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Carrier Services
The Return Of The Optical Transport Market
Video, IP Services Drive New Growth Initiatives
by Michael Kennedy
The optical transport equipment market is rising from the burst Internet
bubble. Incumbent vendors’ sales are increasing and start-ups are
getting funding.
Demand is being driven by new optical network
applications as well as by opportunities created by new technology.
End-user driven demand sources include the need for transport services
to support Storage Area Network (SAN) solutions and wireless backhaul.
SAN demand in turn is driven by enterprises’ efforts to improve disaster
recovery capabilities and support regulatory requirements such as the
U.S. Sarbanes-Oxley Act. Wireless backhaul demand is being driven by
the movement toward 3G wireless technology’s use of IP and high traffic
growth.
These user driven demands provide a strong foundation for
sustained growth.Service provider efforts to improve their service delivery capabilities and
reduce cost are another source of demand growth.
Carrier Ethernet services for enterprise users and infrastructure initiatives to replace
legacy infrastructure with IP and Ethernet technology are also important
drivers. Being supply-side rather than demand-side initiatives, however,
their strength is less robust than user driven demand.
Build out of broadband Triple Play service delivery capabilities—the last
demand driver—is the most glamorous and riskiest sales opportunity.
It is the most glamorous in that incumbent telco plans to become dominant
providers of video services will require a nearly complete retooling of
local and metro telecom networks.
The risk is that incumbent telcos have a poor track record in the cable TV market and
entrenched cable MSOs are well positioned to ward off these new entrants.
New technology also is fueling the return of the optical transport market.
Important innovations include multi-degree ROADM, photonic integrated
circuit, optical burst switching, Provider Backbone Transport, and the
integration of switching and multiplexing into a single system.
The first generation ROADM had two-degree capability—it could select a
wavelength in two directions. For example, an optical signal could be
sent to the East and if that fiber failed then the signal could be sent to
the West on another fiber.
A multi-degree ROADM switches wavelengths in three or more directions.
This is useful in implementing and managing mesh networks and providing all optical
connections on multi-ring networks.
Most multi-degree ROADMs employ 3D Micro-Electro-
Mechanical Systems (MEMS). However, it is difficult for a systems
vendor to gain a competitive advantage in that there are few sources
outside of JDS Uniphase that manufactures most of these underlying sub
systems.
Infinera—a systems vendor—has created a photonic integrated circuit
that it claims will do for the optical networking industry what silicon-
based integrated circuits did for the computer industry.
The circuit makes it possible to transmit and receive 100 Gbps of data over fiber as
compared to the 10 Gbps or 40 Gbps of ROADMs. This capability
combined with sub-wavelength multiplexing of data signals improves the
utilization of a fiber network and reduces costs by eliminating some of
the optical-electrical-optical interfaces required by ROADMs.
Optical burst switching was proposed in 1999. Matisse Networks, a start-
up, has implemented this technology and calls it EtherBurst™. The
solution combines Ethernet switching and DWDM transport into a single
system and consequently makes more efficient use of fiber and the port
capacity of the switches and routers connected to the optical network.
The system also simplifies management in that point-to-point assignment
of each wavelength at each optical node is not needed.
Nortel has pioneered Provider Backbone Transport (PBT), which furthers
industry efforts to remake Ethernet into a carrier-class transport vehicle.
Specifically, PBT makes it possible to support connection-oriented
forwarding using native Ethernet.
This allows service providers to manage Ethernet transport in much the same way
that they manage SONET/SDH circuits and MPLS tunnels. This is especially important in
establishing protection paths through the network and restoring service
in less than 50 milliseconds as is required for carrier-class transport
service.
Many vendors are integrating Ethernet switching and ADM into DWDM
systems. Several ROADM vendors provide line cards (blades) for their
DWDM systems that embody the functions of a standalone Ethernet
switch or SONET/SDH ADM system.
The Ethernet systems emerging now are quite comprehensive including full compliance
with the Metro Ethernet Forum’s service interface requirements while the ADM systems
include much of what is delivered over a Multi-service Provisioning
Platform (MSPP).
This functionality provides significant CapEx reductions
by combining the functions of two separate systems into one and even
greater OpEx reductions through reduction of the number of network
elements being managed.
This renewal of the optical transport market is good news for vendors;
however, it is unlikely to lead to another round of wild stock market
speculation. Despite the industry’s many bankruptcies many competitors
remain and the economies of scale and scope of these new systems are
so large that the size of the equipment market is about the same today
as it was five years ago when traffic volumes were one-tenth the
current volume.
Michael Kennedy is co-founder and Managing Partner of Network
Strategy Partners (mkennedy@nspllc.com)
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