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Shutdowns Send Dark Message

Light Reading
News Analysis
Light Reading
2/13/2001

Lack of funding has skewered the plans of several next-generation Internet startups in the past few weeks -- sending a clear warning that an economic slowdown in capital funding isn't just talk.

In a veritable St. Valentine's Day Massacre on the IP front, a trio of startups have expired or fallen badly during the past week alone, including would-be global bandwidth supplier 1CyberNetwork Ltd., IP switch vendor Point Reyes Networks Inc., and IP provisioning vendor IPHighway Inc.

In all three cases, backers have pulled the plug on further funding. That other startups are getting record rounds (see GiantLoop Lassos $120 Million, $60M to Fuel IntelliSpace Expansion, Astracon Has $25M Round Two, Codeon Raises 37 Million, and Yipes Closes $200M C Round) indicates that investors are getting choosier about which companies will be funded and which ones won't (see Optical Investment Expected to Slow).

Here's a summary:

  • Last week, 1CyberNetwork closed the doors of its worldwide headquarters in Rockleigh, N.J., and dismissed its employees in the final act of a long, sad drama. The project, started originally in 1997 by entrepreneur Neil Tagare as Project Oxygen, called for creation of a worldwide fiber optic network covering 300,000 kilometers and more than 170 countries.

    Tagare, who'd originally helped launch FLAG Telecom Ltd., hoped to finish the project by 2003. But his budget of $10 billion to $14 billion was nearly impossible to fund at a single blow, despite support pledges from the likes of carriers AT&T Corp. (NYSE: T) and Telstra Corp. and backing from VC firm Pacific Century CyberWorks (PCCW). By May 2000, PCCW put the project on life support, changing its name and mission. By that time, however, huge amounts of market share had gone to nimbler carriers -- such as Global Crossing Ltd. (NYSE: GX) -- whose business plans were less challenging. Life support was pulled, and the project breathed its last.

  • In the case of Point Reyes, being turned down for a second round of funding has sent the switch vendor scrambling. "We're looking into our options," said a company source who requested anonymity. If the firm can't raise the money somewhere else, it may have to sell its technology.

    Point Reyes was seeking to gain a foothold in the competitive and still-very-new market for switches that use multiprotocol label switching (MPLS) to create more profitable IP networks for carriers (see The Service-Aware Switch). The vendor faced stiff competition from Tenor Networks Inc., and it needed big bucks to get the job done.

    "To enter the MPLS core switch market is very tough, very expensive," says Scott Clavenna, president of PointEast Research LLC and director of research at Light Reading. Among other things, companies must build line-rate OC192 packet processing into their wares, he says -- a costly proposition.

  • IPHighway hasn't folded yet, but spokespeople there confirmed today that the company has laid off its sales and marketing force -- in an effort to face up to a disappointment about venture funding. "The capital markets have been very difficult for the past three months," says VP Paul DeBeasi. "Basically, it's lengthened our fundraising time."

    Some analysts think pulling the plug on IPHighway is premature. "They have some great folks; they were modifying their software for the carrier market," says David Passmore, research director at The Burton Group. He thinks IPHighway already has the goods and that it's "silly" for VCs to look elsewhere for provisioning startups. "They just basically have to give their enterprise QOS package a lobotomy," he quips.

These are just the most recent examples of an overall slowdown in capital funding that's spelling doom for a number of startups. At the end of January, IronBridge Networks Inc. underwent a restructuring (see IronBridge Has Fallen Down). Other funding casualties include Digital Broadband Communications (see Digital Broadband Fades Away) and Britain's Aduronet (see AduroNet Goes Bust).

-- Mary Jander, senior editor, Light Reading http://www.lightreading.com

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smokbel
smokbel
12/4/2012 | 8:54:09 PM
re: Shutdowns Send Dark Message
I heared from a Villa Montage employee that they're closing the doors. Any truth to that?
jackofall
jackofall
12/4/2012 | 8:54:08 PM
re: Shutdowns Send Dark Message
Heard that empowertel (VoIP switches) is also shutting down.
netskeptic
netskeptic
12/4/2012 | 8:54:05 PM
re: Shutdowns Send Dark Message
Considering the spectrum of companies involved. I would say it is an encouraging sign of going back to reality.

I am holding a deep belief that all talks about QoS over IP beyond diffserv is nothing else than a bunch of a hot air (1) without any hope to ever work and (2) even without any hope to provide any functional edge over diffserv combined with the possibility to configure on demand host-to-host routes over CBR SVCs.

I am also holding a deep belief that VOIP is a bad solution in search of a problem to solve. With the ongoing DWDM bandwidth explosion there is no problem to keep a couple of waves in the bunch for voice traffic. I would suppose one could make a goal of producing cheaper/more effective TDM gear, but apparently this equipment is not sexy enough.

Just a personal opinion of a guy from the trenches.

Thanks,

Netskeptic
realdeal
realdeal
12/4/2012 | 8:54:04 PM
re: Shutdowns Send Dark Message
Any truth to the rumor that Cisco is on a 60 day hiring freeze?

I hear they continue to interview people but are NOT making offers for 60 days and NOT calling it a hiring freeze- what else would you call it????
gogi
gogi
12/4/2012 | 8:54:03 PM
re: Shutdowns Send Dark Message
I heard that too yesterday thru someone working there.
mn66
mn66
12/4/2012 | 8:54:00 PM
re: Shutdowns Send Dark Message
DiffServ for internet and if it ever makes it.

What carriers are looking for is a technology that will allow them to replace their current ATM backbone with a new IP/MPLS backbone which will allow them to sell bandwidth pipes or connectivity with certain SLA between two customer locations or multiple customer locations.

Internet is not necessarily tied to this private carrier backbone.

If you like TDM , there is nothing that will change your mind. But enabling technology to break the TDM boundaries and push TDM only to the edges (such as DS3/T1 that are used to interface with customers) and eliminate TDM in the backbone altogether and bring in packet backbone is what needs to be done to reduce
1) simplify provisioning as well shorten provisioning times
2) simiplify network management so that you don't have to hire people with 15 years of experience with M3100 or some junk CMIP background and cross-connect experience
3)unified network so you need less team size to operate the network and hence more cost effective and possibly pass on the benefits to customers

I don't think I am going to convice you that what Point Reyes was about to do is to enable a paradigm shift that might have really enabled carriers to offer more services with less number of routers.

netskeptic
netskeptic
12/4/2012 | 8:53:59 PM
re: Shutdowns Send Dark Message
It seems like I was misunderstood: I was writing mostly about IPHighway and the crop of protocol vaporware it is promoting, and you are talking about some serious carrier traffic engineering problems, whihc is (almost) unrelated matter.

Actually, there are only few (and relatively minor) points of disagreement:

1. I do not think that it would possible to completely replace TDM with packet switching. So, I see low-cost TDM switch with human face as a very sizable branch on the big tree of the network evolution.
2. While MPLS is an important technology by itself and it is here to stay, however, it is not going to solve traffic engineering problems at the carrier level.
3. Nobody (at least there is no visible hype about it) is even trying to address real traffic engineering problems.

Thanks,

Netskeptic


toolsoup
toolsoup
12/4/2012 | 8:53:59 PM
re: Shutdowns Send Dark Message
Tenor alread has all of this and @ oc192 rates
mn66
mn66
12/4/2012 | 8:53:58 PM
re: Shutdowns Send Dark Message

1. TDM in the backbone is going to go away , whether you like it or not. Level 3 , no TDM, GBLX no TDM. Williams probably are going in that diretion. To be competitive carriers have use technologies that are cost efficient otherwise they are going to go out of business.

2.If FR using lots of TDM cross connects costs 1500$/month and the same qaulity of connectivity can be provided at 300$/month with packet backbone I think the carrier who is offering such service is going to attract customers. The driving force is cost efficiency.

3.If you are talking about traffic engineering problems that carriers have that no body can solve I would not accept. Many algorithms can be applied to solve specific traffic engineering problems.

If you point to some papers/references that explain what are the challenges carriers are facing in terms of TE I can provide some comments.
Otherwise I tend to think TE can be solved within the framework of current efforts in MPLS-TE and if you have specific inputs , you should be able to influence those efforts.

It is not enough to say, it can't be solved. First you have to provide a set of sepcific problems and point to lack of solutions for those problems in the current efforts at IETF or elsewhere. Vague problems have no solutions anywhere.

netskeptic
netskeptic
12/4/2012 | 8:53:58 PM
re: Shutdowns Send Dark Message
> 1. TDM in the backbone is going to go away ,
> whether you like it or not. Level 3 , no TDM,
> GBLX no TDM. Williams probably are going in
> that diretion. To be competitive carriers have > use technologies that are cost efficient
> otherwise they are going to go out of business.
>
> 2.If FR using lots of TDM cross connects costs
> 1500$/month and the same qaulity of
> connectivity can be provided at 300$/month with
> packet backbone I think the carrier who is
> offering such service is going to attract
> customers. The driving force is cost efficiency.

You would not be able to run reasonable quality voice over packets, at least it will be as ineffective as running it over TDM - I may be wrong on this issue, however, I did not see anything contradicting this opinion so far.

And I do not need to be convinced that everything else should go over packets.

> 3.If you are talking about traffic engineering
> problems that carriers have that no body can
> solve I would not accept. Many algorithms can
> be applied to solve specific traffic
> engineering problems.
>
> If you point to some papers/references that
> explain what are the challenges carriers are
> facing in terms of TE I can provide some
> comments. Otherwise I tend to think TE can be
> solved within the framework of current efforts
> in MPLS-TE and if you have specific inputs ,
> you should be able to influence those efforts.
>
> It is not enough to say, it can't be solved.
> First you have to provide a set of sepcific
> problems and point to lack of solutions for
> those problems in the current efforts at IETF
> or elsewhere. Vague problems have no solutions > anywhere

There is a ton of junk science piled around QoS issues since the early ATM days. If the problem is just to find a right algorithm, how come that there is still no commonly accepted solution around ?

Do you think that RSVP and COPS make any sense ? I suppose that you do.

It seems like the only way for you to accept my point of view is through the market rejection of these remarkable new toys and for me to accept yours is through the huge market success of the same new toys. So, let us not argue things we cannot prove to each other.

I had just expressed my opinion. I would add only that so far my batting average in early detection of stillborn technologies was pretty high (but it was not perfect either).

Thanks,

Netskeptic

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