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DWDM

Carriers: Show Me the (Optical) Startups

DALLAS -- Optical Expo 2006 -- Venture capitalists, get your wallets out. Service providers at a panel here today say there is still a need for more innovation in optical networking equipment.

In a panel discussion on optical networking trends and tribulations, representatives from DynamicCity Inc. , Level 3 Communications Inc. (NYSE: LVLT), OnFiber Communications Inc. , and Broadwing Corp. (Nasdaq: BWNG) agreed that they're not opposed to talking to optical networking equipment startups, and would welcome any innovations that could drive costs out of their networks.

The number of optical equipment startups has dropped dramatically from a few years ago. And several optical companies that looked as if they'd beaten the telecom recession -- such as Allen, Texas-based White Rock Networks Inc. -- didn't have enough gas to keep going. (See White Rock Got Rocked.)

But there's still some needs for new technology, and the panelists here say that the larger equipment providers aren't investing enough in research and development to really come out with anything innovative in the near future.

"There are some technologies that I held in my hands in the late 1990s that still haven't made it to productization," says DynamicCity's CTO, Jeff Fishburn.

Fishburn adds that rather than building equipment with service delivery in mind, several equipment makers say, "We need to build it for [Verizon], and try to sell it to everyone else later."

The business reality of attracting investment -- and finding a market large enough to sustain a new product company -- can be daunting. "I wouldn't want to be an optical startup right now," says Mike Jones, CTO of Broadwing.

But there are opportunities. To a man, each of the service providers on today's panel remarked that there are gaps in what's available from the big box vendors -- and startups could fill those gaps.

Tom Issenhuth, Level 3's principal architect for core network development, says there could be a lot of work done in helping service providers "bridge the gap between older data interfaces and Ethernet." This would make data networks easier to manage, he says.

Fishburn adds that there needs to be a different kind of optical crossconnect for fiber-to-the-home buildouts. He says, "The ones designed for transcontinental landings for fiber are not something you'd want to put into a [neighborhood] cabinet."

Not only are there new opportunities, there are new companies demanding bandwidth that simply weren't around several years ago -- and that, in the past, has spurred fits of startup investment. "YouTube and Myspace didn't exist a few years ago, and now they're ordering 10-gig waves," says Issenhuth.

Outside, roaming the corridors of this show, were some serial entrepreneurs who showed up in search of the next big idea -– or investment opportunity. One of those, H. Michael Zadikian, said he feels like he's been away from the industry for years, "but not much has changed."

Zadikian helped sell Monterey Networks to Cisco Systems Inc. (Nasdaq: CSCO) and presided over a four-company startup cluster that attracted millions in venture capital, but later folded. (See Iris Group Attracts $60M and Iris Group Wilts; Metera Next to Shutter.)

Back in the panel session, the sickly odor of bubble-era startups wafted through the room when Scott Raynovich, Light Reading's editor in chief, asked Broadwing's Jones how the company's gear from Corvis was holding up. (See Infinera Gets Corvis (Sort Of).) "They made six switches -- we have all of them," Jones quipped. "They're the most reliable thing in the network, but we don't need any more of them."

— Phil Harvey, News Editor, Light Reading

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Drew Lanza 12/5/2012 | 3:40:19 AM
re: Carriers: Show Me the (Optical) Startups The Government, the Carriers, the big box makers, the components guys, scientists, engineers, VC's and Investment Bankers.

We all share some blame for collapsing the food chain that was the optical telecommunications industry.

There are some surviving startups like Infinera, Calix, Force10, Neophotonics, and a handful of others who were started before the bubble burst and are doing well now.

It's enormously frustrating to hear carriers say that they wish they had more of the 'go-go years' technology now.

Engineers, scientists and VC's 'push' technology. Carriers 'pull' it.

The pipe falls apart if either side stops doing its job.

I'm afraid that the carriers aren't likely to see any of that great technology any time soon.

The network has moved into a low cost, commodity mode of operation. That mode suppresses R&D and is damn hard to reverse.

The carriers are pretty much stuck working with whatever comes out of surviving titans like Cisco and Alcatel and surviving startups like Infinera, Calix, and Force10.

And those companies, in turn, are stuck working with whatever comes out of surviving components titans like JDSU and Bookham, or the rare surviving startup like Neophotonics or Cortina.

Every surviving actor on this stage is thinking, "Fool me once shame on you; fool me twice shame on me."

Drew
OpticOm 12/5/2012 | 3:40:18 AM
re: Carriers: Show Me the (Optical) Startups Agree.
I would never get back in that market.
The downturn was sooo painfull and I will stick to the enterprise market, thank you.
RouterOttawa 12/5/2012 | 3:40:18 AM
re: Carriers: Show Me the (Optical) Startups No to mention that optical networks are sooooo yesterday... Now all the lemmings, er, venture capitalists, are chasing the ``next big thing'' -- biotechnology.

Organic switching anyone?
eyesright 12/5/2012 | 3:40:16 AM
re: Carriers: Show Me the (Optical) Startups ...to not buy from a start up.

1) You have to prove you are financially viable.
2) Here is my (long) list of must haves.
3) Is it OSMINED yet? And no, I won't sponsor you or help pay for it.
4) Have you performed interop with all my legacy vendors?
5) We might test it in the lab, but you have to work with network planning to build a business case before we do.
6) We won't help you build any business case until engineering has proven it in the lab.
optical 12/5/2012 | 3:40:16 AM
re: Carriers: Show Me the (Optical) Startups Btw - White Rock is not based in Allen. It's either Plano, or Richardson. Well, i don't know myself so I shouldn't be correctling anyone but I know it's not Allen.

The carriers can never complain about a lack of startups. They do nothing to assist a startup who has deployable technology other than to tell them "go find a partner." This is all a shame in terms of innovative technology hitting the marketplace!
paolo.franzoi 12/5/2012 | 3:40:16 AM
re: Carriers: Show Me the (Optical) Startups
WoW.....

"...to not buy from a start up.

1) You have to prove you are financially viable.
2) Here is my (long) list of must haves.
3) Is it OSMINED yet? And no, I won't sponsor you or help pay for it.
4) Have you performed interop with all my legacy vendors?
5) We might test it in the lab, but you have to work with network planning to build a business case before we do.
6) We won't help you build any business case until engineering has proven it in the lab."

1 - Yes, we like to bet our $100s of Millions of dollars on a company where we will be 90% of the revenue. We want fixes to the bugs you ship us AND a roadmap.

2 - Yes, we have lots of needs and your product has to do them. You did do market research first before building your product, didn't you? Did you think we were building our business on the idea of deploying your product?

3 - Yes, OSMINE was part of the deal when you started your company. Oh wait, you were planning to sell to the CLECs and now have to "refocus" your company to sell to us.

4 - Yes, I should not have to do your testing for you.

5 - Yes, you are one of 100 companies large and small trying to get my limited attention. This is my way of saying, "Are you kidding me?" but letting your Sales and Marketing guys write up reports about all the "traction" that you have.

6 - See the answer to 5. Add in the comment, "Please build something that actually does anything useful for me instead of something that allows your favorite intellectual pastime to be solved."

Please note that the 3 companies mentioned in the article have a smaller budget for buying telecom equipment than most homes do. I love the whine, "Build me custom equipment for $300M in and I will give you that $1M PO!". If they want new equipment, then have them work together and make a spec. Then, there may be enough business for somebody to do something for all of them.

seven
busted 12/5/2012 | 3:40:15 AM
re: Carriers: Show Me the (Optical) Startups Make it stop, somebody please make this nonsense stop!

douggreen 12/5/2012 | 3:40:15 AM
re: Carriers: Show Me the (Optical) Startups There is plenty of blame on both sides.

Startups:
Most of the "carrier excuses" (big carriers/RBOCS) can be boiled down to this: the benefits that you are offering do not justify the pain that I will go through to deal with a startup. The people at Sprint will tell you that they bent over backwards to work with Ciena on their first DWDM system because 1) they needed it and 2) it was SO far ahead of what anybody else have. If you want customers to help you develop your product, offer them something that SOLVES a burning issue that nobody else solves.

Smaller carrier (like those listed in the article): During the bubble, you seemed more interested in pre-ipo stock than you did in our equipment. In fact, in my first meeting with one of the 4 carriers listed, I was told that our potential for IPO was more important than what the equipment did. The company would make more on an IPO (based on a contract) than they would have to pay for the equipment, so an IPO would justify buying equipment and putting it in a warehouse. The next question was "do you have any advisory board positions that offer stock options? You helped create the scam, and now that the scam is gone, you wonder why nobody is funding anything innovative?
NightTrain 12/5/2012 | 3:40:15 AM
re: Carriers: Show Me the (Optical) Startups Check out these comments, pretty good blog entry about this LR article

http://wrkoss.blogspot.com/
Stevery 12/5/2012 | 3:40:14 AM
re: Carriers: Show Me the (Optical) Startups
It's really hard to read this article without thinking: What goes around comes around.
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