Telecom's Green Alert
Heavy Lifting Analyst Notes Stan Hubbard, Director, Communications & Research, MEF 7/3/2008
We face a crisis that is crying out for innovative telecom solutions to real-world problems. You don't have to run a Google (Nasdaq: GOOG) data center or become green and touchy-feely to get your mind around this issue. Consider just a few macro data-points.
This week, Bloomberg reported that that the price in 2009 of power in Germany, Europe's biggest electricity market, climbed to a record of €89.9 ($141.60) per megawatt-hour. That is up a whopping 46 percent since the beginning of 2008 and 108 percent in the past three years. Electricity in nuclear-powered France also hit an all-time high – trading at €93.3 per megawatt-hour.
In June, USA Today reported that utilities throughout the U.S. plan to crank up electricity prices by as much as 30 percent to help counter the impact of a doubling in the price of coal since mid 2007.
While telecom players have talked about the need for space and power savings for many years, I get the sense that a growing number of service providers, equipment vendors, and component suppliers are now waking up to the energy issue.
Power consumption definitely was a key topic at NXTcomm 2008, following on the heels of the announcement by Verizon Communications Inc. (NYSE: VZ) that it is establishing energy-efficiency standards for network, data center, and customer premises equipment. Verizon has set a target for new optical, switch, router, and other gear to be 20 percent more efficient by January 2009. Qwest Communications International Inc. (NYSE: Q) and AT&T Inc. (NYSE: T) reportedly support the concept of such standards. BT Group plc (NYSE: BT; London: BTA) and NTT Communications Corp. (NYSE: NTT), meanwhile, already have well established initiatives to cut energy use and carbon emissions related to network operations.
On the vendor front, energy efficiency has popped up in the context of competition between different solutions in the same network layer and between products in different network layers. For example, Juniper Networks Inc. (NYSE: JNPR), ECI Telecom Ltd. , and Alcatel-Lucent (NYSE: ALU) have indicated that they see energy efficiency as an important differentiator when competing against gas-guzzling legacy switches and routers. ADVA Optical Networking , meanwhile, has highlighted that using Layer 1 transport in as much of the network as possible can provide significant energy savings compared to a heavy reliance on Layer 3 routers that require processing power for IP look-up and forwarding.
We can look forward to more energy-related telecom marketing in the coming months, especially if oil and coal prices remain at stratospheric levels.
— Stan Hubbard, Senior Analyst, Heavy Reading