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Infinera Muscles Into Interoute

Ray Le Maistre
10/30/2006

Optical equipment hotshot Infinera Corp. (Nasdaq: INFN) has secured itself another toehold in Europe with a deployment at pan-European carrier Interoute Communications Ltd. , beating out incumbents Alcatel (NYSE: ALA; Paris: CGEP:PA) and Ciena Corp. (NYSE: CIEN) to win its portion of the deal. (See Interoute Upgrades Network and Interoute Grows With Ciena).

The operator, which provides enterprise services around Europe as well as wholesale services to carriers and ISPs, received new funding a year ago in the form of a €120 million ($152 million) capital investment from Dubai Holding 's Tecom Investments subsidiary. Now it's spending €22 million ($28 million) on an optical upgrade of its 35,000-kilometer network, and is deploying Infinera's DTN platform in Western Europe, and Ciena's CoreStream Agility WDM product in Central and Eastern Europe. (See Interoute, Tecom Partner, Interoute Offers Enterprise VOIP, and Interoute Offers Multipoint Ethernet.)

Infinera's success shows once again it's a force to be reckoned with in the optical world, and that rivals such as Ciena, a six-year incumbent vendor at Interoute, are right to be keeping their eyes on the relatively new company's developments. (See Ciena CEO: Watching Infinera and Ciena's New Contract: No Big Deal, Yet.)

Interoute's CTO, Matthew Finnie, says the carrier added Infinera to its roster of suppliers because the vendor's technology has "unique attributes that meet our specific needs as a wholesaler." Essentially, Infinera's technology is allowing the carrier to add capacity very quickly in large chunks and with much lower operational costs than other systems.

Finnie says the demand for network capacity in Europe is going through the roof, and that Interoute has more than quadrupled its provisioned bandwidth in the past year, from 200 Gbit/s to about 900 Gbit/s. "We had known for some time that an optical upgrade was necessary, but the increase in uptake, driven by demand for 10-Gbit/s wavelengths, caught everyone on the hop."

So Interoute issued an RFP to "renegotiate costs with existing suppliers" Ciena and Alcatel, which had provided the carrier's entire SDH layer. The carrier also invited Infinera, "which had been in touch with us and who we had been looking at for some time," to bid. Finnie says other vendors were also considered, but he declined to identify them.

The CTO says it became clear that Infinera's technology met the operator's exact needs for this upgrade, which is all about lighting new fibers with a lot of capacity quickly and cost effectively, rather than replacing existing deployed systems.

And with the added competition and technical developments of the past few years, Interoute can afford to do a major upgrade. "This would have cost us hundreds of millions a few years ago," he says.

"We're going into operation with Infinera's equipment very quickly over a very large footprint in a region that's growing very quickly. We wanted to pre-provision the capacity as much as possible to cut back on the traditional labor-intensive processes, and we can do that with Infinera's gear," Finnie says. "Because we own the fiber we were able to check in just four weeks what was required and whether we could do it, and now we're lighting up 100-Gbit/s chunks of capacity around Western Europe, and 200 Gbit/s in South-West Europe where the demand is particularly high. We're doing the whole deployment in three months, finishing in January," says Finnie.

He says the key to Infinera's system is the ability to deploy capacity at 100 Gbit/s at a time. "We can load up ten 10-Gbit/s channels at a time -- that's 10 times more than we can do at the moment, and the sweetspot for us is the ability to enable bulk provisioning with a robust system. We've done some brutal testing on this system -- firing up 300 Gbit/s of capacity and the ripping it down again, and the system remains stable. A lot of the optical vendors talk about cool new features, but for us it's all about speed, stability, and reliability. That's a simple proposition, and that's good for us -- we're simple people."

And then there's the operational benefit, adds Finnie. "When customers need more capacity we don't have to send out a team of people driving a van around Europe turning on wavelengths because the capacity is already available. And the demand for that sort of capacity exists now. Nobody in their right mind would put in 100 Gbit/s before because there was no guarantee that the demand was there, but now we know it's there."

Finnie knows, though, that the real test is to come once the Infinera gear is in production and provisioning real customers, such as Europe's incumbent carriers and the region's ISPs.

For Infinera, the deployment is its latest European success. One of the vendor's first customers was German operator Freenet AG , while Level 3 Communications Inc. (NYSE: LVLT) is expanding its network in Europe and North America with Infinera gear. (See Infinera Wins Level 3 Deal and Freenet Deploys Infinera.)

Infinera isn't the only company benefiting from the upgrade, though. While Finnie won't provide any breakdown of the capex spent on the upgrade, Ciena's role in the carrier's Central and Eastern European network, where it is already widely deployed, is also strategic for Interoute, says the CTO, and "it's healthy to have two sources from a negotiations point of view."

Finnie says that part of its network is "the terrestrial back door into Europe," as it is the route that connects the bulk of Europe with Turkey, the Middle East, and northern Africa. Finnie says Interoute is comfortable with Ciena as a supplier. "They understand what we need and we're big enough to matter to them," says the CTO.

Interoute has been expanding further east from its original Western European base with a couple of infrastructure-based acquisitions during the past few years. (See Interoute Buys TPN and Interoute Buys Euro Network.)

— Ray Le Maistre, International News Editor, Light Reading

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