Supercomm Preview, Part I
Heavy Reading's analysts have been combing the Earth for new and interesting telecom networking technology, and now Light Reading's editors have asked our resident analysts to put together a preview of what they expect to see next week on the shores of Lake Michigan.
This preview will be presented in two parts. Part 1, an overview of access and transport technologies, runs today. On Monday, we’ll take a closer look at wireless and convergence technologies.
Here’s Part I of the big themes that our analysts expect to see at Supercomm:
IPTV & Its Network Impact
After languishing for years as a quirky, niche technology, all of a sudden IPTV is generating some of the industry’s loudest buzz. Yes, the potential is huge. Although networks optimized for IP video services are being deployed today on a relatively small scale, primarily in Europe and Asia, the planned North American rollouts are poised to help fuel the expected tenfold subscriber growth over the next several years.
However, the IPTV market also presents some significant challenges for service providers. First of all, they need sufficient access bandwidth in place to support it. The RBOCs have made it clear that GPON is the technology of choice for many of the next-gen broadband access buildouts, and vendors such as Alcatel (NYSE: ALA; Paris: CGEP:PA) will look to evolve their ADSL technology with next-gen products in support of this trend. As service providers pursue the goal of boosting bandwidth past 20 Mbit/s per home, the impact on the aggregation and IP service edge network will be dramatic. The network, in short, will have to become “smarter.” There is still much debate about how to distribute intelligence throughout IPTV networks.
Most vendors have similar, but never identical, ideas about how to solve this problem. Dominant DSLAM vendors such as Alcatel want intelligence in the DSLAM. Core IP specialists such as Juniper Networks Inc. (Nasdaq: JNPR) and Cisco Systems Inc. (Nasdaq: CSCO) would rather keep more intelligence in the edge routers. The bottom line is, there are many different ways to design an IPTV network.
Some vendors are pushing Ethernet/IP DLSAMs, high-density Gigabit Ethernet aggregation switches, and video-centric broadband service routers/B-RASs. The horde of vendors going after these markets includes Alcatel, Cisco, ECI Telecom Ltd. (Nasdaq/NM: ECIL), Juniper, Redback Networks Inc. (Nasdaq: RBAK), and Riverstone Networks Inc. (OTC: RSTN.PK). Several themes will be consistent: higher system capacity, higher-density Gigabit Ethernet interface support, and high-availability architectures in support of new real-time service requirements. The network edge market is poised for a shakeout, and IPTV is the application that will cause the tremors.
— Rick Thompson, Senior Analyst, Heavy Reading
Ethernet Services & Equipment
If you're looking for a bright spot in the telecom industry, look no further than what's happening in Ethernet services. Carriers of all stripes have said in recent months that they have been experiencing double-digit year-over-year growth in Ethernet revenues. And in just the last few weeks, three carriers – one national operator and two regional players – told Heavy Reading that they are on track to blow past 2005 Ethernet revenue targets and have had to reset the sales bar higher for the rest of the year.
One of the unfortunate side-effects of all this growth is that it is fueling an explosion in the number of Ethernet service offerings, which will inevitably jack up competitive pressure. At Supercomm, you'll hear operators looking for equipment vendors to help them deal with these pressure by extending their service reach to more customer locations, delivering higher-performance services, supporting a wider range of value-added applications, and controlling network infrastructure and operating costs.
I expect quite a few carriers to highlight deployments or planned deployments of multipoint Ethernet services, given that this is the hottest part of the market right now. These services can be delivered using Ethernet switches/routers with MPLS and VPLS features or Sonet/SDH systems with RPR functionality. As for switches and routers, Cisco Systems Inc. (Nasdaq: CSCO) obviously plays strongly here, but the names to watch are really Alcatel and Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA), both of which have been gaining good traction with feature-rich switch/router products.
On the RPR front, while relatively few operators – including AT&T Corp. (NYSE: T), Cablevision Systems Corp.’s (NYSE: CVC) Lightpath, and PPL Telecom – are deploying the technology today, interest has picked up over the past six months from RBOCs and others. Cisco and Nortel Networks Ltd. (NYSE/Toronto: NT) are strong RPR players, while Lucent Technologies Inc. (NYSE: LU) and others are fighting for market share.
There has also been an explosion of interest in Ethernet access technologies in the past year, with dozens of operators evaluating platforms that support Ethernet over fiber and/or copper. Expect a lot more of this at the show. Carriers are interested in using these relatively cheap solutions to extend their Ethernet networks, control service operating costs, and provide a common and ubiquitous network. Startups seemingly generating the most buzz in this market include Anda Networks Inc., Covaro Networks Inc., Hatteras Networks Inc., and Overture Networks Inc. (which just announced a partnership with Juniper). Also making noise are Actelis Networks Inc., Ceterus Networks, Metrobility Optical Systems, MRV Communications Inc. (Nasdaq: MRVC), Paradyne Networks Inc. (Nasdaq: PDYN), RAD Data Communications Ltd., Verilink Corp. (Nasdaq: VRLK), and other creatively-named companies.
— Stan Hubbard, Senior Analyst, Heavy Reading
MPLS Migration at the Network Edge
MPLS technology and its various applications present some of the toughest questions to be raised at Supercomm. The biggest question may be its use in access networks and just how critical this is to operators. More importantly, if they have a strategy and application in mind for the technology, how do they implement it? Heavy Reading has talked with more than a dozen service providers about this topic in the past three months, and we have found this to be one of the most daunting analytical tasks ever.
Operators are of many different minds. Some want to move customers off legacy services onto Layer 3 IP VPNs. Others want to preserve legacy services, but improve their margins by tunneling them through the IP/MPLS core using pseudowires. A third strategy is to preserve access circuits but evolve the service using a Layer 3 MPLS VPN structure in the core. Yes, the mind spins trying to form a useful opinion when advising vendors. Do everything! There is a session on pseudowire solutions Monday afternoon that could hold some answers, and we'll be seeing some of the latest multiservice switch and edge router solutions first-hand on the floor.
ROADM is the buzzword of the day in optical, but is anyone really deploying the stuff? The answer is certainly yes, but the hype created by large RFPs from SBC Communications Inc. (NYSE: SBC) and Verizon Communications Inc. (NYSE: VZ) has stirred the optical pot to the point of excess. Too many vendors are still competing for this rather small piece of the pie, which continues to suffer the enervating mix of unreasonable pricing pressure and advanced feature requirements - multi-degree wavelength switched nodes, with GMPLS, mesh networking, integrated Sonet switching, automated amplifiers, dispersion compensation, wavelength switching, performance monitoring, you name it, all at a price premium of zilch, zip, nada. Sounds like fun, eh?
Fujitsu Ltd. topped our recent ranking of ROADM system vendors, so Heavy Reading will be catching up with it, plus the other contenders, including Alcatel (and partner Tropic Networks Inc.), Lucent Technologies Inc. (NYSE: LU) (and partner Movaz Networks Inc.), Mahi Networks Inc., Meriton Networks Inc., and of course Cisco, which is quietly chipping away at the metro DWDM market with its 15454 MSTP platform. It'll also be worth seeing what ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) and Huawei Technologies Co. Ltd. have to offer. They are building momentum in the optical market and will undoubtedly have to be reckoned with.
There are a number of questions that will (hopefully) be answered at Supercomm this year. Such as: Now that RBOCs have all the regulatory relief they've ever asked for, what's next? Will their keynotes now call for the end of video franchise requirements?
How well is Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) doing? It won the BellSouth Corp. (NYSE: BLS) business for FTTC; it continues to forge ahead at Verizon, winning business all over the world with its 8800 routers from the Vivace acquisition; and it continues to succeed with the 5500 DCS, which everyone counted out in 2000. Those wins seem pretty big, so why does it seem as though everyone – most noticeably Wall Street – has a sinking feeling about the company? Kind of a puzzle, and I plan to investigate first-hand. [Ed. note: Light Reading plans to investigate as well, including conducting an interview with Tellabs CEO Krish Prabhu.] Back at Supercomm 1993, the buzz was the presence of cable TV equipment suppliers, the promise of a telco "video dialtone," and the first wave of real convergence between telco and cable. This year, look for a new twist: No real mergers between telco and cable companies, but you'll still see Scientific-Atlanta Inc. (NYSE: SFA), Motorola Inc. (NYSE: MOT), and Harmonic Inc. (Nasdaq: HLIT) touting video gear for telcos. This year, the saviors of the RBOCs are IPTV and FTTP, but I can't help harkening back to 1993, when Bell Atlantic announced its intent to merge with TCI, then called it off six months later, then took a full decade to develop a new video strategy. Will this time around be any different?
Another big question: Are Nortel and Lucent really turning into wireless equipment suppliers? Well, since they are very involved in the VOIP infrastructure market, actually the answer is no; but it's still a question worth keeping in the back of one's mind as you sift through the pile of press releases from each vendor at this year’s Supercomm.
And the final question for the day: Is bowling really the right theme for a Light Reading party?
— Scott Clavenna, Chief Analyst, Heavy Reading