Nortel Brings 'Disruptive' Long-Haul Optical Technology into the Fold

By: Erik Kreifeldt

More than just another billion-dollar acquisition of an optical networking start-up, N/A' (Brampton, ON) $3.25 billion intention to acquire Qtera Corp. (Boca Raton, FL) marks a turning point in long-distance fiber optic networking. Both Nortel and marquis customer Qwest Communications (Englewood, CO) indicate that the Nortel OC-192/dense wavelength division multiplexing (DWDM) platform that has dominated recent long-distance fiber network deployments will be displaced by new ultra-long haul technology.

"This solution is a tremendously superior solution form an economics perspective," says Qtera president and CEO Fahri Diner, comparing his company's equipment with today's technology. Carriers can save 60% to 80% of network cost using Qtera's equipment versus today's equipment, he says.

Although Qtera has not made any product announcements, Diner suggests that a suite of DWDM systems, optical amplifiers, and optical add/drop devices can provide abundant, cheap, survivable bandwidth at the optical layer. Cheap capacity enables optical protection schemes that are bandwidth-inefficient, yet simple and inexpensive. Optical-layer facilities restoration in turn frees up the processing power of terabit Internet protocol (IP) routers to do routing, not restoration, which eases the processing burden that makes routers a dubious choice for wavelength management at the core of the network.

Qtera has developed an optical transport platform that transmits bundles of 10 Gb/s signals some 4,000 km without regeneration—the current state of the art is 600 km. Because the long-distance transmission requires fewer regenerators than today's networks, and because regenerators comprise a major chunk of long-haul network equipment cost, reducing the required number of regenerators in a network significantly impacts total cost.

"The Qtera solution allows us to get significant cost reduction, disruption, and leadership in the network so [our customers] can serve their customers better," says Clarence Chandran, Nortel's president of carrier packet solutions. "This is all about speed to market for our customers," he continues. "Time and speed are really of the essence here."

Long-haul disruption
The current technology that Qtera is disrupting is Nortel's own. Nortel is supplying equipment for 32 out of 40 recent major network developments, mostly with 10 Gb/s capability, according to spokesperson Shelley Grandy. Many of those networks use an integrated system of DWDM, optical amplifiers, and SONET add/drop multiplexers (ADMs) and regenerators. Newer deployments feature open DWDM interfaces to accommodate wavelength transponders, IP routers, ATM switches, or transport equipment from other vendors.

One of Nortel's marquis customers, Qwest, is already leaping from the current-generation platform to a next-generation strategy. Rather than upgrade its 16-channel system to 32 channels, Qwest has opted to start afresh with another set of fibers, using routers and ultra-long haul photonic equipment. Qwest plans to start using next-generation optical network technology in the first half of 2000, after trialing both Qtera and Corvis (Columbia, MD) gear.

Billion-dollar business
The billion-dollar Qtera deal has no doubt created a group of happy millionaires. Diner maintains that Nortel's leadership position will make it attractive for Qtera employees to stick around. "We welcomed a lot of [former] Nortel employees back to Nortel this morning down here in Boca [Raton]," Chandran adds.

Like Qtera, several companies have developed from a pool of former Nortel talent, Chandran continues, maintaining that it's no trouble for Nortel to buy the companies back for big bucks. "We're very proud of doing that," he says, acknowledging that billions of dollars comprise the price of entry in the next-generation network equipment market.

With the optical networking market forecast to yield several billion dollars in market opportunity over next three to five years, "we have absolutely no concern over this not being a profitable transaction," Chandran says of the Qtera deal. "We expect that in the second half of next year, we will be recognizing revenues from this particular business transaction, and in fact we are in alpha and beta trails with a number of customers as we speak," Chandran says.