Metro DWDM Game Heats Up

Healthy competition is shaping up among Nortel Networks Corp. (NYSE/Toronto: NT), ONI Systems Inc. (Nasdaq: ONIS), and Ciena Corp. (Nasdaq: CIEN) in the metro DWDM market.

Earlier this week, Nortel announced upgrades to its Optera Metro 5200 DWDM platform. And new numbers from Dell'Oro Group show that Ciena is gaining on the top two players in the market: Nortel and ONI.

The latest version of the Optera Metro 5200, a product that’s been around for about two years, includes new hardware that will enable it to scale to 10 Gbit/s, which will allow it to support Sonet/SDH, OC192, STM64 and 10-gigabit Ethernet applications.

The addition of 10-Gbit/s functionality comes out of necessity, say some analysts. Competitors ONI and Ciena both have already announced 10 Gbit/s on their platforms.

"ONI has been shipping its 10-Gbit/s product for a couple of quarters at least,” says Rick Schafer, an analyst with CIBC World Markets. "That’s one of the differentiators between them. Nortel had to add 10 Gbit/s.”

This is a critical time in the metro DWDM market. For the first time in its short history, ONI has lost market share there. According to the Dell'Oro report published last week, ONI’s market share dropped to 26 percent in Q3 from 34 percent in Q2 (see Dell'Oro Plots Ups and Downs). Nortel kept its number one position with 37 percent of the market, the same as the previous quarter.

The biggest surprise is Ciena’s gain in market share. It was the only company to increase market share from Q2 to Q3. It jumped to 23 percent in Q3 from 18 percent in Q2. Ciena, which has a strong long-haul DWDM product, now seems to be making headway with its metro platform, MultiWave Metro. Even though the product has been around for a few years, competitors like Nortel have criticized it as a scaled-down version of the company’s long-haul product. But judging from these new numbers, carriers don’t seem to mind.

For the third quarter, the entire metro DWDM market declined about 25 percent, according to Dell'Oro. This is the first decline ever for this market. And the future doesn’t look much better. This year, the entire DWDM metro market is estimated to be $676 million, which includes actual numbers from the last three quarters and an estimate for the fourth quarter of 2001. In 2002, Dell'Oro expects the market to grow only about $12 million to $688 million.

Joe Padgett, director of marketing for optical metro for Nortel, says he isn’t worried about competition from Ciena or ONI. "They [ONI] are a novelty,” says Padgett. "They have one decent product out there today. A lot of our service providers have put them in the labs, but when you look at the numbers, we are still leading the market in deployments.”

Analysts and carriers see things a little differently. They applaud ONI for its technological prowess, but note that the product's real issue may be the price tag. During the past quarter, the cost game has played out in Nortel’s favor, particularly in Asia, where carriers are much more cost conscious than their North American counterparts.

"Where we’ve seen Nortel succeed is overseas,” says CIBC's Schafer. “They don’t have the same feature set as ONI, but sometimes the Asian carriers don’t need all that functionality."

Also hurting ONI is the fact that the company still doesn’t have its Osmine certification. This is important for companies selling to RBOCs. ONI officials placed new emphasis on the Osmine process in the last quarter's conference cakk, saying they would spend significant resources on it (see ONI Stock Takes a Hit). The company is also focusing on diversifying its customer. The company has depended largely on sales to competitive local exchange carriers (CLECs), which make up almost 50 percent of its total customer base.

Ciena could also run into trouble down the road as it tries to increase market share, because it hasn’t certified its metro product with Osmine either.

Nortel, on the other hand, announced last month that it has finished its Osmine certification, something the company says helped it land a deal as the primary provider of DWDM technology for SBC Communications Inc. (NYSE: SBC) under a multiyear metro optical contract.

— Marguerite Reardon, Senior Editor, Light Reading
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optblues 12/4/2012 | 7:30:25 PM
re: Metro DWDM Game Heats Up Posted:
The hard part about BLSR is not building a system that offers it (relatively speaking, in comparison to all other facets of a DWDM system development), rather, it's managing QOS issues from the carrier side and dealing with the fact that you just gave up the combination of equipment and path redundancy afforded by UPSR. A line break is OK with BLSR, but a transmit failure just shut off all your traffic... I hope your truck rolls really fast.


This is not true. Optical UPSR and BLSR differences do not limit the protection of equipment failure at the Tx/Rx line side. I can protect both equally in both scenarios. In fact, most vendors are keen on the choice between Tx/Rx equipment failures and fiber/amp failures. The thing is, UPSR can easily be implemented with a simple 2:1 coupler and a dumb 2x1 switch. This doesnGÇÖt protect the Tx/Rx equipment side but is the most cost effective method. If the user chooses to have dual Tx and Rx, then he can PAY for the protection. Likewise, OBLSR can provide equipment protection in a slightly modified form with two Tx units and two Rx units. In BLSR, the use of different wavelengths for the working and protection units and some couplers/switches do the job just as well.

IGÇÖm telling you guys, it goes back to the traffic patterns and the equipment cost. If I can build a dirt cheap, simple to deploy and maintain OUPSR system and it half way meets your traffic patterns, then the providers will buy it over OBLSR. It is that simple. (Stock warrants aside).

Why do you think the RBOCs are so slow to change to new technologies? They have huge, huge systems and networks setup. Throwing a monkey wrench in the works really has a trickle down affect. This is the main reason why they tend to approve new products that behave the same way as the currently deployed systems, just with higher density and more interface options. RBOC=KISS.
gea 12/4/2012 | 7:30:20 PM
re: Metro DWDM Game Heats Up Pigglywiggly wrote:

"So... if it's too hard, that implies that O-BLSR is too expensive and too complicated to deploy... yep, I agree with that."

In your post you seem to show that you are unaware of where commercial SONET BLSR deployment is at. The SONET BLSR is king in any backbone network throughout the world. Actually, there almost isn't another technology deployed in any numerically significant sense. And BLSR deployment in metro areas seems to be hitting the UPSR hard. I've seen some networks that used 2/BLSR in the metro and 4/BLSR in the backbone, and when I asked the NOC guys "where are your UPSRs?" They replied "what's a UPSR?". But of course, it'll be a long time before UPSR disappears from RBOC networks.

However, a SONET BLSR is a ferociously complex critter (RBOC=KISS...No.), if you've ever looked under the hood of a BLSR or the Telcordia standard, you'll may pass out when you see the K1K2 signaling going on. And that's just for starters. And each BLSR node is EXPENSIVE.

From this analysis, Pigglywiggly would conclude that no BLSRs would ever get deployed, but the fact is that they save LOTS of MONEY compared to UPSRs, both because of the shared protection bandwidth as well as the ability to run "extra" traffic over that bandwidth prior to a PS event.

ONI has basically developed an optical BLSR which is probably a LOT simpler than a SONET BLSR, and for high-wavelength count environments, its going to save a LOT OF MONEY over 1+1s, even though PER NODE its more expensive and a hell of a lot more complicated. So "simplicity" in 2001 doesn't mean a lot to carriers that want to cut costs, and are not exposed to the internal complexity of a product. They expect it to work.

And again, routers and ethernet switches don't like 1+1...they have no problem link aggregating the "working" and "protect" channel to get double the bandwidth, then sending the data over the surviving link in the event of a failure. 1+1 can't support this, but shared protection schemes can.

moguefett 12/4/2012 | 7:30:06 PM
re: Metro DWDM Game Heats Up hey, maybe I am a true believer. But I didnt suggest you buy a thousand shares. Im in it for the excitement, not the money. My salary yields more than capital gains on any amount of shares of CORVIS would be worth.
As far as someones post reguarding my lack of knowledge and basis for BS proclamations, let me tell you...I make comparisons solely on fortified grade A, angus beef. Im there. And Im here, merely conveying the truth. Or is it that truth is lost in the translation. The rest of your life after you read this post is up to you. Just try to make it a good one while you can.
Love and Peace
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