Cable Tech

Wavelength Services Catch On

Announcements this week from leading carriers highlight the growing popularity of wavelength services, in which optical wavelengths are packaged as bandwidth products. But the jury's still out on their potential impact, and service providers are keeping their hopes to themselves.

Global Crossing Ltd. (NYSE: GX) announced this morning that it's launched a worldwide wave service, one that allows carrier customers to tap 2.5- or 10-Gbit/s connectivity among "more than 90 cities in Asia, North America, and Europe" (see Global Crossing Crosses Globe).

Separately, Level 3 Communications Inc. (Nasdaq: LVLT), which also claims international wave services, says it's sealed a pact with America Online Inc., the Internet division of AOL Time Warner Inc. (NYSE: AOL), by which AOL will buy wavelengths in North America, private lines between North America and Europe, and colocation services in six U.S. cities (see Level 3 Wins AOL Contract).

Neither Global Crossing nor Level 3 would provide many details of the announcements at press time. Information was particularly skimpy regarding the Level 3/AOL deal, about which AOL hasn't issued a release at all.

"We prefer to let the services speak for themselves," says America Online spokesman David Theis.

So far, they're mute. Carriers apparently aren't willing to tip their hands in this most competitive -- and distressed -- of markets. "They hate to provide revenue figures of any kind, but especially for new services where adoption is only beginning," says Nick Maynard, senior analyst at The Yankee Group. If carriers can't show more than a handful of customers for wave services, Maynard says, they'd rather say as little as possible.

Wavelength services, in which service providers lease wavelengths of a fiber strand owned by another carrier, offer a money-saving alternative to Sonet and private-line services. They represent a market forecast to grow an order of magnitude over the next five years, reaching a high of nearly $8 billion by 2005, according to the Yankee Group.

Scott Clavenna, president of PointEast Research LLC and director of research at Light Reading, says the savings from wave services are compelling enough to win converts, despite the fact that they don't yet offer the protection schemes or net management of Sonet (see On the Crest of a Wave).

"Wave services help service providers get a bigger bang from their shrinking capex budgets – not only because they're less expensive than Sonet connections, but also because they can be provisioned much more rapidly," Clavenna maintains.

Analysts are careful to point out that wave services won't be a panacea for the current capex downturn. "We've had confirmation of our forecasts, and some even expect growth to be brisker than estimate," Maynard says. "But wavelength services [alone] aren't going to reinvigorate the market."

Still, investors are clearly thinking waves will help carriers whose outlooks have been rickety. In trading today, shares of Level 3 shot up 0.84 (14.74%) to close at 6.54; and shares of Global Crossing rose 0.04 (2.37%) to 1.73.

Maynard says long-haul wave services, such as those offered by Level 3 and Global Crossing, will account for the lion's share of revenues over the next few years. Other long-haul players include America's Fiber Network (AFN), Broadwing Communications Inc. (NYSE: BRW), Genuity Inc. (Nasdaq: GENU), and Williams Communications Group (NYSE: WCG). Qwest Communications International Corp. (NYSE: Q) has pledged offerings too.

Metro carriers with wavelength services are set for growth rates comparable to those for long-haul, albeit on a smaller scale. Providers include Sigma Networks Inc., Sphera Optical Networks Inc., Telseon Inc., and XO Communications Inc. (Nasdaq: XOXO).

— Mary Jander, Senior Editor, Light Reading
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optigirl 12/4/2012 | 7:31:13 PM
re: Wavelength Services Catch On I'm sorry but how in the world can anyone realistically predict growth rates like these people are claiming? Hey, don't get me wrong, I'd love to be able to find some companies to invest my dwindling 401K into but these estimates are well past the realm of absurd.

The last thing we need are more so called experts strapping on pom-poms and cheerleading for their clients.
HarveyMudd 12/4/2012 | 7:31:13 PM
re: Wavelength Services Catch On Only small carriers have announced to provide wavelength services. These carriers are not able compete in the traditional communication services so they are trying something new. It is not clear how popular the service would be. The biggest problem that small carriers face is the reliability of the service.

The market for wavelength services to the tune of $8 Billion is very hard to believe.

The succcess of the carriers will depend largely on the vendors from which service providers procure their equipment.

To the best of my knowledge, Nortel Networks can provide quality equipment that can support SLA, various topologies and end-to-end connectivity.

Consultant 12/4/2012 | 7:31:12 PM
re: Wavelength Services Catch On The previous message contains a significant amount of nonsense. Carriers such as Level3 has clearly shown their ability to compete in
"traditional telecom services." The company has gross margins of 64% on 2001 revenues in excess of a billion dollars. And yes, it is out of the woods.
rjmcmahon 12/4/2012 | 7:31:11 PM
re: Wavelength Services Catch On The succcess of the carriers will depend largely on the vendors from which service providers procure their equipment.

Can you elaborate on this statement? What's more important, reliable technology or the terms of the vendor financing?

Its hard to see a vendor doing what International Harvestor did with farming, i.e. increasing the yield of the land while locking the farmer to working the land (via long term debt on the farm equipment) since technology itself seems to be the perishable good.
edgecore 12/4/2012 | 7:31:08 PM
re: Wavelength Services Catch On This was huge about 2 years ago when companies like Williams and MFN started testing the waters with it...back by network planners from NT and SCMR who would swear that this was the end all and be all of the connectivity services (flexible protection mechanism...i.e. potected, user protected with a seperate route on an ATM or IP network, or unprotected). It was also supposed to be the best way to offer short term capacity in a hurry without being tied down to 15-20 year leases).

It came to a point last year where every service provider we talked to wanted to know more about lambda services because it seemed to be a good way to move forwrad in the carrier carrier space!

In the long haul it was easier to price, positioned between dark fiber and leased lines, you would end up with a DS0/mile price below the OC48/192 leased line price...but that is commodity and dropping fast!

One of the interesting issue was how to price lambda services in the metro...would you price it based on what it was carrying? In the end a lamda is a lambda, should you charge less because it carries GbE and charge more because it carries Fibre Channel? That became a hot topic because the market was so green and immature...

Transparency was also an issue when trying to take lambda services from the metro to the LH.

Managed Lamda services also had the whole "security/paranoid" issues of big customers not wanting their wavelength to share the same fiber as other companies around the block! Isn't that why Giant Loop came out and started to offer the whole private managed network thing?

But what managed lambda did do ii they did offer a new service to the non telco/dataco types such as the utility companies and the railroad companies that were looking to diversify...and guess what..these companies actually have money! So along with the regular connectivity services such as DS3 all the way up to OC192, managed lambda would help diversify their service portfolio.

Not convinced on the future of this service! Provisioning on demand, flexible contract lengths and differentiated protection schemes all sound cool...but only time will tell!

cnliii 12/4/2012 | 7:31:06 PM
re: Wavelength Services Catch On is the "new" wavelength services offering really just a shorter time frame IRU? This is still a commodity product, right? As opposed to managed services which Qwest, LVLT and GX all want to move toward.

please clarify.

thank you.
Shareholdervalue 12/4/2012 | 7:31:06 PM
re: Wavelength Services Catch On I don't think these claims are all that absurd.

The key to unlocking this is making it possible to sell services for shorter and shorter terms. Today's problem is that if you want an OC-48, you'd better want it for a year, because that's all you can buy. When (not if) carriers get the ability to offer services on a more ad-hoc basis, revenues will increase dramatically. It's simple economics.
BOD Analyst 12/4/2012 | 7:31:05 PM
re: Wavelength Services Catch On Who supplies the Customer Premises equipment for wavelength services -- the SP or the customer? It would seem that the equipment choice will dictate the types of services (e.g. GigE, ESCON, DS3, or SONET rate). There is a need to control the optical signal (wavelength stability, power level) as it can affect other signals on the same DWDM network.
betterfastercheaper 12/4/2012 | 7:31:04 PM
re: Wavelength Services Catch On Dark fiber is probably the least value you can deliver to a customer, and fully managed IP, VPN, application hosting, risk management, etc are areas of more value. Wavelength is an intermediate step above dark fiber, offing greater granularity of service delivery (terms, bandwidth, etc). I don't see how wavelength services satisfy all, or a big majority, of customer requirements - it does, however, serve a specific market segment neededing a specific feature set/price point.

The more granular a carrier can break down its services/features, the more options it has for price discrimination because it can tailor its offerings to the needs of specific segments. I would argue, furthermore, that effective price discrimination should be an important goal of today's carriers since it benefits both the customer and the carrier. To effectively price discriminate, a carrier should look at wavelength services as one part of a portfolio of services, each addressing particular needs and priced accordingly. In this light, wavelength services (or other) can have indirect effects to the profitability of the entire portfolio that cannot be appreciated by analyzing the merits of wavelength alone.
edgecore 12/4/2012 | 7:31:04 PM
re: Wavelength Services Catch On The SP will decide where he wants to terminate the service, and that will also dictate where he can do PM on the service as well.

Most wave services have been long haul, so in a C.O. or PoP you would interconnect an OC192, or an OC48 or 12 GbE to the transponders (or sub rate transponders) of the SP offering the service.

In this case, you have to patch panel your way over to the SP's LH DWDM system from your cage!

In the metro, you would still need to have the SP drop a box at the enterprises site, or within his building (in the case of an MTU..you know the whole BLEC thing). A pizza box type of product or a low wave count DWDM box would be the best.

The enterprise customer getting the metro wave service wiould simply hand over a fiber to the SP managed DWDM box on site.

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