[qi:gigaom_icon_fttx] Every time you watch that YouTube video or “30 Rock” on Hulu, buy music from iTunes, back up your data on Jungle Disk, check out your Twitter status or poke someone on Facebook, what you’re also doing is adding to the demand for bandwidth. It doesn’t matter which part of the world you’re in; it doesn’t matter what type of network you use (cellular, cable or DSL) and it certainly doesn’t matter what device you use — you are consuming bandwidth. A lot of it. According to Cisco’s estimates, the demand for bandwidth is doubling every 12-18 months, a trend that’s unlikely to change in the foreseeable future. After all, we’re spending more and more time online, doing more and more things digitally.

This big societal move to a more connected life is causing carriers to spend a lot of money upgrading (or building) new networks, even the smallest cable companies in the farthest corners of America. And for Mike Hatfield, that is great news. Today he announced that his 3-year-old company, Cyan Optics, has signed up nearly 20 carriers –- though none of the major guys, to be sure –- and has raised at least $27 million in three rounds of funding from venture capital companies including Azure, Grande Ventures, Kinetic Ventures and Norwest Venture Partners. Juniper Networks (s JNPR) is an investor as well.

I’ve known Hatfield for a long time; he’s a good proxy on the state of the optics and networking industries. Back during the first Internet bubble, he made out like a bandit when Cerent, an optical gear maker he was associated with, was sold to Cisco Systems (s CSCO) for $8 billion. Later he started Calix, another networking gear maker, and now Cyan Optics. His co-founder at Cyan is Steve West, who also helped found Turin Networks, which merged with Force 10 Networks. West is also Cyan’s CTO.

Hatfield is good at spotting opportunities and building products that the market might need a few years down the road. Of course these are priced much lower when compared to the incumbents. At Cerent, he and his team built a cheaper SONET transport box for optical networks. At Calix, they built a cheaper digital loop carrier system. And Cyan has built a replacement for multiservice Sonet/SDH. The new gear is a pure optical transport system, one that allows carriers to pump out more data while keeping costs under check.

Hatfield and West belong to a group of telecom and optical insiders who reside in and around Petaluma, Calif., some 100 miles or so north of Silicon Valley, and often work very closely with carriers. Cyan claims that its packet optical transport system (a combination of hardware and software), because of its ability to function at the optical level, makes it more capable than its competitors. Cyan has a portfolio of products, including a management software platform that is built to handle today’s networks -– its highest-end equipment is twice and in some cases three times as capable as gear from incumbents such as Ciena (S cien) and Fujitsu. David Huber, who started Ciena, is an investor via his venture fund, Grande Ventures.

A typical broadband network can be roughly divided into two parts: the access network, which connects you and me to Comcast’s central office, and the rest of the network, often called the middle mile, which connects to the Internet via regional, metro and long-haul fiber connections. Cyan is going after the latter, the transport networks. In its press release, the company says:

The Cyan Z-Series (www.cyanoptics.com/solutions/solution-overview) includes the Cyan Z33 and Z77 multi-layer transport platforms that modularly combine packet, TDM and optical add / drop multiplexer, cross-connect and transport functionality in highly integrated platforms supporting over 100 Gbps per slot. The Cyan CyMS (www.cyanoptics.com/solutions/cy-ms) is the first management system that provides full multilayer visibility and business intelligence. The result is a new generation of packet optical transport solutions that meets the current and future cost and scalability demands of today’s service provider networks.

“The Cyan Z-Series takes packet optical transport systems to a new level of multilayer integration in both hardware and software,” stated Michael Howard, principal analyst of carrier and data center networks at Infonetics Research. “I especially like the breakthrough innovation of multilayer management comprising visualization, planning, provisioning, and control, which will help make service providers’ operations fundamentally more efficient. This is one of the best new products I’ve seen in years.”

Many of these products have been talked about for years. In an ideal world, Cisco would have developed some of these technologies as next-generation Cerent products. When I talked to Hatfield last week, he pointed out that the carriers want to deliver more bandwidth and yet keep the costs of delivering that bandwidth low, otherwise the network economics breakdown. Cyan was started to address this quandary, he said.

Cyan may have snagged 20-odd customers and can boast a pedigree, but that doesn’t mean it can waltz its way to victory (or exit). There are about nine other companies with similar product plans, according to Heavy Reading, a market research company. But in light of his two successes, it makes sense that this time, Hatfield has some competition 🙂