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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