Optical heavyweights gather in New York to plot the new world of booming applications, bandwidth, and flexible networks

April 19, 2006

3 Min Read
Optical's Future Looks Brighter

NEW YORK -- How real is the optical comeback? A packed house of service providers, investors, and equipment vendors here yesterday at Light Reading's Future of Optical conference attested to the fact that it's very real.

Experts said that broadband growth, video services, and wireless communications will drive optical technology forward, and that six years after the telecom crash, operators find themselves in need of upgrades again. (See Optical Stocks Climb Again, 2005 Top Ten: Heavy Findings, and Revenge of DWDM.)

"Optical is coming back -- we've talked to the service providers and it's true, it's growing again," said Heavy Reading Chief Analyst Scott Clavenna. "IPTV and video on demand is really front of mind for the operators."

In addition to IPTV, Clavenna believes that Ethernet services, fiber buildouts, and wireless backhaul will also require new equipment deployments. In the core of the network, many carriers are still using "Vintage 2000 equipment" that may soon need to be upgraded.

The need for a next-generation optical network was the topic covered by Joe Weinman, VP of Strategy and Emerging Services at AT&T Inc. (NYSE: T), in a keynote speech.

In Weinman's world, corporate customers are in need of a more dynamically provisioned network. Higher bandwidth needs and realtime applications require a network that is more flexible, manageable, and able to adjust to changing conditions.

Weinman's described a network consumed with real-time communications, high-bandwidth video, and corporate data processing needs. "Eventually we'll see [mobile access] to standard and even high-definition video. You're going to have multiple drivers, with people interacting several times per day," he said.

The science fiction movie does not end there. AT&T is serious about building an on-demand global network to dynamically provision bandwidth and utility computing for corporate customers, says Weinman. This will also include dynamic pricing of services, such as you find in the airline industry.

"There is an average of 10 percent server utilization," said Weinman. "That's ridiculous -- who actually buys 10 times as much as they actually use? It's like going to McDonald's and ordering 10 Big Macs, but throwing away nine of them because you only need one."

The dynamic, on-demand optical McDonald's will require plenty of new technologies, said Weinman, many of which are already being developed. Specific technologies of interest include equipment that utilizes ROADMs, VCAT (virtual concatenation), G.709 management, and WAN optimization techniques.

The G.709 standard, in fact, was mentioned by several presenters during the conference. The standard, which is being developed by the ITU, will give service providers many important management features for DWDM optical networks that are common to Sonet/SDH networks. The G.709 will also allow service providers to more efficiently manage optical channels without converting them to electrical signals.

Equipment provider presenters, which also sponsored the conference, included ADVA Optical Networking , Ciena Corp. (NYSE: CIEN), Cisco Systems Inc. (Nasdaq: CSCO), Fujitsu Ltd. (Tokyo: 6702; London: FUJ; OTC: FJTSY), BTI Systems Inc. , and NEC Corp. (Tokyo: 6701). They outlined emerging equipment trends in optical networking. Big themes were the convergence of Sonet, Ethernet, and packet-based technologies; ROADMs; and optical management such as G.709.

This just in: Apparently the buzz-phrase for optical networking in 2006 is the "packet friendly optical network." Makes ya feel warm and fuzzy, doesn't it?

So does this mean that a new gold rush is on for optical technology? (See Optical Train Wreck?) This round of investment -- for the service providers and the financial types alike -- may be more rational, and somewhat subdued, says Michael Genovese, an equipment analyst with Citigroup , who attended the conference.

"In the optical market, a sustainable 10 to 15 percent annual growth has developed, which is actually new," says Genovese. "It looks like the overall market is finally fairly healthy. That said, from a systems vendor perspective, I'm still somewhat cautious considering the number of competitors in the market and that fact that their products, roadmaps, and marketing pitches all look pretty much the same."

— R. Scott Raynovich, Editor in Chief, Light Reading

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