Whose tech will win access wars?
8/21/00
By C. A. Soule
When companies carped about how telecommunications carriers couldn’t adequately match their bandwidth needs to actual usage, Boxborough’s Appian Communications came out of the blue with its idea to connect fiber-optic networks to business Ethernets, giving companies that control. Investors swooned.
But a prominent local analyst says that the best revenue opportunities lie further up the telco chain from the workplace, in new equipment that will work with the aging workhorse SONET-based fiber-optic systems used for the past few decades by carriers to cart telecommunications traffic onto national networks.
Scott Clavenna, principle telecommunications analyst for Pioneer Consulting in Cambridge, has classified the murky “metro market” into three clean segments. He distinguishes between the next generation of SONET gear, dense wave division multiplexers (DWDM) that increase system capacity by splitting light into differing wavelengths, and optical access systems that improve businesses’ ability to customize telecommunications services by using Internet protocol.
SONET rings began being built in cities in the 1980s, and allowed communication carriers to connect their existing digital carrier and fiber optic systems.
Optical access systems can incorporate a dozen services, including broadband Internet access, optical access in multi-tenant buildings, virtual private networks, wavelength-on-demand, and storage area networks.
While that last category has gotten a lot of attention in 2000, with companies like Appian turning heads at trade shows, Clavenna says that the biggest revenue in the next five years will still flow from integrated SONET equipment.
Pioneer predicts that sales of traditional, SONET-based equipment will reach $6 billion this year, while DWDM devices will only register about $120 million. Optical access devices will rack up a comparatively scanty $2.6 billion in sales.
Furthermore, Pioneer says that by 2004, the SONET equipment sales figures will more than double to $12.7 billion, while new metro technologies will grow to $6.1 billion, a faster rate of growth, but still well overshadowed by the SONET revenue forecast.
California companies Cisco Systems and Redback Networks dominate the market for next-generation SONET equipment, but neither company is paying much heed to Pioneer’s yellow flag on optical access gear. Redback recently spent $636 million to pick up Abatis, a Vancouver edge service provisioning company, so it clearly thinks the edge market is worthwhile.
Alcatel, Fujitsu, Nortel Networks and Lucent Technologies for years have owned the market for traditional SONET gear. Those latter companies are trying to accelerate their research and development efforts to catch up to Cisco and Redback, and all of them are working to integrate their DWDM and optical switching platforms with an optical access piece to form end-to-end systems.
Sycamore Networks of Chelmsford, which has manufactured optical switches that sit in front of long haul networks, seems to be going in that direction as well. It acquired Sirocco Systems earlier this year, giving it a metro access piece to its offerings and taking it a step closer to the enterprise optical access link in the chain.
Other area companies receiving attention in Pioneer’s report include Chelmsford’s Astral Point Communications, and Quantum Bridge Communications based in North Andover.
Of course, Appian isn’t paying Pioneer much heed. The company this summer demonstrated its “Optical Services Activation Platform 4800,” which allows businesses to “tune” their bandwidth needs over their native Ethernet networks, and provision and manage new services.
The company says the platform allows users to plan for network traffic peaks, to outsource computer applications, and to expand their network services according to the organization’s needs.
Mick Scully, founder and chief executive officer of Appian, said that his company and a handful of others have solved the “sipping straw” problem of bottlenecks in bandwidth, and that service providers will come knocking.
But Pioneer Consulting says that companies like Appian will not see extraordinary growth for another four years, due to hesitancy on the part of legacy systems carriers to take the plunge. The firm notes, however, that carriers might change their tune after further cost assessment of such systems.
P.G. Menon, a co-founder of West Coast telecommunications startup Atoga Systems, agrees with Scully — even though he expects to compete against Appian directly.
“Our conversations with potential customers have turned up different data,” he said. “Competitive local exchange carriers are less tied to SONET, because they are interested in the high speed deployment of application services. Service providers have to run around provisioning systems, so they are not using the network to its full potential.”
Menon said that the optical access companies that win the war will be those that partner with other companies, perhaps an admission that the market will be driven by service providers and equipment companies further up the chain.
Appian has already gone hunting for partners. A month ago it announced that it would pair with New Jersey company Everest Broadband Networks, a company that has made waves providing broadband applications for multi-tenant buildings.
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