Letter From TIC

Column
Column
Column
12/23/2004



Light Reading’s Telecom Investment Conference (TIC) couldn’t have gone better this year. New York’s Fifth Avenue glittered with giant snowflakes, Rockefeller Center’s tree was, naturally, unnaturally placed among towering skyscrapers, and people inside The Plaza Hotel actually laughed at my jokes (“BT’s 21st Century Network is perfectly named… It gives them 96 more years to get it accomplished.”) You know things are looking up.

Our theme this year was one of optimism – not to be confused with the desperate hopefulness of recent Decembers (see From MeBay to Quadruple Play). This was grounded confidence, with a few good bar charts to back it up. Spending is returning to the telecom marketplace, and capex-to-sales ratios are returning to the historical mean. Attendance is up at telecom events, and folks are actually sticking around to hear what’s said in the last session, rather than just playing hooky in the hallway until drinks are served.

And, strangely enough, the technology of the day is fiber – the same stuff that got the industry into its recent mess. This time, however, the carriers are talking about access fiber – and they appear to mean what they say.

The threat of annihilation by blood-thirsty cable MSOs, coupled with incredibly shrinking regulations, is finally driving RBOCs to follow through on – and actually exceed – their plans for deployment of fiber into the local loop. They are freaking their suppliers out, asking for so much gear the vendors can’t possibly keep up, and freaking analysts out, who have been conditioned to react to every major fiber access announcement with a yawn, a wink to a colleague, and a quick scribble in their notepad: “Add 10 years to this and I’ll believe it.”

And it wasn’t just fiber that we talked about this year. My opening presentation, predictably upbeat, threw out these catalysts for happy times in 2005:

  • Circuit to Packet Voice: This isn’t just about CLECs throwing a softswitch into some collocation space and selling telephone service. It’s the all-out transition from legacy networks to next-generation IP-based networks. BT Group plc (NYSE: BT; London: BTA) is the most appealing example, as its 21CN plan to converge all of its networks under one IP-based system comes with lots of corporate muscle behind the effort – talk and action. Times definitely are improving.

  • Ethernet Everywhere: There are a couple ways to look at the “Ethernet Everywhere” push. First, service providers need to push Ethernet services to remain competitive, plain and simple. Customers are asking for it and will abandon their current provider if it doesn’t respond. IT departments continually require more for less, and Ethernet services are delivering. Time Warner Telecom Inc.’s (Nasdaq: TWTC) Senior Vice President, Mike Rouleau, pointed out that Ethernet actually allows service providers to offer more for less, as they can use a cheaper connection to provide more bandwidth and a broader range of value-added services on top of it.

    Second, Ethernet is also a big part of service provider infrastructure plans. Gigabit Ethernet and 10-GigE will become increasingly important within service provider networks for low-cost, high-speed backhaul from DSLAMs, PONs, and metro services. Within cable MSOs, the story is the same: Operators are moving from DVB-ASI to GigE for video transport.

    Ultimately Ethernet can be envisioned as the universal data link layer, and a single “universal jack” through which operators provision services on demand, from best efforts to premium, with scaleability to a full Gigabit. As Paul Havala of Fujitsu Network Communications Inc. (FNC) recently said, in all seriousness, “If you don’t know Ethernet, you don’t know Jack.”

  • Telco Triple Play: We talk a lot about the Triple Play at Heavy Reading. It’s a big deal. It will be a bare necessity for survival. It isn’t clear, however, how adding video to telco networks will tip the balance in the battle against cable MSOs. This could easily turn into a kind of cold war, in which one group simply tries to outspend the other, ultimately hobbling both under a world of debt and success rates below 50 percent in any one market. This worries me, and though the Triple Play is certainly good for analysts, it remains to be seen if it is good for RBOCs.

  • Virtualization of the Enterprise: This is a big deal, but we don’t cover it much at Heavy Reading just yet, as it involves big changes from non-telecom enterprise players such as IBM Corp. (NYSE: IBM), Sun Microsystems Inc. (Nasdaq: SUNW), and Hewlett-Packard Co. (NYSE: HPQ). Yet just as packet switching has put the “virtual” in networking, the same transformation is occurring in the data center. Terms like I/O, processing, storage, operating systems, and data need no longer be associated with a single physical resource. Instead, smart middleware can abstract all of these elements of computing from the physical and turn an enterprise network, or any network of resources for that matter, into a single virtual computer, file server, or whatever. The results are either pedestrian (better utilization of storage systems) or grandiose (outsourced computing, or back to the future of time-share).

  • Making It Mobile: Consider all the above, without wires.

    Later in the evening, after a wine tasting and costume change, the Leading Lights Awards were presented, and it’s no coincidence that the themes mentioned above played loudest in the winner’s circle (see LR Reveals Leading Lights Winners). Atrica Inc. has the carrier Ethernet story; Vonage Holdings Corp.’s Jeffrey Citron talks the VOIP talk; Acopia Networks Inc. is verging on the virtualized enterprise; Vodafone Group plc (NYSE: VOD) impressed with the magnitude of its 3G rollout; BigBand Networks Inc. is a Triple Play arms merchant...

    The amazing thing about the Leading Lights awards, though, is they revealed how much progress has been made in the last year despite such tough times in the industry. Cisco Systems Inc. (Nasdaq: CSCO), for example, managed to spend the last four years or so and $500 million cranking out an impressive next-generation router architecture with its award-winning CRS-1. And it’s now clear that several startups actually have serious customers and revenues and could be suiting up for IPOs in 2005.

    2005 does look like a good year indeed, one in which for the first time in four years someone may actually point to a North American operator when touting broadband achievements. As I said before the panelists started their stump-speeches, “I’ve been putting up this slide for four Decembers now, but this time I really mean it.”

    Really, I do!

    — Scott Clavenna, Chief Analyst, Heavy Reading

    (2)  | 
    Comment  | 
    Print  | 
  • Copyright © 2019 Light Reading, part of Informa Tech,
    a division of Informa PLC. All rights reserved.
    Privacy Policy | Cookie Policy | Terms of Use