nanotech isn't just about fiber optics. In July, US semiconductor company Kopin announced a new range of LED chips called CyberLite that use nanotech to get around the natural atomic-level defects of LED chips that occur every 100 nanometers which usually prevent the chips from operating any lower than 3 volts.

Discera uses MEMS technology to make a receiver called a "vibrating mechanical resonator" that could give radio devices like cell phones better frequency selectivity and improved battery life.

Nanotech is also promising to change the rules on things like data storage. The University of Arizona Optical Data Storage Center is working on a technique for using MEMS probe devices to read and write on cheap nanotech organic films, allowing data to be written, read and stored in clusters of molecules. The result: storage measured in terabits per square inch. In lay terms, that's 1,540 CDs packed onto a single CD.--John C. Tanner

11. Software-defined radio: Liberation in wait

SOFTWARE-DEFINED RADIO (SDR) embodies all that could be brilliant about next-gen radio communication--open interfaces, scalable and common hardware platforms and radio-band and air-interface agnostic mobile devices.

SDR is so compelling that many believe it's only a matter of time (Did someone say 4G?) before this dynamically adaptable technology becomes commercial available, with the help of agencies like the FCC whose members view it as a face-saving solution to spectrum mismanagement.

Scarcity of spectrum, whether real or concocted , could make SDR a tantalizing option--potentially shoveling loads of unlicensed spectrum conveniently into play. Its emergence will continue to be both actively supported and forcefully opposed.--Kirk Laughlin

12. Personalized TV: Beyond TiVo

AS TECHNOLOGY ALLOWS users to continually fine-tune their interests, video providers will follow suit. Personalized TV streams, as opposed to broadcast TV, are going to grow in popularity, according to David Britts, partner with VC firm ComVentures. AOL-Time Warner is taking the lead, he said, moving to offer "everything on demand." These offerings are like TiVo, he said, but network-based, over an IP network. AOL-Time Warner veteran Jim Chiddix also has taken a lead in promoting the offerings, Britts said, with Maestro TV personal video recording.

In addition, the Integrated Broadband Environment for Personalized TV Experience offers a solution consisting of three main components: a content provider, a resource administrator and a content browser, as well as a personal device for personalization. One key organization is the TV-Anytime Forum, which seeks to develop specifications to enable audio-visual and other services based on mass-market high volume digital storage. However, Britts says, these offerings still have regulatory and technological issues. "Honestly, the technological hurdles might be easier to get past than the regulatory hurdles."--Suzanne Sanders

13. Cost reducing the optical network: Adaptive receivers

"WE'RE INTERESTED in all the work that's going on with optical generation," says Bill Cadogan, general partner with St. Paul Venture Partners. He sees a lot of promise in adaptive receivers that would measure the quality of a signal by looking at slope and gain and adjusting the level. "Potentially, it could eliminate the cost of signal management," says Cadogan.--Joan Engebretson

14. Threat or opportunity? Real-time data compression

THE IDEA OF USING compression algorithms to save bandwidth is not new. Wireless voice networks rely on it--and it is key in shrinking pre-recorded video content for streaming applications. But compressing data transmissions can be problematic, simply because it's difficult on a large scale in real time without introducing significant delay.

Recently, though, a couple of solutions have appeared--from Peribit Networks and Expand Networks--both aimed at the enterprise market.

At first glance, this technology would appear to be a threat to service providers. Peribit's product eliminates 75% of the bits that enterprises send across the wide area network, says Peribit president and CEO Jef Graham, who adds that 75% of Peribit customers buy the product to avoid upgrading their access lines to a higher speed.

But the technology--which, in Peribit's case, was developed in connection with DNA research--could have applications in the carrier market. It could lend itself well to end user devices for wireless data applications or for satellite providers wishing to maximize limited bandwidth.--Joan Engebretson

15. Alternative twisted pair modulation techniques: Beyond copper

ALTERNATIVE MODULATION techniques for high-speed access over twisted pair are "intriguing," says Darrell Williams, chief investment officer for the Telecommunications Development Fund. While DSL has been impaired by the presence of physical impairment on the copper loops, such as load coils or bridge taps, technologies such as the HDSL2 are enabling carriers to deploy high-speed services with bridge taps and without repeaters. Service providers can then extend the reach of these services.--Shira Levine

16. Network optimization: Squeezing out more value

EVEN THE MOST BASIC carrier network is complex. Add next-generation technologies such as IP and ATM, and factor in the effect of carrier mergers and acquisitions, and that complexity increases exponentially. As a result, many service providers do not have a good sense of what's actually in their networks. According to industry statistics, network inventory data is at best 40% to 60% accurate, meaning that carriers have significant quantities of unused or underused equipment in their networks and face provisioning and network management problems as a result.

Enter network optimization solutions--software designed to collect information about the network and transform it into valuable data, such as network utilization and configuration management. Industry experts predict that network optimization will be a hot topic for 2003, as service providers--both wireline and wireless--try to squeeze as much value as possible out of their networks.

Sprint, for example, is "aggressively exploring" deploying softswitch technology in its network that would allow the carrier to collect network statistics and use them for traffic management, says Kathryn Walker, the carrier's senior vice president of GMG Network Services.

Over the last few years, several companies have sprung up in the network inventory space, which provides an important basis for network optimization, including Cramer Systems, Granite Systems, NetCracker and Architel, which was acquired first by Nortel Networks, then bought by MetaSolv Software.

However, Todd Brooks, general partner at venture capital firm Mayfield Fund, expects to start seeing particular interest in companies developing software to handle network traffic management and route optimization.

Wireless network optimization in particular is expected to take center stage over the next several months, as wireless carriers capitalize on their 2G networks while they make the slower-than-expected transition to 3G.

Stratecast Partners analyst Karl Whitelock predicts that wireless operators will be particularly interested in new technologies that allow them to leverage their existing networks to support bandwidth-heavy data services.

"No 3G spectrum has been allocated in North America, so carriers are still using their existing spectrum and adding a big hog called data," Whitelock says. "Spectrum has become a very precious resource, and they're interested in finding the best way to reuse it."

As technologies such as wireless LAN come into play, wireless operators will start pushing for billing systems that support seamless wireless roaming using multiple devices, particularly when it comes to data services, says Darrell Williams, chief investment officer of venture capital firm Telecommunications Development Fund,. "The key advantage is ubiquity--allowing the customer to use whatever services he wants, wherever he wants," Williams says. "If I want to use my PDA and I'm on someone else's data network, I want to know that the billing information is passed back and forth seamlessly, and information and transactions are not compromised."--Shira Levine

17. Wireless mesh: There goes the neighborhood

UBIQUITOUS WI-FI coverage may be the ultimate wireless LAN service model, but it's expensive as hell, with access points limited to a range of a couple hundred meters. But what if every radio on the network--including terminals--acted as a router to relay data to the nearest peer?

That's the idea behind wireless mesh networks, a concept being developed by startups like MeshNetworks, CoWave Networks, Ember and Tokyo-based Root. Wireless mesh is really a radio version of the Internet. Packets fly from router to router until they reach their destination. The difference here is that a Wi-Fi-enabled PC card or PDA can also serve as a router or repeater in the network once the radio chipsets are designed to mesh. Combine this with inexpensive rooftop routers and intelligent access points, and a Wi-Fi access point's range could extend from 100 meters to a few miles.

While wireless mesh is several years away from getting beyond the trial stage, many elements--such as wireless routers --are already commercially available.

MeshNetworks has done field trials with its technology in Orlando. In October, Ember announced its EmberNet suite of OEM components, including nodes, serial nodes, gateways and a developer kit. And of course Wi-Fi hot spots continue to pop up.

Whether operators go for wireless mesh is an open question. But the DIY potential could very well take the controversy over community Wi-Fi to a new level.

A living example is the Kochi City-size Area Network (KCAN) in the remote Japanese Kochi prefecture city of Nankoku City. It's a $400,000 citywide intranet using wireless routers and 802.11b access points connecting 13 primary schools, four junior-high schools and 18 municipal buildings. Residents were inspired to build their own network after a 1998 flood, in which the city's only telco, NTT, blocked Internet access in the name of emergency bandwidth rationing.--John C. Tanner

RELATED ARTICLE: Visionaries on hot technologies.

Katherine Walker, Senior vice president of Global Network Services Sprint Corp.

Sprint, which has been an early adopter of next-generation softswitches, is aggressively exploring the service architecture behind the softswitch, says Katherine Walker, Sprint senior vice president of Global Network Services.

"On the horizon, the service architecture will be able to support both voice and data," says Walker, who envisions using the architecture to collaboratively link Sprint's local, long-distance and wireless divisions.

Walker also cites optical signaling and a collapsible network over IP as potentially disruptive technologies.

"A collapsible network over IP would enable a customer to efficiently and quickly 'plug and play' various mobile communications devices anywhere and anytime."

Mario Mazzolo Chief development officer Cisco Systems

"I think we're going to see a lot of advances in security-related technologies," says Mario Mazzolo, chief development officer for Cisco. "We think that security is going to be an extremely important capability that the new network infrastructure will provide. This is very relevant to real customers."

Mazzolo sees the Internet as an enabling technology to facilitate intercommunication among different companies and creating a new level of business relationships. And security will be critical to that vision, he says.

Bill Cadogan, General partner St. Paul Venture Capital

"It's our view that the next generation won't be a whole lot different, but will be much lower cost," says Bill Cadogan, general partner with St. Paul Venture Capital.

Gigabit Ethernet is an excellent way of reducing network operating costs and is more versatile than many have recognized, adds Cadogan. "Many people are working on how to carry legacy services over Gig E. It's not simply a data option. It could carry TDM as well as Sonet does."

Cadogan also expects to see carriers deploy a Gig E replacement for frame relay and an Ethernet-based DSLAM.