When Speed Counts, Fiber-Optic Cable Delivers

By: Jacqueline Lee| - Leave a comment

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In 2008, a trader for the Chicago Board Options Exchange named Dan Spivey thought of a way to help investment banks make more money off high-frequency securities trades. He approached James Barksdale, former CEO of Netscape and founder of the Barksdale Group, and asked for capital to lay a fiber-optic cable between Chicago and Carteret, N.J., the home of Nasdaq.

Existing cables followed railroad rights-of-way. Spivey’s cable took the straightest possible path, which meant boring holes through the Allegheny Mountains at a cost, according to Forbes, of $300 million. When Spivey and Barksdale finished the project, their shorter cabling cut 100 miles and shaved three milliseconds off trade transmission times between Chicago and New Jersey. The company Spivey and Barksdale formed, Spread Networks, now leases the line for eight to 10 times what other fiber optic providers charge.

Today’s banks don’t just rely on the fiber-optic Internet backbone to make faster-than-lightning trades; they need fast connections within their own data centers. Traders are willing to pay a premium for those precious milliseconds and the competitive advantage they provide. When speed matters above all else, fiber-optic cable delivers. It also sends signals over much longer distances, eliminates the need for intermediate equipment and cuts energy costs.

The Advantages of Fiber-Optic Cable

According to Jim Hayes, president of the Fiber Optic Association, copper coaxial cabling begins to get impractical for speeds of over 1 gigabit per second. Hayes told Electrical Contractor Magazine that unlike fiber-optic cable, which transmits data using photons, copper cabling pushes electrons to transmit data. When data moves at high speeds, electrons encounter significant resistance, requiring more power to push the signal.

More power not only becomes expensive in terms of kilowatts, but also generates a significant amount of heat. Data centers and server rooms relying on copper coaxial cable incur significantly higher cooling costs. Data transmitted over fiber-optic cable doesn’t encounter the same electromagnetic resistance, so it generates far less heat. Fiber-optic cable also doesn’t absorb any energy from the photons it transmits, which means it carries signals over longer distances than copper.

Real-World Results

In 2013, Colin Wood, writing for Government Technology, reported on the city of San Diego’s new nine-story Central Library. The new building was three times the size of the old library building, featuring more than 300 computers, free Wi-Fi, iPad kiosks and 3-D printers.

The building’s network delivers high-speed connections for its patrons using only 20 percent of the power required in the previous building. The library also expects to save 50 to 70 percent on capital expenditures related to its network. The secret? Installing a passive optical network that can also serve other libraries within an 18-mile radius.

The new building has the same number of IT staff as the old one, even though it serves three times as many patrons. Closets that used to house server equipment are now serving as janitor’s closets, and the one remaining server room contains a single shelf’s worth of equipment. Hayes said fiber-optic cable requires no power transmission between the main server area and the end user. Neither the central equipment room nor the intermediate distribution areas require air conditioning, which means big energy cost savings.

Making the Switch

Hayes estimates an optical network connecting 8,000 employees requires one-tenth of the equipment space and one-fifth of the power of an all-copper network, all at one-half the installation cost. Today’s single-mode fiber-optic cable, which can be used in most installations, offers connection speeds up to 100 gigabits per second.

For financial institutions that live or die by the speed of their transactions, switching to fiber-optic cable is just good business. It makes no sense for banks to pay a premium for Spread Networks’ Chicago-New Jersey line — or any trading connection — only to be slowed down by their own internal networks.

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About The Author

Jacqueline Lee

Freelance Writer

Jacqueline Lee specializes in business and technology writing, drawing on over 10 years of experience in business, management and entrepreneurship. Currently, she blogs for HireVue and IBM, and her work on behalf of client brands has appeared in Huffington Post, Forbes, Entrepreneur and Inc. Magazine. In addition to writing, Jackie works as a social media manager and freelance editor. She's a member of the American Copy Editors Society and is completing a certificate in editing from the Poynter Institute.

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