December 3, 2002
Nortel Networks Corp. (NYSE/Toronto: NT) today uncorked the OPTera Metro 4150, the latest version of its OPTera Metro 4000 series platform for the SDH market (see Nortel Intros Optera 4150).
Fizz -- or fizzle?
The answer calls for a look at the status of the SDH market and Nortel's position in it. That market comprises service provider networks in Europe, the Asia/Pacific region, and Central/Latin America. In contrast, North American networks are based on Sonet circuitry (see Sonet (Synchronous Optical NETwork) and SDH (Synchronous Digital Hierarchy)).
With today's announcement, Nortel's adopting a pitch familiar to anyone who's been tracking the SDH market -- namely, that service providers can build more efficient metro networks with so-called next-generation SDH platforms that combine add/drop multiplexing and crossconnect capabilities with multiservice interfaces. A particular niche of interest includes products for networks based on STM4 (622 Mbit/s, equivalent to Sonet OC12) and STM16 (2.5 Gbit/s, the equivalent of OC48) SDH connections, which are common in city networks.
It makes sense that Nortel's determined to increase its sales in this space. For one thing, the next-gen SDH market's doing better overall than its Sonet counterpart. Despite a sizeable downturn in sales this year, market researcher KMI Corp. estimates that the SDH market is liable to range from US$4 billion to $5 billion in 2002 (KMI hasn't tallied the figures yet). Sales in the Asia/Pacific account for an ongoing flow of greenfield installations.
Growth is expected to stay steady. "We expect the SDH market to be flat to pretty decent in 2003," says KMI analyst Michael Arden.
Nortel also enjoys success in SDH. According to KMI, it holds roughly one quarter of the market, following closely behind Alcatel SA (NYSE: ALA; Paris: CGEP:PA), which dominates with roughly one third of sales, and Lucent Technologies Inc. (NYSE: LU), whose share is a bit more than that of Nortel but less than Alcatel's. (Again, KMI hasn't tallied exact market share figures yet.) Other next-generation SDH players include Marconi plc (Nasdaq/London: MONI) and Siemens AG (NYSE: SI; Frankfurt: SIE).
A dark horse in the next-gen SDH market is Cisco Systems Inc. (Nasdaq: CSCO), which announced an SDH version of its ONS 15454 this summer (see Cisco Sees Euros in SDH ). Being late to the party could be a drawback, but Cisco is always a force to be reckoned with.
What does Nortel's new platform offer that will help it win against competitors like these?
"I think this is the most compact, highest density mux available," says Howard Thomas, product manager at Nortel. Thomas admits he's not ready to make specific comparisons, though. And the further one delves into feature-by-feature match-ups, the hazier things get.
Indeed, Nortel's OPTera Metro 4150 doesn't seem distinguished in some key areas from its peers. Its aggregate capacity is 6.25 Gbit/s, compared to 5 Gbit/s for Alcatel's 1650 SMC, a comparable product. And like Alcatel's device and Lucent's Metropolis ADM Multiservice Mux, the OPTera Metro 4150 supports multiple ring terminations, any-to-any connectivity, and grooming at the VC12 (2 Mbit/s) level.
Nortel seems to fall a tad short on the number of multiservice interfaces offered for the new box. The vendor supports 10/100-Mbit/s Ethernet now, but won't have Gigabit Ethernet or Fibre Channel connectivity until the first half of 2003. Alcatel, in contrast, already has Gigabit Ethernet and also offers ATM.
Alcatel underscores this distinction. "What we're seeing in RFPs is... that everyone in the [European Telecommunications Standards Institute (ETSI)] market space requires multiservice capabilities," says Thomas Fuerst, senior director of global solutions for Alcatel's Optical Networks division.
Fuerst doesn't downplay the importance of Nortel's role in the European SDH market, however. And he indicates that ongoing success for any vendor depends on having new features at the right time. Alcatel, he hints, is "talking" about adding packet ring capabilities in 2003, for instance.
Nortel claims that 20,000 Metro 4000 series customers, including a range of carriers in Europe and Asia, have the potential to upgrade to the 4150 (see Nortel Breaks Into India, Nortel Posts UK Metro Win, and Powercor Australia Chooses Nortel). Nortel says 12 customers already have done so.
But the race is clearly on: Alcatel says it has more than 30,000 next-gen SDH devices installed, and Lucent claims 25,000.
Ultimately, success for Nortel's new offering could depend on a subtle combination of factors, including how receptive existing customers may be to staying with a previously chosen vendor. Individual network vagaries will also factor in: Some service providers, for instance, may not need Fibre Channel. Others may pass on ATM. Pricing, ever a complicated issue, will certainly play a role as carriers opt for some features and forego others.
One thing seems clear, though: With this announcement, Nortel's focusing on a market that seems healthy, particularly when it comes to the STM4 and STM16 niches.
"Next-gen SDH will be strong compared to other market segments," says Alcatel's Fuerst, "especially in the metro."
— Mary Jander, Senior Editor, Light Reading
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