An astonishing 90 per cent of European backbone bandwidth remains unsold, leading to fears that many carriers and optical networking manufacturers are teetering on the brink of bankruptcy, Gartner has revealed to vnunet.com.
Speaking at the NetEvents European Telecoms and Networking Symposium in Portugal last Friday, Gartner's vice president and chief analyst, Ian Keene, warned that although the European optical switching market will be worth around $7bn this year, there will be trouble ahead.
According to Keene: "Carrier backbones are at 10 per cent utilisation. Who wants to install a bunch of terabit switches when only 10 per cent of the network is being used as it is? In a time of market uncertainty, this is a big problem for carriers."
"Everything is fine, except that it's not. There's a lot of debt around. Carriers are in debt, some worse than others. There's been a lot of Chapter 11's, a lot of carriers in Europe have gone to the wall, so basically the equipment vendors who are producing, developing and selling this wonderful technology have significantly fewer customers."
"Not only are there fewer customers, they are also very discerning customers who are not going to just buy lots of stuff because it looks good," Keene added.
Gartner's figures, however, have sparked controversy within the industry.
Phillip Hemsted, director of EMEA marketing for optical switch firm Sycamore Networks, said: "About the backbone utilisation being just 10 per cent, that is absolute rubbish and I can prove it."
Hemsted argued that expecting 100 per cent utilisation in an optical backbone was not practically possible, because bandwidth becomes unusable or "stranded" in real world SDH/SONET architectures.
In addition, he pointed out that: "Carriers will only ever run a link at 70 per cent. And then they will have to fire up a new wavelength.
"However, that 70 per cent is effectively only 35 per cent, as for every working path there is also a protected path that uses up capacity. If you couple that with your only 50 per cent network use, that gets you down to 17.5 per cent of your network that could ever be at full utilisation."
Roland Schutz, director of product marketing and strategy for optical equipment manufacturer Eolring, also disputed Gartner's estimates: "I would like to come back to the 10 per cent usage of the core networks. I do not agree with that figure.
"If we were talking about Ethernet networks, this would be true. However, with ATM it is not 10 per cent of the core network that is used. In the case of optical networks, 30 per cent is used."
Keene defended his carrier backbone usage estimates: "This is not an extraordinary number if you look at what other market research organisations and investment banks are providing as estimates. The rate of 10 per cent fits into the middle ground."
"Essentially orders are down," he continued. "One would have to be really blind not to notice that the vendors are going through a really tough time at the moment. We do not see this as a short term blip in the market. What do the equipment vendors do?
"There is tremendous under-utilisation, which is a big problem. The only way to achieve big demands for optical equipment is to increase utilisation.
"The way to do this is to drive end-user bandwidth needs without which the backbone will not be filled up quickly. This is not easy. There are not throngs of customers subscribing to ADSL services that will fill the backbone, which is why I think the emphasis has to be on medium and large size businesses."
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