A historical perspective: 22 April 1996 Ericsson rethinks public switching
Ericsson rethinks public switching
BY JOHN BLAU
L.M. Ericsson is retreating from the ATM "core" public switches market to concentrate on producing smaller "edge" switches.
The company's decision follows a move last year to scale down its public networks division, part of a strategy to concentrate on existing markets, rather than future possibilities.
Just as Ericsson is re-evaluating the market for mainframe-style switches and moving to much smaller ones, so other big telecoms suppliers are seeing the market change and open up to newcomers.
"Our ATM product development is clearly driven by our customers' needs," said Gunnar Wranne, general manager for ATM products at Ericsson. "And what they want today are edge switches."
Wranne said Ericsson's previous strategy was "to try and pack everything into the big ATM switch." But this approach, he said, was abandoned as carriers moved to deploy less complicated and less costly ATM access and edge switches.
In Germany, Ericsson has deployed ATM cross-connects in Deutsche Telekom's broadband transit network.
Although Wranne said Ericsson has the expertise to develop a large core ATM switch "when the market arrives," some customers seem less convinced. Ericsson's biggest customer, Sweden's Telia, selected AT&T over the Swedish vendor for its backbone ATM network.
All three of the major European equipment suppliers are taking a hard look at projected demand for large core ATM switches. What they have found is a tiny market unable to justify the long-term costs involved in its research and development.
After the excitement at the beginning of the decade about multimedia, ATM services to the home and business, the European vendors now concede that this market may not emerge for another decade.
To date, Deutsche Telekom has deployed only seven core ATM switches in its transit network, with a total of 23 planned in the final phase. Telia has four, targeting a total of eight. And the numbers are similar at other European carriers.
Thomas Nolle, managing director of Cimi Corp., a consultancy based in Voorhees, New Jersey, projects that over 90 percent of all core ATM switches deployed in transit networks up to 1999 will be versions of edge switches.
"We won't see meaningful numbers of true core switches operating at speeds of 100 gigabits per second and upwards until 2005, when real multimedia applications are deployed, and enough traffic is generated to justify large-scale aggregation," he said.
European switching dilemma
So the question facing Europe's big three switch suppliers is whether to tie up millions of dollars of investment in the development of equipment for a relatively small market that may be years away or to concentrate resources on delivering products in demand today.
The latter option seems to be preferred by board members focusing on the bottom line. Ericsson's move may be followed by other infrastructure vendors. Alcatel, facing growing competition at home and abroad after another record loss in 1995, can no longer afford to plough money into technology that may never leave the shelf.
"We are assessing our position on ATM at the moment," said Martin De Prycker, general manager of broadband products at Alcatel. "And it is not 100 percent clear to us which way we should go."
Alcatel's assessment will be complicated by its commitment to develop two core ATM switch product lines.
De Prycker said Alcatel clearly needs to develop ATM products that are "of value to customers." And he believes there will be benefits in deploying big core ATM switches if the edge switch market takes off and generates more traffic. "The problem is," he said, "if we are selling only a couple of machines to a couple of customers, the investment may not be worthwhile for us."
Development of a core ATM switch is still "in the plan," De Prycker said, but the company will focus increasingly "on what customers want today."
Likewise, Siemens is strengthening its position in the edge market, although there appears to be a greater commitment to developing a true core ATM switch and positioning it ahead of the competition.
Thomas Rambold, president of Siemens's broadband networks product group, said that robust core ATM switches will be needed to manage complicated connections to other smallband and broadband networks, intelligent networks and mobile networks functions which would overload a conventional edge switch.
Rambold said that having a core ATM switch is an essential component of the company's strategy to provide a full range of broadband-switching technology.
To beef up their portfolio for access and edge switching products, Siemens and Newbridge Networks Corp. agreed last month to pool their expertise in public and corporate broadband networking. They will develop compatible edge switches that allow companies to interconnect their ATM LANs over the wide area network more easily.
The Siemens-Newbridge linkup follows similar alliances between Alcatel and Cisco Systems Inc., and Northern Telecom and Fore Systems Inc.
For vendors with perseverance, however, waiting for the core ATM switch market could eventually pay off, analysts say.
Deutsche Telekom, for instance, is defining a new universal network for the next century. The network will be designed to transport multimedia and broadband Internet traffic, and possibly public telephone service, said Franz Hiergeist, Telekom's network director.
"ATM will play an increasingly large role in our networking strategy, Hiergeist said. "There will be a need for the big ATM switches at the higher network levels and definitely demand for very powerful edge switches at the lower levels. We anticipate strong growth in digital broadcasting, interactive multimedia applications and broadband Internet traffic." But for now, Hiergeist conceded, "we have a need for edge switches."
Last month, Deutsche Telekom purchased 90 edge switches from General DataComm Inc. These will be used to upgrade Germany's scientific broadband network, which will initially provide transmission speeds at up to 34 Mbps, with 155 Mbps speeds by mid-year.
Despite European vendors' tactical withdrawals, analysts say the remaining players should keep their development of big ATM switches in the public eye. "Vendors that are developing core ATM switches would be foolish not to billboard this technology," Cimi's Nolle said, "because there won't be many of them competing in the market when it eventually arrives." |
