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Optical/IP

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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razeredge 12/5/2012 | 3:56:44 AM
re: Optical's Future Looks Brighter Is an optical vendor? Where?
paolo.franzoi 12/5/2012 | 3:56:44 AM
re: Optical's Future Looks Brighter http://networks.nec.co.jp/engl...

There is this country called Japan. They have the worlds largest single carrier called NTT. NEC supplies this carrier (and others as well) with equipment.

seven
optiplayer 12/5/2012 | 3:56:42 AM
re: Optical's Future Looks Brighter I love it when people ask for others to do research for them to prove or disprove their silly theories.

Anyway, according to Dell'Oro, NEC did over $500M in optical business last year similar to Siemens and Cisco but well behind market leaders Alcatel and Nortel. Of that, 80% was in Asia.
razeredge 12/5/2012 | 3:56:42 AM
re: Optical's Future Looks Brighter Good one...the point was where outside of Japan? ie: Europe, US, etc.

Since you brought it up, can you point me to recent wins in Japan? Anything is the last 5 years would be good.
Scott Raynovich 12/5/2012 | 3:56:41 AM
re: Optical's Future Looks Brighter NTT is no longer the largest!
optiplayer 12/5/2012 | 3:56:41 AM
re: Optical's Future Looks Brighter "And $500M would be about double Cisco's optical revenue....."

Not according to D'O which is a reliable source from my experience. Cisco did north of $550M and a bit more than NEC.

BTW, my comments on people looking for others to do there research was directed at "razeredge" not you.
paolo.franzoi 12/5/2012 | 3:56:41 AM
re: Optical's Future Looks Brighter
You asked if NEC was in the optical business. They clearly are. I am not sure why you don't think they have a business, but they do. I looked up their website to point at their products, took me about 3 minutes. You can look up the rest. Unless that ability escapes you, then I suggest you give up.

And $500M would be about double Cisco's optical revenue.....

seven
Scott Raynovich 12/5/2012 | 3:56:40 AM
re: Optical's Future Looks Brighter via revenue, yes, you are right.

Via Market Cap Vodafone is the largest.
paolo.franzoi 12/5/2012 | 3:56:40 AM
re: Optical's Future Looks Brighter
Still bigger than AT&T after it buys BellSouth (which has not happened yet).

I am real sure Cisco does a lot less optical than $500M.

seven
PO 12/5/2012 | 3:56:29 AM
re: Optical's Future Looks Brighter "There is an average of 10 percent server utilization ... who actually buys 10 times as much as they actually use?"

Who cares what the average utilization is? It's the wrong metric. Your car might average about 8% utilization. Or, if you count by passenger space, maybe 2% at most. Does that mean you shouldn't own a car? Do roadways which are almost empty for much of the day have too much capacity?

At any instant, a link or a cpu is either busy or it's idle. 100% or 0%. The question isn't what the average utilization is (over some arbitrary time interval), but rather how long the 100% intervals last. (I.e. what's the max delay between idle intervals?) Communications capacity requirements are dominated by peak occupancy, not minimal occupancy.

If a server averages 5% load for 148 out of 168 hours in a week, and 50% load for the remaining 20 hours, it'll exceed 10% average utilization for the week. And at 50% load over four hours every weekday, services are likely to experience notable delay.

Who builds a successful business by making customers wait?
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