Much ballyhooed startup Infinera Inc. has landed its equipment into a live network just six months after making the boxes available.

German ISP Freenet.de AG, a wholly owned subsidiary of MobilCom AG, is using Infinera's DTN -- a Wavelength Division Multiplexing (WDM) system with add/drop multiplexing capabilities -- in its multiwavelength core, the companies announced today.

This marks Infinera's first customer deployment, and it happened quickly, considering systems didn't begin shipping until July 2004. Shipments to Freenet began in October, and the ISP was running live traffic on Infinera's systems by mid-December, says Serge Melle, Infinera's vice president of technical marketing (see Freenet Deploys Infinera).

Freenet is using Infinera's boxes to bring 10-Gbit/s Ethernet transmission onto a 1,800km core ring -- a substantial piece of the company's 4,200km fiber optic network. The build-out uses about a dozen of Infinera's DTN nodes, Melle says. Infinera isn't saying how much the deal is worth.

Infinera's DTN systems use extensive chip integration to shrink the equipment's size and cost dramatically. The company spent two years in well publicized secrecy after landing a magazine cover proclaiming it a revolution in the making (see Infinera's Amp-less Ambition).

Infinera's core idea is actually an old one. The company converts optical signals to electrical for processing, then back to optical -- the "OEO" transition, as it's called. Infinera developed its product in the wake of the "all-optical" craze that hit the telecom industry in 2000, when vendors and venture capitalists were convinced that network owners would want to do away with OEO equipment (see Infinera Declares WDM War). In addition to presenting a smaller system, Infinera uses OEO to allow quick provisioning of wavelengths, which the company claims gives it a serious advantage over other WDM options.

"If it takes off, I wouldn't be surprised if this sets all-optical networking back five years," says Mark Lutkowitz, analyst with Telecom Pragmatics Inc.

But Freenet, while it's Germany's second-largest ISP, with 6.4 million users and 100 percent year-over-year growth, isn't a name that will strike terror in the hearts of Infinera competitors such as Ciena Corp. (Nasdaq: CIEN). Which is a shame, because Infinera's prospects are much more grand than this first win might indicate, Lutkowitz says. "In a way, [this deal is] a disadvantage for them, because it makes them look like all these other startups."

Infinera claims to have more trials in the works, with customers including North American IXCs and CLECs, European PTTs, and Asian PTTs. The company has "actively started" eight trials and expects to start "several more" this quarter, Melle says.

"We've ended up doing a lot more trials than we'd planned a year ago," he says. "Part of the $52 million round we raised last September was to increase the amount of system builds that were going to be used for those trials." (See Infinera Raises $52M More.)

Lutkowitz says Infinera's story checks out, and that major carriers really are drooling (not literally) over Infinera's possibilities. "There's no question it's rare when a startup gets the kind of raves these guys are getting," he says.

Still, Infinera has a long way to go to recoup the $205 million investors have put into the company -- particularly considering the headcount remains greater than 200. Melle notes Infinera isn't publicly predicting when it will break even or when its cumulative revenues will make up for that $205 million. "We're certainly on track with our business plan," he says.

It's likely Infinera will get much of its business from supplementing other equipment in carriers' networks, so one strategy the startup might consider is a partnership. "What they need to do is marry themselves with an ADM provider to complement what they have," Lutkowitz says.

— Craig Matsumoto, Senior Editor, Light Reading

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