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Fortunes Swing for Swedish Startups

Net Insight looks to upstage sibling Dynarc with contract to deploy DTM technology in a US media network

July 9, 2001

3 Min Read
Fortunes Swing for Swedish Startups

While equipment startup Dynarc AB has been heavily promoting its "optical IP rings" in the past year or so, hardly a peep has been heard from Net Insight AB (Stockholm: NETI-B), a company with almost identical origins.

That, however, could be about to change. Net Insight says it's won a landmark contract -- one that could raise its profile in the United States and help restore its shareprice. Right now, its shares are trading at about 12 Swedish kronor (US$1.10), having fallen from about 70 kronor ($6.40) last September.

Net Insight is developing optical networking products using DTM (dynamic synchronous transfer mode) technology, which aims to replace ATM (asynchronous transfer mode) as a more efficient means of handling large volumes of video traffic. It's a broadband version of circuit switching, originally conceived in the research labs of Ericsson AB (Nasdaq: ERICY). It was then developed further by Sweden's Royal Institute of Technology before Dynarc and Net Insight were set up to commercialize it.

The size of Net Insight's contract hasn't been disclosed, but it comes from Qmedia Inc., a startup operator that's planning to roll out a specialized media network serving the TV, film, and entertainment industry. The network will link 50 U.S. cities and incorporate more than 10,000 route miles of fiber.

Qmedia is planning to spend an "eight figure" sum over the next two years on building this network, according to John Kostak, Net Insight’s VP of global marketing. Net Insight is just one of Qmedia's suppliers. Others include ADC Telecommunications Inc. (Nasdaq: ADCT), Fujitsu Network Communications Inc., and Level 3 Communications Inc. (Nasdaq: LVLT).

Qmedia's potential customers have very exacting requirements. They're folk like ABC and Fox that want to shunt around studio-quality video, occupying bandwidths of up to 270 Mbit/s among broadcast stations, production studios, and other media facilities. They also need a variety of multicasting options so that video can be distributed to several places at once.

After testing, Qmedia has picked Net Insight's gear for this purpose. In a draft press release announcing the contract, Russ Hamm, Qmedia's founder, says that Net Insight "has cutting edge technology specific for media networks."

Net Insight appears to have found a niche market for its products in specialized media networks. Kostak says it's a pretty big niche, claiming there are other projects like Qmedia's on the drawing board -- potentially a multibillion-dollar market.

Dynarc is targeting a much bigger potential market -- one for IP rings in metro networks, which are being standardized by the Resilient Packet Ring Alliance (see Resilient Packet Ring Alliance Formed). The much bigger market, however, attracts much tougher competition, from heavyweights like Cisco Systems Inc. (Nasdaq: CSCO) and Nortel Networks Corp. (NYSE/Toronto: NT), as well as startups like Lantern Communications Inc. and Luminous Networks Inc..

Olov Schagerlund, Dynarc's president and CEO, says DTM helps Dynarc counteract this competition. It enables Dynarc to offer service providers a way of guaranteeing quality of service when carrying TDM (time-division multiplex) traffic such as voice over Dynarc's IP rings, he says.

A big question mark still hangs over whether carriers will adopt resilient packet ring (RPR) technology rather than stick with Sonet or go the whole hog and deploy gigabit Ethernet in their networks. Schagerlund is convinced they will, noting that almost half of the standards proposals in the RPR Alliance come from carriers.

Schagerlund also points out that Dynarc has already secured contracts to supply its IP ring equipment to seven carriers. And Dynarc has already notched up its own eight-figure contract -- a deal worth $18 million with Sweden's Song Networks, formerly called Tele1 Europe AB.

— Peter Heywood, Founding Editor, Light Reading

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