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Internet Photonics Touts VOD

Light Reading
News Analysis
Light Reading
3/31/2003

Internet Photonics Inc. made its first big customer announcement and unveiled a new product today, in a move aimed at promoting its stance as a video-on-demand (VOD) supplier (see Internet Photonics Intros GSLAM).

The news reflects Internet Photonics' rather broad focus in the optical Ethernet market -- as well as the risks it's taking to make its mark.

Let's start with the announcements: Internet Photonics says Cablevision Systems Corp. (NYSE: CVC), a major supplier of cable TV in the New York area, has over 200 pieces of the startup's equipment installed in its network. More gear will follow, the vendor says, via a "multimillion-dollar, multiyear" contract. Cablevision is using the gear to support VOD services, whereby customers can order videos from the cable operator directly, as an alternative to "pay per view" (movies at pre-set times) or the corner video rental store.

Internet Photonics also introduced a large-scale version of its optical Ethernet transport system. The new product is called the Gigabit Services Line Access Multiplexer (GSLAM). And while the new box is not being used by Cablevision at present, it contains the same technology that's inside the gear Cablevision is using.

Specifically, the GSLAM implements a technique Internet Photonics calls "Sonet wraparound," which lets MSOs set up 10-Gbit/s Ethernet links on their Sonet fiber -- without changing or disrupting Sonet rings. Internet Photonics announced the technique shortly after boosting its total funding to $63 million last year (see Internet Photonics Pipes in $31M).

The approach addresses the oft-stated goal of MSOs: to compete with local exchange carriers by supplying "triple play" voice, video, and data services on one network -- without, however, building new facilities to run the value-added services.

"If an MSO is moving cable modem traffic around the ring currently using Sonet, they can add a layer of Ethernet transport for video-on-demand traffic to the same ring using CWDM," says Scott Clavenna, president of PointEast Research LLC and director of research at Light Reading. The nice part is they don't have to spend a whole lot more to make it happen.

"It is fairly unique, an interesting approach," says Sterling Perrin, senior research analyst at IDC. "Carriers don't want to rip out what have in place... This could allow them to defer spending on multiservice provisioning platforms."

The downside, Perrin notes, is that there is lots of competition in the market Internet Photonics is addressing -- or, rather, the markets it's addressing, plural. The startup is now pitching cable MSOs, but its equipment is meant as an alternative to other CWDM-based metro platforms for telcos as well.

Indeed, today's announcement emphasizes VOD, but Internet Photonics says its gear also works equally well running voice or data over Ethernet services on Sonet rings.

This strategy pits the 16-month-old startup first against a slew of large, established vendors. To start with are players that supply DWDM gear to MSOs -- including behemoths Motorola Inc. (NYSE: MOT) and Scientific-Atlanta Inc. (NYSE: SFA). It's also aiming to surpass a growing range of folk with CWDM-based metro gear, such as ADVA AG Optical Networking (Frankfurt: ADV), Alcatel SA (NYSE: ALA; Paris: CGEP:PA), and ECI Telecom Ltd. (Nasdaq/NM: ECIL), to name just a few (see CWDM Products Proliferate). And then there are the RPR suppliers, such as Cisco Systems Inc. (Nasdaq: CSCO), Nortel Networks Corp. (NYSE/Toronto: NT), and Luminous Networks Inc.

You get the picture: David and Goliaths.

There's something else: VOD, the application touted by Internet Photonics as a killer app for MSOs, doesn't stand out as more important than voice or data to some observers. "There's no one killer app," says Terry Barnich, president of New Paradigm Resources Group Inc., a telecom research and consulting firm.

Still, Barnich says MSOs are working to get bundled triple-play services to market, so it looks as if Internet Photonics has picked the right spot to start growing a customer base. Only time will tell if its technology can outsell big rivals across a broader range of takers.

— Mary Jander, Senior Editor, Light Reading

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