IXCs Go Metro
By Evan Blackwell
from the May 21, 2001 issue of Broadband Week
Some of the most powerful U.S. long distance carriers have been extending their long-haul networks into the metro area space as a response to sagging long distance voice revenue, and some new research indicates the strategy could bring a huge payoff.
IXCs such as Qwest Communications, Level 3 Communications and Sprint are poised to become huge players in the metro optical arena by linking their long distance networks to local fiber rings and moving closer to the customer. At least, that's the prediction laid out in a new study of the metro optical space by The Strategis Group.
"Many IXCs are at or near completion of their long-haul networks and the metro is very enticing to them," says Rand Haley, a Strategis Group analyst and one of the study's authors. "They're hoping to drive synergies between the networks and drive more traffic to their long-haul networks."
Strategis forecasts that cumulative U.S. metro optical equipment revenue will top $82 billion by 2005. By that time, the report predicts, IXCs will account for 52 percent of that revenue.
Of the major long distance carriers popping up in the metro, Qwest and Level 3 both have gotten praise as frontrunners. Qwest's Macro Capacity Fiber Network spans more than 106,000 miles, and the company already has outlined plans to move into its 25 major DSL metro markets with local fiber connectivity by the end of the year. The company has deployed in about half those areas, with St. Louis coming online last month. Level 3 has completed its optical network buildout into its top 25 markets.
Sprint officially joined the fray late in 2000. When the company forecast its 2001 growth initiatives in November, the FON Group revealed plans to expand into Metro Area Networks (MANs) in its 20 largest metro markets. The buildout is now underway, and Sprint plans to have its first six MANs completed by the end of 2001. Sprint has been studying on a case-by-case basis whether to buy its own fiber, or form fiber-leasing agreements with undisclosed partners.
"We started in Q4, and we've been going through several different steps. There's network planning, ring design and actually lighting the fiber and getting service deployed," says Sue McCanless, director of access planning at Sprint and one of the project's architects. "We're now well into our implementation plan."
Then there are the two largest U.S. long distance carriers, AT&T and WorldCom. The Network Services division of AT&T already has a presence in 71 metro markets (with in excess of 5,000 SONET rings in operation) and is taking fiber to the doorstep of business customers. WorldCom's been offering its On-Net service for the past two years by deploying fiber into buildings over metro rings and carrying customer traffic end-to-end.
All the IXCs say they've entered the metro for many of the same reasons. The access economics are better, they create a closer relationship with the customer and there is explosive market potential for services available in the local areas.
"It really helps us to avoid the outrageous access charges that the ILECs maintain," says Dave Johnson, a spokesman for AT&T Network Services. "It also gives us end-to-end responsibility for our customers. We don't have to depend on an LEC if a fiber gets cut, or any other kind of service problem."
The explosion of the optical metro market also created a place for a company such as FiberNet Telecom Group, a carrier's carrier that's providing optical connectivity in three of the U.S. markets with the greatest demand for MAN bandwidth: New York, Chicago and Los Angeles. FiberNet picked up on the IXC movement into MANs, and it now counts Qwest and Sprint as two of its customers, among others.
"We focus on the metro piece of the all-optical puzzle," says Trey Farmer, FiberNet's
executive vice president. "The metro has previously been dominated by the ILECs. When the long-haul guys built their networks out, they sort of used a common architecture that allows everybody to ride on top of it, which is more appealing."
As a recent example of its business with the IXCs, FiberNet signed a three-year contract with Qwest in March to serve as an "optical off-ramp" in New York. After a network like Qwest's is extended to the metro, FiberNet connects carrier interconnection points to carrier hotels and premier office properties that house sought-after enterprise customers.
Of course, the IXCs are far from along in the metro. There's plenty of competition to go around, including the ILECs, aggressive CLECs such as Time Warner Telecom and a new set of emerging carriers focused exclusively on providing big bandwidth in the metro. Those companies, which include Telseon and Yipes Communications, all seem to have different business models in the metro area.
But Strategis' Haley says the emerging metro players have one thing in common--the IXCs view them as prime candidates for partnership.
"(IXCs) see the services these guys are offering," says Haley. "They need to capitalize on the phenomenal revenue potential of the services that can be offered with metro optical networks."
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