Blinded by the Light

The explosion in data traffic caused by the Internet is forcing service providers to seek new ways to increase the capacity of their fiber-optic infrastructures and provision circuits within minutes instead of months. This data eruption is also prompting enterprise customers to seek out relationships with service providers that can guarantee continuous data network uptime and capacity, and that have the agility to turn up bandwidth on demand.

And what technology is going to handle these radical changes? Optical switching.

Optical gear, which uses pulses of light to carry traffic, will be part of the buzz at this week's ComNet 2000 show, but it is also one of the hottest hardware and software development markets in the industry.

For example:

Startup Optical Networks this week at ComNet will announce $50 million in new customer wins, $75 million in new funding and 58,000 square feet of new manufacturing space.

Cisco Systems Inc. has spent close to $10 billion to acquire three optical networking companies in the past six months.

Venture capital firms have put billions of dollars into optical network firms in the past year.

In optical networks, wavelengths of light become discrete channels that can be transmitted over long-haul, metropolitan-area networks (MAN) or "last mile" access networks at terabit speeds.

Transmitting data as light instead of electrical impulses makes for greater bandwidth capacity and more efficient use of bandwidth, says Chris Nicoll, an analyst at Current Analysis in Sterling, Va.

"With Internet access speeds going up because of DSL and cable modem deployment, we're seeing the old bottleneck - the 'last mile' - starting to expand slowly," Nicoll says. "If digital subscriber line deployment rates can match expectations, then the metropolitan- and wide-area networks are going to have to scale up as well.

"The thing about a fiber is that you've almost got infinitely scalable bandwidth on that one connection," he says. "You don't get that with copper."

Lucent, for example, says it has loaded up a single fiber with 1,022 wavelengths in its labs, meaning bandwidth so plentiful that enterprise users could indulge in just about any high-speed WAN applications they choose.

But fiber technologies up to now - the most predominant being SONET - did not take full advantage of fiber's scale or flexibility. With today's SONET switches, which are optimized for voice transmission, bandwidth was still provisioned manually and statically.

"Most optical networks at best have SONET [Add/Drop Multiplexing] switches and possibly some broadband digital cross-connects that operate at a DS-3 level.

These switches just don't give you the full flexibility to reconfigure your network any way you want to," says Andy Wright, chief technologist at Williams Telecommunications in Tulsa, Okla.

Newer, more intelligent optical switching and transport technologies are being developed to supplant SONET. Rather than the set bandwidth SONET provides, intelligent optical networking will provide more flexible bandwidth to carry bursty data traffic more efficiently.

Dense wave division multiplexing (DWDM) technology is expanding the capacity of existing fiber by adding wavelength after wavelength of light to a single strand. To feed these DWDM backbones, vendors are building peripheral hardware with the smarts and flexibility to provision bandwidth dynamically and instantly to handle the peak-and-valley nature of data transmission.

The vast capacity and provisioning flexibility of optical networking is spawning a new class of services from service providers as well. For example, instead of T-1 or T-3 circuits, service providers can offer 100M bit/sec, or 1G or 10G bit/sec Ethernet services. Enterprises considering outsourcing their WANs today may be outsourcing their LANs tomorrow.

"With optical networking, we can easily deploy Gigabit Ethernet in the right places," says Peter LaHatte, director of marketing at Marietta FiberNet, a MAN service provider in Marietta, Ga., and one of Optical Networks' new customers.

"The speed that we can turn up new services improves dramatically because we don't need to send crews out to reinforce existing fiber or run new splices - the capacity is already there. You just turn it on, and typically speed wins out over price in deploying telecom services in a competitive environment."

Optical switching has dramatic cost benefits for enterprise customers. For example, Quantum Bridge makes passive optical network equipment designed to bring fiber directly to customer sites. The company claims carriers using its gear can charge $500 to $1,000 per month for a 10M bit/sec service and still make a profit. That is more than six times the bandwidth for about the price of a T-1.

"Our objective is to figure out ways to offer [multigigabit] services to ISPs cost effectively so they can keep their cost down to the customer," Wright says.

Service variety also means less capital equipment investment for enterprise customers. Customers will be able to plug their existing equipment into optical access boxes supplied by service providers. "It might not seem optical to them.

They'd just connect their PBX or router to it," says Rosemary Cochran, an analyst with Vertical Systems Group in Dedham, Mass.

Investors are pouring money into start-ups such as Quantum Bridge that are building the equipment needed to create these optical networks. Appian Way has $22 million in venture funding to build customer-site access gear it claims will cut the hardware cost of accessing a megabit of bandwidth from $700, the price of DSL line, to $30 per megabit.

Tenor Networks has raised $22.5 million to develop an optical service switch that can convert the light signal to electric, read the packets, then forward them to the right lightstream in the optical core. Tenor says the switch will read and enforce different qualities of service and also track how much traffic each customer is sending, giving carriers the ability to charge for services based on use rather than bandwidth.

While upstarts are providing pieces to the puzzle, the big network vendors are spending big money to buy up the technology and know-how they need to make all the necessary gear to build new optical networks.

Carl Russo, group vice president of Cisco's optical products group, joined Cisco following Cisco's acquisition last summer of Cerent, a maker of SONET transport products that combine add/drop multiplexing, digital cross-connect, time division multiplexing as well as packet and cell switching. Cerent's SONET products are optimized for data rather than voice, and are designed to let service providers accommodate rapid changes in network traffic in a matter of minutes instead of days.

Cisco also acquired Monterey Networks last summer. Monterey builds optical cross-connect technology that is used to quickly provision capacity at the core of an optical network.

In December, Cisco acquired another optical networking company, this one a maker of DWDM gear: Pirelli Optical Systems, which produces 128 channel OC-192 - or 10G bit/sec - long-haul DWDM transport systems. And in December of 1998, Cisco acquired PipeLinks, a developer of SONET routers that enable service providers to simultaneously transport circuit-based traffic while routing IP packets.

Combined, the acquisitions of PipeLinks, Cerent, Monterey and Pirelli - along with Cisco's own optical switch, the Gigabit Switch Router 12000 - enable Cisco to address a market which will reach an estimated $40 billion by 2005.

Is Cisco done? Not by a long shot, Russo says.

"Optical networking is evolving so rapidly that we're going to continue to build out the product portfolio that our customers need to build these next-generation Internet transport networks," he says.

Similarly, Nortel Networks leaves the door open to more acquisitions following its purchase of Qtera, whose technology extends the reach of wavelengths over fiber. "We're going to do whatever it takes to get new technology - internal development and acquisition," says Ashoka Valia, vice president of strategic marketing for Nortel's optical networking group.

Lucent so far has been more home-grown in its approach, but it has made investments in optical start-ups, giving them access to new technologies beyond their own R&D group, says Kathy Szelag, vice president of marketing for Lucent's optical networking group.

With all the investments so far, expect carriers to start offering services supported by these new networks early next year, says Andrew McCormick, a senior analyst with Aberdeen Group in Boston. Trials of all-optical network services are already underway.

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