The Emergence of the Optical Edge
By Scott Clavenna, Pioneer Consulting LLC
Contents
Metro DWDM and new SONET
Edge emerges
Edge players
Edge hurdles
Edge viability
The Supercomm 1999 trade show was marked by the introduction of at least 10 metro dense wavelength division multiplexing (DWDM) systems, making it the hottest topic of the optical networks market in 1999. Even before these offerings gain much traction in the marketplace, a new hotspot of optical networking has emerged: The optical edge, an evolving network space loosely defined between major central offices and the "last mile" access network.
Optical edge systems move beyond metro DWDM's extension of wavelengths from the core into the metro area and incorporate service layers of the network such as synchronous optical network (SONET), asynchronous transfer mode (ATM), and Internet protocol (IP). Multilayer platforms have existed in telecommunications networks before, but the optical edge is unique in that it uses WDM as an integrated means of scaling capacity at the physical layer.
Stalwart vendors Lucent, Nortel, Ciena, and Ericsson brought metro DWDM products to market in 1999, as did start-ups Optical Networks Inc. and Osicom. Though many of these were commercially available, they did not gain quite the traction with local carriers as analysts might have expected, due primarily to the systems' cost versus dark fiber and their limited management capabilities. The logic followed that manufacturers must drive the cost of the systems down and increase management functions to compete. The result, however, has not been so clear.
Metro DWDM and new SONET
The impact of the introduction of the Cerent 454 product (now part of Cisco Systems) on the metro optical transport business cannot be overstated. Metro DWDM vendors that set out to compete against the traditional SONET systems designed for local exchange carriers by Fujitsu, Nortel, Alcatel, and Lucent found themselves with another formidable foe in the Cerent box.
The 454 not only cost half as much as a traditional OC-48 (2.5 Gb/s) SONET add-drop multiplexer (ADM), but also included digital cross-connect functionality and modular scalability to 4xOC-48 capacity in each network element. The system also supported a much wider range of interfaces than traditional SONET ADMs, including Ethernet, meaning it could be deployed cost-effectively in both access rings and metro interoffice ring.
Carriers responded quite favorably to the Cerent proposition, limiting metro DWDM primarily to applications of fiber exhaust and point-to-point interoffice connectivity. Pioneer Consulting estimated the metro DWDM market to reach only $155 million in 1999, growing to $240 million in 2000. Compared to the $10 billion spent on all metro transmission and edge network equipment in 1999, metro DWDM remains a niche solution.
Edge emerges
At the same time that the Cerent 454 gained traction in metro transport networks, ADVA Optical made a business out of selling WDM systems for enterprise networks, the outermost edge of the optical networks market. Enterprise WDM interconnects corporate data and storage equipment with cheap multiwavelength systems, rather than with multiple fibers. The deployment of Cerent and ADVA systems in the metro transport and enterprise networks, respectively, left an enormous gap at the heart of the metro optical networks market between major central offices and the "last mile" access network—the optical edge.
In 1999 and early 2000, the optical edge space is filled with SONET-based transport equipment and a host of data networking equipment, from ATM edge switches to IP routers and Layer 3 switches, comprising a $10 billion dollar market opportunity in 2000 that metro DWDM systems do not adequately address. This is not meant as a slight against metro DWDM, only to say that at present, these systems often add cost and another layer of complexity to a network at a time when many carriers seek simplified solutions. The market opportunity, therefore, centers around integration, giving a carrier the ability to manage multiple services from a single platform, and scale that platform using the capacity and protocol-transparency of WDM.
Edge players
Cisco is aggressively targeting the optical access space today, upgrading the legacy Cerent 454 with 16-channel DWDM scalability and ATM edge switching. This keeps Cerent a formidable player in the optical edge market of 2000, but a host of new start-ups are now competing for carrier mindshare with highly-integrated optical edge network systems that incorporate metro DWDM, hybrid multiplexing and switching, and multilayer service provisioning and management features.
These new optical edge players are many, including Chromatis (which fathered this concept in 1999), Alidian Networks, Siara Systems (now Redback Networks), Mayan Networks, Astral Point, Luminous Networks, Appian Communications, Amber Networks, Sirocco Systems, and Zaffire (formerly New Access Communications).
Edge hurdles
The challenges facing these start-ups are the same that have faced many other developers of integrated solutions of the past: How do we compete with the best-in-class products that we're integrating? Are compromises necessary to achieve low-cost integration? Who do we sell to, the transmission group or the data group within a carrier?
The biggest hurdle in the race for the optical edge is software. The start-up companies must devote some 70% of their resources to software development, which is the intelligence that brings formerly disparate edge systems together.
Edge viability
Contracts are already being handed out that validate the approach of these new players, at least in the greenfield networks of small competitive local exchange carriers (CLECs), where risk-taking is at its highest and purchase decisions made most often by a unified team of planners. As many optical edge system start-ups make their product available in the 3rd and 4th quarter of 2000, it will become more clear how the entire carrier market will adopt integrated metro optical solutions.
Regardless of how rapidly these systems are adopted, it by no means signals the end of the metro DWDM market. On the contrary, it is to a large extent and enabler of that market, creating a highly viable subsystem market within the multi-billion space called the optical edge.
Scott Clavenna is principal analyst at Pioneer Consulting LLC