IBD. Lucent Moving At Light Speed Into New Era
Date: 3/15/99
Author: Michele Hostetler
Lucent Technologies Inc. hopes to see the light this year. Fiber-optical light, that is.
Fiber optics, now used mainly in long-distance networks, will make its way to corporate
networks in the next few years, says Richard McGinn, chief executive of the largest seller of
telecommunications gear.
Fiber optics - glasslike wires that use light to send information hundreds of times faster than do
copper phone wires - will play a key role in melding data and voice onto the same networks,
McGinn says.
Lucent is squaring off in this emerging converged-network market with longtime rival Northern
Telecom Ltd. and data networking leader Cisco Systems Inc., among others.
McGinn recently talked with Investor's Business Daily about how he sees communications
networks evolving.
IBD:
What is your vision for networking?
McGinn:
There are truly fundamental, dramatic changes taking place today in the industry that we define as
communications networking. We have a march of technology occurring in semiconductors,
software, photonics and wireless that is disrupting conventional wisdom about networks. There
are literally convulsions occurring in the markets these days.
We are moving from a world where a lot of enterprises and service providers . . . selected parts
or boxes and then . . . knit those things together to deliver the services they needed. These
networks tended to be application- specific, like voice.
The architecture we're heading toward is a network of networks that is multiservice,
high-performance, very highly reliable and increasingly cost-effective. Prices are coming down, . .
. and we can measure it in percentages - plural - every month, not unlike the curves we've seen in
the past in the PC industry. We're seeing performance going up dramatically. In optical, as an
example, it's even faster than Moore's Law (which says chip performance doubles every 18
months).
IBD:
How is optical technology changing networking?
McGinn:
That is literally an embryonic network. Photonics is where silicon technology was 15 years ago.
It's really at the beginning stages, maybe the first inning of play. You're going to move from the
tremendous carrying capacity of broadband optical in long-distance telephone networks . . . to
metropolitan- area networks and then campus-area networks and ultimately at the local- area
network.
The beauty of this is that companies will wind up with dynamic bandwidth - individual
wavelengths on fiber-optical systems. Ultimately, as you move to the enterprise (a company's
local-area network) in three to five years, you'll see a substantial flattening of (traditional gear
sales). You'll see less need for the hodgepodge of active electronics in these enterprise networks
that today are characterized by hubs, routers and so on. This is really quite a major leap forward
for the enterprise. Photonics (use of fiber optics) is transforming the way networks are deployed.
It's evolving even as we speak.
IBD:
When will fiber optics become more widespread?
McGinn:
We are supplying carrier- grade optical networks to certain (corporate) campuses today. They
tend to be superheavy users, not the normal kind of businesses. But I'd expect within 12 to 18
months you will see the firm implementation of metro- area optical networks going in (thanks to)
new low-cost technology.
And within two to three years, the market will begin to pick up substantially for campus and
individual-building optical networks. That puts huge pressure on the status quo in the enterprise
marketplace in terms of hubs and routers.
IBD:
The latest in fast gear for service providers and carriers is terabit routers, a step up from gigabit
routers. Do you plan to buy any of the start-ups that are developing such routers?
McGinn:
We organically and through acquisition are going to serve all the requirements necessary to
deliver these full networked offerings. I think we've demonstrated with quite a number of
acquisitions and one pending that we are quite willing and able to both develop on our own and
acquire companies. How's that for a non-answer?
IBD:
How do you see network traffic evolving? Voice now accounts for 80% of phone carriers'
revenue, and data 20%.
McGinn:
I guess what I hear is voice traffic is growing somewhere between 3% and 5% a year, . . . and
data traffic for the Internet is growing 50%, 80%, pick your favorite large number. I think it's safe
to say . . . we'll reach a parity probably within five years in terms of the amount of traffic that's
moving around man to machine and machine to machine vs. human to human.
IBD:
What's Lucent's strategy for moving from just voice to voice-data networks?
McGinn:
It's a piece-by-piece basis. There are those who would say one size fits all. Our (voice)
customers are telling us they are going to make the move to either migrate from their existing
network or have their existing networks progress or reside alongside a data network.
New carriers coming in probably are going to go with a data network architecture to start with.
You've got different business strategies . . . driving the direction that people take in data
networks. We're addressing each of them.
IBD:
How are you positioning Lucent against Cisco and Nortel?
McGinn:
We consider them to be two very good competitors in the field, coming from two different
perspectives. We have to position ourselves not vis-a-vis them, but according to what customers
are telling us.
(C) Copyright 1999 Investors Business Daily, Inc.
Metadata: LU NT CSCO I/4890 I/3574 E/IBD E/SN1 E/TECH
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