Dow Jones Newswires -- October 6, 1999
SMARTMONEY.COM: Bright Lights, Big Network
By Tiernan Ray
Smartmoney.com
NEW YORK (Dow Jones)--Call it the grandma rule. Every time a hideously complex technology is unveiled by the tech world, grandmothers get dragged into the discussion to excuse our general inability as a species to comprehend jargon-filled technical information.
The latest example: optical networking, a swirling mass of confusion that is suddenly more critical to understand than ever before in the wake of Cisco Systems' (CSCO) purchase of optical-switch maker Cerent for $7.8 billion a month ago. I'm sure there are plenty of savvy octogenarians who surf the Web. Probably, though, most are as confused as the rest of us about this optical-networking business.
A week ago Tuesday, as Nortel Networks (NT) rolled out yet another new optical-product offering, a reporter once again invoked the grandma rule, asking Nortel's optical-networking Veep Clarence Chandran to explain the fine details of a technology that, judging from the Q&A, had quite clearly baffled adults of all ages listening to the call. Chandran's response? "My father is 75, and he uses email to communicate with his grandkids. This technology will speed up the Internet, giving him instant access to his grandkids."
Wow. And you thought the Internet was all about sex, shopping and stock quotes. Seriously, Chandran's comment reminds us the uses of any new technology can be obscure at first - like trying to explain the car to a horse-and-buggy culture. But there are a couple of good reasons why users of the Internet and technology investors should care about optical networking - and rapid access to the grandkids, not to be too hard-hearted about it, is pretty far down on the list.
One of the primary benefits of optical networking, of course, will be speed, but more important is a new level of control it will give to the phone companies. While consumers increasingly have access to high-bandwidth connections to the Internet in the form of cable modems, business customers who buy high-speed phone lines, such as a T1, have to wait days, weeks or months to get connections installed. That's not just a bummer for business customers, it hinders the rollout of much-needed bandwidth for Internet sites. And that makes the entire experience of surfing the Web less than what it should be. Optical networking could help by giving the phone companies a very flexible kind of network, which would in turn allow them to turn on new bandwidth in seconds as needed. If bandwidth is easy to provide, it stands to reason the uses of banwidth could become more diverse and more interesting, leading to new applications of the Internet.
The other point to note about optical networking is that the technology will allow for unprecedented control over the allocation of bandwidth. You can imagine all sorts of outcomes there. An online brokerage could, for example, create a kind of private lane on the Internet for its best customers, giving them faster - perhaps even real-time - connections with which to make trades. And forget about cable modems: A phone company could sell you not just the so-called "last mile" to your home, but also for a small fee a level of service that is better than what your neighbor has.
If you want to understand how all this can happen - the technology of optical networking, in other words - all you have to do is keep in mind the simple fact that there are really two stories about optical networking. One story is about classical optics, the science of light. The other is about what is happening to the r outer market owned by Cisco. Thankfully, only two buzz-acronyms need be memorized to understand each story. The first buzz-acronym is DWDM, for dense wavelength division multiplexing. Yes, a mouthful. Big thinker George Guilder (who, incidentally, started much of the optical networking craze early in the decade by pushing the idea of an all-optical network), once remarked that PCMCIA, the name given to those little slots on the side of a laptop computer, stands for "people can't memorize computer indus try acronyms." It is perhaps his most eloquent argument.
The first story, the story of classical optics, is about sending light down a strand of glass fiber, and it's a tale that's been around at least since the late '70s, when separate developments at AT&T's (T) Bell Labs and Corning (GLW) made it commercially viable for the first time to flick a laser on and off in succession in order to create signals that convey information. In the '80s, as lasers inside fiber-optic cables got buried in the ground, phone companies started to dump massive amounts of traffic rather indiscriminately into these fast arteries of their networks.
The explosive growth of the Internet in the '90s increased the need for capacity in the existing fiber cabling. Starting a few years ago, DWDM was introduced to solve that need by putting a prism in front of the laser. That made the laser flick on and off in different colors, multiplying the signal and thereby multiplying the bandwidth. For example, Nortel says that next year, its optical switch, which it calls the OPTera Connect, will be able to split a laser into 160 different colors, each of which sends bits of data at a rate of 10 billion per second, so that the entire device can transmit 1.6 trillion bits in a second.
When you increase the capacity of a simple device in this way, you also increase the complexity. Suddenly, a fiber-optic cable is no longer just a dumb pipe sending lights that flick on and off. Each fiber can now be a network of a sort unto itsel f, with colors communicating with one another.
The whole story of optical networking as "optics," then, is about how DWDM created complexity and what's being done to deal with that complexity.
What's being done is that Nortel, Corning, Lucent Technologies (LU) and others are building all sorts of lasers and what are called waveguides to make the various colors in fiber talk to one another. Nortel et al. will excel in this realm based not so much on their understanding of networking, as on the principles of physics. They must understand how to manipulate laser signals and how to mix the signals with just the right kind of interference to achieve communication rather than garbage.
You would imagine that as fiber-optic cabling gets more complex in this way, something has to happen to the routers that Cisco has classically sold to Internet service providers. That is because it is the role of the router to decide where and how to send bits in a network, which, after all, is made up of fiber-optic cabling.
So the second story of optical networking is how to make a better router to take advantage of the complexity that DWDM has introduced and all the breakthroughs that Nortel and Corning are coming up with in the physics of optics. Here the key buzz-acronym is MPLS, for multiprotocol label switching. Don't worry, that's it for buzz-acronyms.
As DWDM lets optical fiber transmit more data at faster and faster speeds, routers need to get faster to keep up with those speeds. That is why Cisco and upstart competitors such as Juniper Networks (JNPR), which went public this past spring, now sell routers that advertise the ability to transmit 10 billion bits of data per second, just like Nortel's optical switches.
Private companies such as Avici Systems, of Billerica, Mass., in which Nortel holds a 16% stake, promise to send speeds at even faster rates of 40 billion bits per second. Nortel broke off its development arrangements with Avici, but it plans to hit that 40-billion-bits-per-second rate next y ear with routers it owns from its acquisition of former Cisco competitor Bay Networks.
But again, it's the control, not the speed, that's really important. What's crucial is that the new routers made by Cisco et al. will for the first time ever be controlling the way that the underlying fiber-optic cabling sends bits. Traditionally, a router processes packets of data as electrical signals and then dumps those packets into the fiber optic cabling beneath rather indiscriminately. Routers hover etherea lly above DWDM on a separate plane, in a sense, the two never communicating directly.
That must change. With ever more complex fiber optics thanks to DWDM and faster routers that can keep up with that complexity, an Internet router ultimately needs to tell a fiber optic cable which of the many colors or wavelengths should send a bit. If a piece of DWDM equipment has a failure with one of its wavel engths, for example, the router should know about that, and it should help to decide which wavelengths ge t the bits instead. MPLS, a method for routers to communicate with one another and with other equipment, may well be the technology that gives the router that kind of control.
As you can imagine, at some point both stories of optics come together. The routers get faster and learn more about the underlying fiber optics, and eventually, maybe, the two pieces of equipment are fused into one piece of equipment. That would allow the Internet service providers, Internet content providers and e-commerce sit es to deliver tiered services based on speed with pinpoint accuracy. It gives the phrase "being bumped to the head of the line" a whole new dimension.
Nortel certainly hopes this kind of technology convergence is the future. This week it announced its big, fast router, called the OPTera Packet Core, which can talk to those underlying DWDM machines. But the Packet Core isn't even in alpha testing with customers. We'll probably see it rolled out some time early next year, says Nortel. (Nortel says the Packet Core and the Optera Connect will be presided over by a "common control" system that uses MPLS, kind of like the Freudian superego.) Meantime, skeptics insist that the two stories may not come together for some time. That's because if you buy a single piece of equipment from Nortel with routing and optics, you might get decent DWDM equipment, but the MPLS capabilities of the routing wouldn't be as good as, say, what Cisco could offer. The reverse is true of Cisco's knowledge of optical physics, some say, the Cerent purchase notwithstanding.
In the meantime, both companies will probably sell to their strengths, where they are best able to explain to their customers at the phone companies - and their customers' grandmothers - what all this stuff is about.
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