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Billions and billions. If the late astronomer Carl Sagan was reborn as a telecom analyst, his famous refrain would apply equally to the red-hot optical networking sector as it did to the vastness of space.
Instead of billions of stars and galaxies, however, Sagan would be crowing about the growing billions of information bits optical components send through the world's networks, and the billions of dollars in market capitalization that many optical networking companies, some of them relative newcomers to Wall Street, enjoy today.
Shining stars in the sector include Corvis Corp., which has inked deals with Broadwing, Qwest Communications International Inc. and Williams Communica-tions and wields a hefty market cap of $20 billion even with no announced revenues, according to Aberdeen Group senior analyst Andrew McCormick. And upping the ante significantly in July was optical component maker JDS Uniphase, which made a stunning $41-billion bid for SDL Inc., a developer of optical laser components.
But there also are optical networking companies engaged in good old-fashioned deal-making, primarily Ciena Corp., which according to Salomon Smith Barney Inc. has 37 customers, more than all the so-called next-generation players (everyone but Cisco Systems Inc., Lucent Technologies and Nortel Networks) combined.
The driving force behind the exploding growth of optical networking is the world's insatiable appetite for bandwidth to deliver Internet-based applications and services. Just as you'll never hear anyone complain that their Internet connection is too fast, the demand for more and more capacity is theoretically open-ended with no foreseeable limits.
"In three years, we'll be installing as much capacity in our network every single day as we currently have today," said MCI WorldCom spokeswoman Linda Laughlin.
Upstart carrier Level 3 Communications Inc., which has been laying 12 fiber conduits along its long-haul routes, is not yet finished with its first fiber cable "pull," but has announced plans to fill a second conduit, according to Jack Waters, Level 3's group vice president of global architecture.
Each cable contains, on average, 96 fibers. The company is using Nortel's 32-channel, OC-192 (10 gigabits per second) system. Within its metropolitan-area networks, the company has buried between eight and 10 fiber conduits.
"We're practically doubling the capacity on the network on a quarterly basis," says Al Vanthilt, senior director of network engineering for Qwest. "We're generating wavelengths (of light) at an unprecedented rate."
Fueling this astronomical growth in network capacity is a "very rapid technology introduction into the marketplace," says Jeff Kiel, vice president and general manager of Sycamore Networks' core switching division. The accelerated timeline from product conceptualization to shipping has been reduced to between nine and 12 months, says Kiel.
Advances in optical networking technologies have been rolling out of the laboratory and into the marketplace with light-speed velocity. In late September, Sycamore introduced an optical transport system that it said sends laser-generated optical signals up to 4,000 kilometers without optical-to-electrical-to-optical signal regeneration.
In June, Qwest said it trialed Nortel Networks' OC-768-40 gigabit per second-optical networking platform and successfully combined four 40 gbps signals using Dense Wave Division Multiplexing (DWDM) for a total capacity of 160 gbps. Both Sycamore and Tellium Inc. say they can optically switch 1.6 terabits and 1.28 terabits, respectively, of data traffic using their equipment.
Optical switching and transmission technologies are the warp drives helping network operators re-engineer their pipes for the crushing demand for bandwidth that streaming media, Napster-like services, e-commerce and business-to-business applications are generating.
However, the networks that are carrying much of the Internet traffic today were for the most part engineered for voice services, using Synchronous Optical Network (SONET) transmission. "Internet traffic drives that whole architecture nuts," says Steve Alexander, senior vice president and chief technology officer for Ciena Corp.
Today's networks "can't keep pace with the growth of data," says Kiel.
While optical networks themselves are nothing new-carriers have been building optical networks for at least 20 years-the on-again, off-again, or "bursty" nature of Internet traffic, versus the steady predictability of voice traffic, has sent engineers searching for better ways to send large volumes of traffic from one place to the next.
Chris Nicoll, vice president of networking research firm Current Analysis, points out that traditional phone circuits maintain a constant bandwidth channel from one end of a voice call to another, eating up a relatively large amount of bandwidth, much of it going unused, such as in the brief silences that occur during a call.
And while it's easy to predict that Mother's Day and Sundays will be high-traffic periods for voice, Internet events, such as last year's infamous Victoria's Secret virtual fashion show, crashed servers and networks unprepared for the demand. The demand for packet-based Internet and data-centric bandwidth is much harder to predict and accommodate.
For example, this fall's Summer Olympics in Australia required a one-month need for high-speed Internet and data connections. That presented network providers with a huge challenge: provision high-speed circuits quickly, and when usage patterns change, be able to re-direct or move capacity around to serve other needs and customers.
The answer to the dilemma is intelligent software. Sycamore, for instance, provides not only the heavy metal to send and switch vast amounts of data from coast-to-coast, but also the "intelligence," or software, to provision and manage traffic flows.
Today's networks must incorporate the intelligence to be able to pass wavelengths off, based on their destinations, at various points along a network's route. It's important for carriers to "take a wavelength out of the core and drop it on somebody's doorstep," said Alexander.
While optical networking was born and raised for long distance transmissions, technologies are coming to market that boost the capacity, speed and flexibility of fiber networks that sit between end users, such as enterprises and office parks, and the long-haul backbones.
ONI Systems Corp. focuses on metropolitan networks that connect long-haul backbones to enterprise users. According to Rohit Sharma, ONI's chief technology officer, business users are often wired with Ethernet local area networks running at 10 or 100 megabits per second, but are usually connected to the outside world with much slower connections, such as T1 lines running at 1.5 megabits.
In addition, "As you get closer to the consumer, the diversity of services increases," says Sharma. Those services may include Ethernet, Internet Protocol and Fibre Channel protocols. To address the delivery of these various protocols over a single fiber, ONI has developed a transport system and wavelength multiplexer.
The new class of emerging carriers, such as Qwest, Enron Broadband Services, Level 3 and Williams, are building new fiber networks and are not beholden to old SONET-based architectures or the vendors, such as Lucent and Nortel, that traditionally serve those network providers. That gives companies such as ONI, Corvis and Ciena an entree into this lucrative market.
With Nortel quoting CIBC World Markets Telecom Services estimates that the demand for wholesale bandwidth will generate over $60 billion in optical services in 2004, compared to an estimated $13 billion this year, there will be plenty of incentive to keep pushing the envelope for more and more speed, increased channel counts on DWDM systems, capacity and network intelligence.
Nortel, according to Rob Keates, director of solutions marketing, has combined key acquisitions, such as the purchase of pure optical switch maker Xros Inc., with internal optics research and development "to drive forward the all-optical network." Faced with a market seeing a 100-fold growth in bandwidth demand, Keates says carriers are forced to adopt new technologies more quickly to meet that demand.
For a sector already stoked with soaring demand and intense competition to develop faster and more intelligent optical technologies, the future looks very bright. "I don't see an end to it," McCormick says. "If you can create the bandwidth, someone will create an application to fill it. The sky's the limit."
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