US telecoms giant AT&T has come full circle since it spun out local phone operations in 1984, giving birth to Southwestern Bell Corporation. At the time, AT&T kept control of its long distance phone business, and its R&D and manufacturing arms.

In 1995, Southwestern Bell Corporation changed its name to SBC Communications and 10 years later acquired AT&T, keeping the iconic AT&T moniker.

AT&T Labs now boasts 1,900 employees, including 1,300 scientists and engineers. The unit is run by Keith Cambron, who had previously headed up SBC's labs.

"This facility allows us to look several years in advance and helps us to tackle the big technology problems before we have to deal with them in the real world,” says Cambron.

One issue troubling global enterprises and service providers is the rapid growth of web traffic, which some fear could ultimately cripple the internet. With YouTube videos, Web 2.0 applications such as Facebook and Twitter, and voice over IP calls all being loaded onto global networks, capacity risks being overstretched.

Until now, service providers have responded by adding network capacity based on 40Gbit/s kit. AT&T is currently testing equipment that can handle 100Gbit/s loads. But after that, it is not yet clear how current technologies can scale, says Cambron.

“If I try to look six to eight years down the road, do I believe I can get to 400Gbit/s on a single wavelength and what would that technology look like?” he asks.

The problem is the optical technology itself, says Cambron.

“I don’t know whether you can push modulation schemes that much further over the kinds of fibre routes we have today,” he says.

"Remember, a lot of the fibre in the ground was put there over a period of decades, so there is some difference in performance due to signal distortion over that fibre, so whatever 400Gbit/s systems you design have to deal with those,” he adds.