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DWDM

Long-Haul Lag Lingers

It may come as no surprise, but let’s make it official: the long-haul market lag is here to stay.

A Probe Research Inc. report released late last week states that revenues for long-haul optical equipment in 2002 have dropped more than 50 percent compared to last year (see A Long Haul for Long Haul).

And Probe says the decline is here for the -- well, let's say it --the long haul. The sector won’t pick up at all until 2004, says Maria Zeppetella, the vice president of optical infrastructure at Probe and the author of the report. She sees revenues in the sector reaching $6.1 billion in that year. Sadly, she doesn’t expect revenues to surpass their 2001 level in the foreseeable future: even in 2007, revenues will total only about $9.2 billion.

Long-haul optical equipment, which allowed carriers to build high-capacity global fiber optic networks, was a focus of the telecom boom in 1999-2001. In 2001, the long-haul sector cashed in $10.3 billion, representing 51 percent of total revenues in the optical market, the report states. In comparison, revenues in the long-haul market will barely reach $5 billion in 2002, accounting for about 45 percent of all optical revenues, says the report.

The report, based on interviews with many service providers, points out several factors contributing to the freefall. Topping the list is the enormous glut of capacity already in the ground.

"The most important reason was over-capacity," Zeppetella says. "If you don’t need any more optical equipment in your network, you’re not going to buy any more. All the long-haul networks are already built."

Unrealistic traffic growth projections from the likes of UUNet receive much of the blame for setting the ball in motion in the first place. These aggressive projections led service providers to overbuild their networks, which in turn led equipment vendors to create large inventories (see Did WorldCom Puff Up the Internet Too?).

Service providers have been forced to come to terms with more realistic average growth rates of about 100 percent annually (compared to the 1,000 percent annual growth rate UUNet was claiming in the late 90s), Zeppetella writes in the report. In addition, she says, service providers have far less cash than they did during the boom years. [Ed. note: Don't we all!]

Other factors that have contributed to the lack of confidence in the sector include questionable accounting practices, investor skepticism, and an inability to offer profitable new data services, the report states. Offering some hope, Zeppetella says that some service providers have at least been indicating that they’re getting more of a handle on how to make data services more profitable.

Another tiny bright spot shining through in the report is that the WDM market outside the U.S. and Europe grew from 2001 to 2002, jumping from $332 million to $403 million. In North America, the WDM long-haul market was the hardest hit.

Looking to the future, Zeppetella observes that the new market reality has changed the focus of R&D, as well. Instead of focusing purely on creating the fastest and coolest technologies, labs are now concentrating on developing products that will cut operating expenses.

— Eugénie Larson, Reporter, Light Reading
www.lightreading.com
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achorale 12/4/2012 | 9:19:06 PM
re: Long-Haul Lag Lingers achorale wrote:

> Existing carriers have no choice but
> to continue building on what they have.
> Once a piece of equipment is integrated
> in the network and carrying traffic they
> will not, never, take it out to migrate
> to a new cool technology, no matter how
> big the operational savings. They will
> never touch traffic carrying equipment
> and they will never throw anything away

of course, even my evil twin would agree that
carriers do End-Of-Life legacy gear ...
particularly that which is found to have
reliability issues. depending on the
severity of the issues presented by the
legacy equipment, the provider might either
outright replace the gear or take a more
incremental cap-and-grow approach.

> Unfortunately for us "high-tech innovative
> and operationally advanced equipment" vendors,
> solving the operational efficiencies can only
> be done by throwing the existing network away
> and putting our stuff in.

certainly greenfield buildouts are rare,
prompting carriers to typically require an
elegant migration strategy to be in place
before any new element will be given any
serious consideration for deployment. at
any rate, any startup that either breaks
the existing operational models (whether
field operations or OSS usage) or fails
to provide a NSA approach to device
migration is a smoking crater waiting
to happen.

achorale

- a schizophrenic is never alone ...

Prizm 12/4/2012 | 9:19:02 PM
re: Long-Haul Lag Lingers "Existing carriers have no choice but to continue building on what they have. Once a piece of equipment is integrated in the network and carrying traffic they will not, never, take it out to migrate to a new cool technology, no matter how big the operational savings. They will never touch traffic carrying equipment and they will never throw anything away"

Get real! If this were true, our POTS lines would still be handled by mechanical stepper switches and long distance calls sould still be carried over DS3's!
achorale 12/4/2012 | 9:19:01 PM
re: Long-Haul Lag Lingers "Get real! If this were true, our POTS lines would still be handled by mechanical stepper switches and long distance calls sould still be carried over DS3's!"

Sigh ...
lightmaster 12/4/2012 | 9:18:58 PM
re: Long-Haul Lag Lingers Yes, RBOCs will adopt new technology, but not disruptive technology (i.e. disruptive to their networks). A rule of thumb I like to follow is this:

An architectural change internal to the product, or at least confined to the part of the network being "improved" is OK. Don't make anything else in the network change.

Example: You want to give me a SONET ADM that is cheaper, faster, and easier to install? Do you use the latest and greatest switching technology inside? Great, but don't tell me to manage it with SNMP and provision it with MPLS because I'll have to change my whole network management system. And don't tell me that it has to run on a packet ring instead of SONET because that will mean replacing a lot of stuff around it, including test sets, etc.

<<   <   Page 4 / 4
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