Click here to Subscribe

NGN 2000 Report #2

WAVE2055, 11/22/00

What was very insightful at NGN2000 was the overlay of the investment side of the business and how that shapes each of the Technology, Networks, and Services which forms these networks.

Certainly the actions of the last few weeks, where many telecommunications stocks tanked, formed a backdrop of what the equity and debt markets think of this sector. The breakup of AT&T and quasi-breakup of WorldCom are but two other examples of the turmoil. NGN was not a pure technology play but the close coupling between existing (telephone world) and the revolutionaries (digital and IP world) and the turmoil of the investment environment. One is tempted to view these struggles based on network topology or technology or network type or control structures but these are gross simplifications. If there are any simplifications it is about the evolutionary forces between existing businesses, largely telephony, and new forms of network business. Virtually all of this is capital intensive - the cap ex in 2000 is $350b. Thus, most everything is a big bet, long term and large scale, be it old or new. Because of the size of the bet the financial markets play a critical role in the ability of the industry to invest in new physical plant.

Below are tidbits we picked up from various sessions at NGN2000.

Dark Fiber

This is an oxymoron. That is, how can fiber optics, which is dark create a business? Answer: the business is installing fiber in the ground and selling it for others to light. Here are some background points:

-Long Haul dark fiber is being sold from $1,250 to $2,000 per mile.
-Metro fiber is being sold from $2,000 to $5,000 per mile based on the city and costs to originally install.
-Enterprise customers are buying this fiber for their own needs, especially within metro areas.
-The installation costs of fiber in dense metro areas can approach $1/2m per mile. Fiber installation companies, such as Aerie, install as many fibers per conduit as economically feasible - currently this is 432 fibers.
-The cost of national lit fiber is driven by the optics and not installation.

---Aerie Networks provided the following for a representative national build:
Fiber Purchase $700m 15%
Conduit Purchase $250m 5%
Dig/Install/Maintain $950m 20%
Optonics/switching $2,800m 60%
Total $4,700

-According to Chase H&Q, an investment bank - it costs $17 to $20 to light $1 of dark fiber.

---Aerie Networks expects to install 8,885,376 miles of fiber by 2004.

Optical Components

There were numerous comparisons between optical component technology today and that of integrated circuits 25 years ago. Because of the high cost of the optical components and optical - electronic - optical (OEO) conversions there are some 250 optical start-up companies. Some of the challenges outlined include.

-A major challenge in integrating optical components is in the packaging - virtually all packaging and integration is done by hand and is a combination of science and art.
-Mating a fiber to a optical component package is a major technical challenge and the solutions today are not adequate.
-Passive optical components dominate what is available. For example, lambda translation, shifting from one lambda to another with a switch is not currently possible. This gives rise to blocking if a switch moves to another fiber whose lambda is in use.

In panel of three companies on optical components all three had their own fabrication facilities. The fabless semiconductor model in years away in optical components.

Optical Access

There is 65m km of fiber installed in the US and 70% of it is in local areas and owned/operated by ILCE/CLEC.

The drive for interfaces to the fiber infrastructure is continually being broadened and includes: Gigabit Ethernet and Fiber Channel for disk access.

A major advantage of SONET is its ability to recover from an outage - 15ms, however, this comes at a high price in redundancy, which is essentially a 100% overbuild.

The objective of optical network providers is to make the optical network transparent to the user.

In spite of the fact that optical is point to point one speaker described the light path like an infinitely long light packet.

BrightLink in its talk estimates that the latency for an optical path from LA to NYC is 50ms which is 4X a fast disk drive access. Bandwidth is not everything.

Data Centers

Internet Data Centers, high speed and capacity hosting centers, have become the equivalent of metro networks given their demand on bandwidth and power.

Power consumption by these data centers has become such an issue that communities have denied placement of centers due to lack of power.

WAVE Comments

John McQuillian, the conference chairman, disserves credit for shaping this conference and its ability to deliver insights on the industry. John also has a vested interest in that he does investing in this space and has a consulting business. He knows his topic extremely well, knows the players in the industry, gets many requests to present and assembles the conference using a theme which is current. His introductory speech, which we described in the earlier WAVE Report, sets the tone for both how he sees the industry and the conference. It also established the framework for a very productive event. We expect more at the next conference in Boston a year from now.

Comments?
E-mail webmaster
Page updated 1/24/07
Copyright 4th Wave Inc, 2007