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Orchestream Banks on QoS

Light Reading
News Analysis
Light Reading
6/21/2000

Software vendor Orchestream Ltd. http://www.orchestream.com launched a global public offering of stock to institutional investors today, and shares are expected to start publicly trading on exchanges next week.

A company spokesperson confirmed the offering but declined to discuss the details, citing quiet-period regulations in the United States. The company on Wednesday sold 42 million shares to institutional investors in the U.K., U.S., and Europe, according to Reuters. The offering gave the company a $322.9 million valuation. Shares are expected to start publicly trading on the London Stock Exchange some time next week

Orchestream, which develops Quality of Service (QOS) management software for end-to-end management of enterprise and carrier networks, priced shares near the top of expectations. But with enthusiam for Quality of Service (QOS) fading, it might be time to wonder if Orchestream's vision of tiered levels of telecom services will hold water in the long term.

Two years ago, when Orchestream was just getting off the ground, QOS and policy-based management were all the rage. The concept looked great on paper: Telecom carriers would charge more for a premium service that guaranteed delivery of IP traffic, while other customers would pay less for best-effort delivery. Network devices would be managed by one central system (Orchestream's Provider Edition). This would ensure that time sensitive traffic would get the guaranteed bandwidth needed to make it through the network (see Orchestream Gives Carriers More Quality Control ).

Nice idea. But some critics of the technology point out that slicing up the bandwidth alleviates congestion and can lead to the lower-level customers receiving essentially the same service as the more expensive levels--thus, one group of customers pays for the benefit of the entire network. "If you get rid of the congestion, everybody ends up getting the same service," says Tom Nolle, president of CIMI Corp. http://www.cimicorp.com, an independent consultancy.

This phenomenon and other QOS complexities has led to some providers like Cogent Communications Inc. http://www.cogentco.com rejecting QoS in favor of using optical networking to unleash enormous amounts bandwidth (see The Fat Pipe Formula). These providers say that throwing more bandwidth into the network is the simplest and most cost effective way to provide next-generation services.

There is also a third point of view that says neither QOS nor more bandwidth is the answer. "The problem is not a technology problem, but a business problem," says Nolle. "Carriers won't offer high-quality IP services until they figure out a business model for providing them."

Regardless of the debate between QOS pundits and mega-bandwidth supporters, investors in the U.K. seemed to think Orchestream is on the right track. Demand for the stock was nine times as high as the shares that were offered, according to Reuters.

The company reported 411,000 pounds (US $624,000) in revenue as of April 30, 2000 from products shipped in early 2000. It is forecasting revenues around 15 million pounds (US $22.8 million) for calendar 2001, according to Reuters.

by Marguerite Reardon, senior editor, Light Reading

http://www.lightreading.com

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