special issue

The laser at 50: Boom, bust, boomphysicsworld.comThe bubble legacyThe technology crash of the early 2000s may have left many companies bruised, burned or broken,but several key advances in laser technology from that time are now bearing fruit, as Jeff Hecht explainsJeff Hecht is afreelance scienceand technology writerbased in Auburndale,Massachusetts,US, e-mail jeff@jeffhecht.com. He isauthor of the bookCity of Light, whichcovers the historyof fibre optics(2004 OxfordUniversity Press)Imagine an optics company – let’s call it JDS Uniphase– with a market capitalization approaching the grossdomestic product (GDP) of Ireland. Now imagine itmerging with a laser company – say, SDL – that hasa stock valuation of $41bn, higher than the GDP ofCosta Rica. Finally, imagine a start-up with $109m inventure capital in its pocket but no product to its name(Novalux) turning down an offer of $500m as insuf -ficient. It may be hard to believe, but these tales aretrue: they occurred in the year 2000 – an era when thelaser, fibre-optics and photonics industries were thedarlings of the financial world. Such was the madcapnature of that brief period that survivors call it simply“the bubble”.The bubble was born as the Internet took off in themid-1990s, pumped up by the explosive growth of theWorld Wide Web. Investors first noticed the “dot-comcompanies”, which were easy to caricature as a few peoplewith a website and a warehouse. But financiers’interest soon spread to other companies in the widertelecoms market, particularly firms making equipmentto build the “information superhighway”. By March2000, investors were eagerly pouring barrelfuls ofmoney into new optical technologies for a boomingtelecoms market.But the clock began ticking after the technologyheavyNASDAQ index of small-company stockspeaked above 5000 during one week in March 2000that saw investors mobbing that year’s Optical FiberCom munications Conference in Baltimore. First to fallwere the dot-com firms – the companies “selling dogfood on the Internet”, as chief analyst John Ryan frommarket-research firm RHK Inc. so eloquently put it.Businesses making communications hardware initiallyseemed less of a risk, but that did not stop the opticalindustry from also running off a cliff, where it hung suspendedin mid-air with its legs churning like the cartooncharacter Wile E Coyote – until it looked downand the law of gravity took hold. Start-ups crashed, withtheir remains sold on eBay for pennies on the dollar.Sales of the diode lasers used in telecoms dropped likeThe various laser-based technologiesthat emerged from the earlyInternet boom have become crucialboth within the telecoms industryand beyond36a stone (figure 1).In retrospect, it was an investment bubble as daftas the Dutch tulip bubble of the 17th century or theBritish South Sea bubble of the 18th century. Themoney largely evaporated as the bubble deflated. With -in a year, $1000 invested in Nortel stock had shrunk tojust $72. As one wry observer noted, investors wouldhave done better investing $1000 in Budweiser – thebeer, not the stock – and cashing in empty bottles at5 cents each. Today, JDS Uniphase is one of the luckycompanies still in business, with a market capitalizationof $2.5bn, about 2% of its peak value. It has dropped invalue by more than $100bn – more money than vanishedin the Madoff swindle – while Nortel has gone bust.But for every cloud there is a silver lining. The variouslaser-based technologies that emerged from theearly Internet boom have become crucial both withinthe telecoms industry and beyond.The quest for bandwidthThe dot-com bubble was built on the development offibre-optic cables, which became the backbone of theglobal telephone network in the 1980s. Such cables –essentially bundles of parallel glass fibres that carrylight – allowed more data to be sent over longer distancesthan was possible with previous microwaverelay towers or copper-cable systems. It was fibre-opticcables that carried the explosive growth of Internettraffic in the mid-1990s, which in turn created a hugedemand for yet higher transmission capacities. In about1999, Internet traffic was said to be doubling everythree months, although a later analysis by mathematicianand communications researcher Andrew Odlyzko,now at the Uni versity of Minnesota in the US, revealedthat this rate was achieved only briefly in 1995–1996.Still, the perception of a huge transmission demandfuelled heavy investment in new optical technologiesthat could provide the sought-after bandwidth.In fact, the two innovations that would prove centralto increasing fibre-optic bandwidth – namely, opticalfibreamplifiers and wavelength-division multiplexing(WDM) – were actually developed before the dot-comboom. The first of these innovations came as a responseto the problems with the fibre-optic cables of the 1980s,which could carry only one signal wavelength per fibreand needed “electro-optic repeaters” to be stationedroughly every 50 km to maintain signal strength. Theserepeaters converted an input optical signal into electricalform, before amplifying the signal and then turningit back into optical form – a cumbersome and costlyprocess. Optical-fibre amplifiers, in contrast, couldamplify an optical signal directly.Physics World May 2010