To understand why high-speed optics are hard, you need to understand the modulation scheme that enables them.

NRZ: the legacy approach

NRZ (Non-Return-to-Zero), also called PAM-2, encodes data using two voltage levels: low (0) and high (1). It is simple, robust, and cheap. It dominated networking from 10 Mbps through 25 Gbps per lane. The problem is physics. As you increase the baud rate (symbols per second), the electrical signal at the receiving end degrades due to intersymbol interference, cable attenuation, and reflections. NRZ with two voltage levels runs out of signal integrity headroom at approximately 56 Gbps per lane under practical cable conditions. You cannot simply push NRZ faster -- the error rate becomes unacceptable.

PAM-4: doubling the bits per symbol

PAM-4 (Pulse Amplitude Modulation with 4 levels) encodes data using four voltage levels: 00, 01, 10, and 11. Each symbol carries two bits instead of one. At the same baud rate as NRZ, PAM-4 delivers twice the bandwidth.

This is the insight that enabled 400G: instead of running a single lane at 400 Gbps (physically impossible today), you run eight lanes at 50 Gbps each with PAM-4 modulation, giving you 8 x 50 Gbps x 2 bits/symbol = 800 Gbps effective bit rate, which after protocol overhead yields 400G usable throughput.

The cost of PAM-4

Four voltage levels are harder to distinguish reliably than two. The gap between adjacent voltage levels (the "eye opening") is proportionally smaller. Any noise that pushes a received voltage from one level toward an adjacent level causes a bit error. This is why:

FEC is mandatory at 400G and above -- the raw PAM-4 bit error rate over typical data center cable runs is typically in the range of 10^-4 to 10^-5, far too high for reliable networking without correction. FEC can reduce this to 10^-12 or better, but at the cost of computational work and latency.

DSP equalization is mandatory -- without FFE and DFE compensation, PAM-4 eye diagrams at the receiver are too closed to decode reliably.

Cable quality and length matter more than they did at NRZ speeds -- a cable that barely passed specification for 100G might be marginal for 400G and will fail for 800G.

The lane count arithmetic

Understanding lane count x lane speed = total bandwidth is fundamental to reading datasheet specs:

When you see a transceiver labelled DR4, the 4 refers to four optical lanes. When you see SR8, the 8 refers to eight lanes. This number tells you how many fiber strands the connector on the cable must carry.