Even before Cisco plonked down $6.9 billion for small start-up Cerent, the demand for optical switching has precipitated a worldwide R&D race to develop a satisfactory technology for switching devices.
Corporate laboratories have initiated R&D programs, and entrepreneurs with promising ideas have been funded by venture capitalists.
This excitement has led to a plethora of new technology options which will result in a surplus of bandwidth and equal opportunity for voice, video and data, while some new products will focus on directing the surplus bandwidth where and when it is needed.
The crest of a wave
The initial deployment of Dense Wave Division Multiplexing (DWDM) in backbone applications has intensified the need for optical switching to achieve the benefits of optical communications. Although optical systems can transmit terabits per second of information across great distances, the data streams must be converted into electronic signals for switching and routing.
DWDM is an optical technology using several lasers and lights to send a signal down fibre-optic cable and enhance the bandwidth available in the system.
According to Tom Nolle, president of Cimi Corporation, technologies such as terabit and wavelength routers, optical transport nodes and data-friendly DWDM enable service providers to deploy multiservice networks in a timely and dynamic manner. Central to most of these innovations is DWDM which uses different frequencies of the light spectrum to carry signals.
Nolle pointed out that optical transport has been around for decades, as it is the core of almost all large networks. Most use SONET (Synchronous Optical Network), he said, since it is designed to be an optical extension of the telephone networks. "SONET was designed to perpetuate at the optical level what has already been done at the electrical level, such as T1 and T3."
Since the traffic in networks is shifting to voice from data, the data has brought about the theory for optical transport which should not be as linked to the telephone infrastructure as SONET is, Nolle explained. He added that in parallel with that development, a new approach for new solutions is DWDM which replaces the SONET strategy of one light beam per fibre. "You can have multiple light beams sharing the same fibre, and much more information per fibre," Nolle said.
He added that the new technologies reconfirm the ongoing trend of technological innovation being led by startups such as Sycamore Networks and Monterey. With these products, names like Sycamore Networks, Ciena and Juniper Networks will likely be heard rather than Cisco, 3Com, Lucent and Nortel Networks.
Yet Cisco Systems entered the optical transport market in grand style when it plunked down $6.9 billion for loss-making Cerent (see Newswire 27 August). John Chambers, Cisco's chief executive, justified the extraordinarily high figure by saying:
"Anyone who follows our market knows that optical transport is going to explode. This is how the industry is going to evolve. This is going to be a $10 billion plus market and if we can execute right, we can get a 20 to 25 percent market share." Cisco hopes the acquisitions will help service providers quickly migrate from traditional circuit-based networks to newer technologies.
Cerent's 454 optical transport system is the first generation of transport equipment designed around the Internet, Cisco said. It is a single platform that allows service providers to offer data and traditional voice services without investing in legacy SONET equipment.
Using this technology, service providers can accommodate rapid changes in network traffic in a matter of minutes instead of days, Cisco said.
Cisco also acquired Monterey Networks for $500 million which builds optical cross-connect technology that is used to increase network capacity at the core of an optical network. According to Cisco, combined with Cerent, Monterey gives Cisco a "complete" SONET infrastructure offering to help service providers' transition to packet-based multiservice networks and eventually to optical transport networks based on DWDM.
One giant step for Cisco
With the acquisitions, Cisco is gearing up to battle Lucent Technologies, Alcatel and Nortel Networks in a market that is expected to grow to $10 billion in 2002, according to analysts. "The optical transport market is extremely hot," said Chandan Sarkar, an analyst at Soundview Financial. "Cisco clearly had a hole in the transport portion of their portfolio. This is going to be their one big step to plug that hole."
By acquiring these companies, Cisco enters a business sector, called optical transport, currently dominated by the telecom equipment suppliers. Cisco also joins the ranks of Lucent, Nortel Networks and Tellabs as a supplier of SONET-based transmission gear for inter- and local exchange carrier networks. Cisco now has a valuable weapon with which to battle the entrenched telecom giants for the core of the service provider networks.
“It’s key for Cisco to go into the regional Bell operating companies and say, 'Look, we can provide pretty much anything that Lucent and Nortel can offer,’" said Craig Johnson, principal analyst at The PITA Group.
The impact of this purchase already has plenty of networking dealmakers tapping the speed-dial buttons. Experts say the demand for bandwidth from telecom carriers and Internet service providers, and the thinning ranks of next generation networking equipment, will continue to drive the price, requiring Cisco competitors such as Nortel and Lucent to quickly build their own optical point products or scoop up the remaining optical networking players.
There are more optical networking deals in the works. ADC Telecommunications is believed to be working on products in the long-haul optical networking space. Sycamore Networks, another optical networking company, recently filed to go public.
And shortly after Cisco's announcement, for three major component makers, JDS Uniphase, SDL and E-Tek Dynamics, stock prices soared and then fell off a bit.
"Lucent, Nortel, all the system suppliers get their basic equipment from just a handful of companies," said SG Cowen Securities analyst, Jim Kedersha. "In short, they need these guys. They can't go anywhere else."
Loud and clear
Lucent Technologies recently promised the ability to transmit the equivalent of 15 CD-ROMs through the air in less than a second by way of its new WaveStar OpticAir networking system. The Bell Labs-designed system, "about the size of a birdhouse”, uses lasers, amplifiers and receivers placed on rooftops or in windows to transmit voice, data or video communications through the air.
"This is the first optical networking system to use dense wave division multiplexing (DWDM) technology through the air to increase network capacity in densely populated urban or campus environments where it may be impractical to install fibre," said Lucent's optical networking group chief operating officer, Harry Bosco.
Lucent expects a marketplace introduction of one wavelength at 2.5Gbit/sec next March. And by the third quarter of 2000, the company plans to offer four wavelengths at 10Gbit/sec.
A start-up that claims its technology is superior to Cerent's - the optical internetworking company that Cisco bought last week - said that venture capitalists had poured $47 million into it.
One year old Cyras Systems will use its cash to continue the development of technology that enables the transmission of voice and data over optical fibre cable, although it has yet to bring any products to market.
Doug Carlisle, a general partner at Menlo Ventures, one of the venture capital firms backing it, said the start-up "shows tremendous promise in defining a new category of switching technology for multiservice bandwidth optimisation of optical networks."
He claimed that even if the firm's technology was not redesigned, it would still have eight times the capacity of Cerent's and would initially move data at 10Gbps, although this would double to 20Gbps "in the near future." Cerent's switches transmit data at 2.5Gbps today, but it is also developing new products, and both companies' offerings are aimed at telephone companies and Internet Service Providers.
Rafat Pirzada, one of Cyras' founders, added: "We've been extremely successful in building advanced high-speed switching solutions that are both scalable and flexible. We expect that once launched, our products will change the face of the data-over-optics marketplace."
The technical implication of the new offerings questions whether ATM should be at the core of multiservice provisioning or whether IP can be directly transported over SONET; or with DWDM, is SONET necessary at all. The new products would protect existing investments in SONET and still allow the flexibility to take any signal type, IP data, ATM cells or SONET frames and put them over DWDM.
Speed of growth
John Curtis, director of engineering at the Tolly Group, said an interesting point was whether the legacy telephone companies, which still have difficulty spelling the four-letter word ‘data’ and seem to confuse incestuous mergers and acquisitions as a sign of progress, would take advantage of these emerging technologies and become more competitive.
The need for optical networking equipment, or any well-engineered networking equipment, is accelerating. As Cisco, Lucent and Nortel rival for large telecom accounts, they're finding that they simply don't have a large enough portfolio of products to sell. But industry analysts say the markets emerging in the long-haul optical networking gear are growing faster than expected, and that these companies are likely to expand to support the valuations.
Finding refutes many earlier studies that suggest that galaxies don't have much dark matter at the time of their birth
Boris the robot outed as man in rented robot suit
Mission will provide vital data about the performance of rocket, spacecraft, autonomous docking system and the landing system
The flight will take off from California's Mojave Air and Space Port and could happen as soon as 13th December