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Broadband gear
Broadband services aren't quite here yet, because cable and DSL services are still in the early stages. There's a reason folks are spending billions on revenueless fiber optic companies. It's about rolling out the next generation of networks.
The combined use of the global Internet and the World Wide Web is clogging up existing public telecommunications networks. As electronic mail, commerce, application hosting, telephony, and real-time multimedia become a routine medium for businesses and consumers, demand for additional high-capacity network access technologies will increase substantially.
RHK, Inc., an industry research firm, estimates that North American data traffic capacity reached 350,000 terabytes per month in December 1999, compared to just 50,000 terabytes per month for voice traffic in the same period. Data traffic capacity is expected to increase to approximately 16 million terabytes per month in 2003. Internet traffic alone is growing by approximately 200% per year. So public network bandwidth will have to increase at least as fast to satisfy tomorrow's Internet and other data traffic requirements.
Today's networks generally use fiber optic cables and connections, which use light, rather than electricity, as a communications medium. These cables are connected to equipment that filters, amplifies, and switches the streams of data carried by the light flowing over the network.
Network service providers currently use two primary methods for managing and transporting traffic within their optical networks — SONET/SDH for operational features and DWDM for additional capacity.
Synchronous Optical Network (SONET) in North America and Synchronous Digital Hierarchy (SDH) in Europe and other countries are based on standards that govern the management of traffic within an optical network. SONET/SDH equipment aggregates multiple, low-speed signals into higher-speed connections for transport across the optical network.
Dense Wave Division Multiplexing (DWDM) is an optical transport technology that dramatically multiplies the amount of traffic that can be carried over a fiber optic network by dividing each beam of light into multiple discrete channels. Service providers have widely deployed DWDM technology to relieve capacity bottlenecks within their long-distance networks.
The problem with this is that as hundreds of channels are added and changed across the network, complexities and inefficiencies increase. DWDM equipment alone is incapable of performing key SONET/SDH functions that ensure reliable network operations, including performance monitoring, fault location, and service restoration. For this reason, service providers have typically deployed both SONET/SDH and DWDM equipment in their optical networks.
The limits
There are many key limitations to the existing network architecture.
SONET/SDH systems were originally designed to support voice traffic. They convert and aggregate multiple dedicated voice channels into higher-speed channels. Sure, this provides quality delivery of traditional voice traffic, but it's inefficient for unpredictable and dynamic data traffic that does not fit neatly into channels. SONET/SDH standards cannot support huge data traffic spikes efficiently at a reasonable cost.
SONET/SDH equipment typically uses ring architecture to connect several intersections or nodes in a network. If there's a single fiber cut or a single equipment failure between two points on the ring, this structure immediately redirects the signal through the reverse "protection path" of the ring. This makes sense, but it takes months to test and deploy. Also, every SONET/SDH service channel is duplicated on a backup channel, which forces half of the overall capacity of the network to be dedicated to backup capacity that is rarely used.
Current network upgrades are difficult and expensive. All the SONET/SDH equipment in a given part of the network must operate at the same speed. If a service provider increases the speed in one part of the network, every other part of the network must be replaced with new and costly equipment in order for the upgrade to be effective. This takes months of intense planning and deployment.
Each new DWDM channel must be permanently connected or "hardwired" to the existing network, a time- and labor- intensive process. These permanent connections limit the ability to respond to service requests quickly. Service providers must therefore route new services across their networks in inefficient ways, using more equipment and connections and creating more points of failure in order to achieve the desired connection.
So you can imagine that current networks are difficult to provision. They contain large numbers of individual pieces of equipment, each of which must be separately configured, connected, and reconnected in response to every new customer order. These efforts require a "truck roll," a process where technicians are dispatched to multiple locations in the network to reconnect paths, install hardware, and configure software, often requiring hundreds of separate procedures. Provisioning time is often measured in months and requires the efforts of a large, highly skilled workforce equipped with specialized tools and knowledge.
Another strike against SONET/SDH equipment is that it currently requires substantial central office space and power, which becomes problematic as the network expands. As a result, space for equipment has become scarce and expensive. The increase in the amount of equipment has also resulted in additional power consumption, cooling requirements, and other overhead costs.
Because of these limitations, service providers face considerable costs in building and managing networks, costs that are unlikely to be recovered over an acceptable period of time. Each delay in service delivery means lost revenue and lower customer satisfaction.
To date, the steps that service providers have taken to address these limitations have largely been tactical and incremental, such as buying more fiber, installing new SONET/SDH rings, increasing the speed of existing rings, and employing more DWDM to increase fiber capacity. Service providers are seeking more strategic solutions that remove these limitations by upgrading the architecture of their optical networks in a cost-effective manner.
Networking
Bottom line: service providers need to migrate to a new network architecture optimized for data rather than traditional voice traffic. It must support the delivery of optical services, anywhere, at any time, to any customer. Emerging service providers need a network architecture that allows them to grow quickly with relatively low up-front capital costs. And they need reliable, modular equipment that reduces operating expenses while maximizing revenue opportunities.
The new network must allow service providers to rapidly provision and restore high-performance bandwidth to end users on a real-time basis, while significantly reducing manual provisioning and other time-intensive processes. As competition increases, the new network must be flexible enough to allow service providers to differentiate themselves and increase revenues by providing their customers with new value-added services. The operational and maintenance costs of the new network must also be lower than the current architecture with respect to "truck rolls," personnel, space occupied, power consumption, and cooling requirements.
The new system must allow service providers to reduce the amount of equipment required to deploy and expand the network, so they can reallocate capital and assets for new services and additional capacity. And it must be flexible enough for continual upgrades.
Today's network architectures are generally fixed in nature. So their ability to implement breakthrough technologies such as all-optical switching is limited. Service providers need a consistent and upgradeable solution without major disruptions to the design of the network.
Given the many pressures that service providers face, they do not want to risk their networks by deploying unproven technology or products. So new solutions must have been thoroughly tested and verified in previous deployments and comprehensive testing and evaluation.
After Nortel warned of slower revenue growth, the fiber industry took a beating. Stocks like Avanex (AVNX:NASDAQ), New Focus (NUFO:NASDAQ) and Corvis (CORV:NASDAQ) have fallen dramatically.
Are fiber optics just a fad with investors, or will this be a growth sector for many years to come?
Fiber optics will be hot for a while. Optical networking is very different from previous fads like Web communities, Linux, and content. In general, infrastructure stocks seem to be a good bet on the continued growth on the Internet, because regardless of what gets bought and sold or what people watch and read on the Net, there is a real need to make the pipes that transmit all the data better and faster. There's huge potential here.
Please read on...
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