Optical Networking Begins Move Toward Business Customers

A busy month of December acquisitions by Nortel Networks and Cisco Systems Inc. highlighted the emerging importance of optical networking. While most optical networking efforts have been geared toward high-capacity, carrier-type implementations, business customers can expect to reap benefit from development efforts in this space, as well.

Sam Alunni, president of enterprise and Internet infrastructures at Sterling Research Inc. (www.sterlingresearch.com), says giants like Cisco (www.cisco.com), Nortel (www.nortel.com) and Lucent Technologies Inc. (www.lucent.com) are concentrating on delivering optical networking technologies for use in high-capacity data and voice carrier implementations.

All three players, however, are also seeking to effectively invert their respective competency spaces: Cisco is scaling up to develop carrier-type solutions capable of switching voice and data, and Nortel and Lucent are scaling down to provide more data-oriented services for enterprise networks. The goal is to provide an end-to-end infrastructure capable of handling voice and data that is built around high-performance optical technologies.

"Cisco has a tremendous installed base and incumbency in the enterprise space, but it’s desperately trying to get into the carrier space," Alunni explains. "Nortel and Lucent have an inversion of the competency space of Cisco, and they’re trying to get a foothold in enterprise networking."

In mid-December Nortel snatched up privately held Qtera Corp. (www.qtera.com), a manufacturer of long-reach optical networking systems. Nortel officials say the company plans to use Qtera’s optical technology -- which enables optical signals to be sent as far as 2,500 miles in purely optical form -- to help reduce costs in its end-to-end, long-haul optical portfolio.

"What Qtera does is it enhances our current 10 Gb portfolio to help us provide even further cost reduction," says James Rous, director of market development at Nortel. "We can reduce the number of optical to electrical conversions, and vice versa. Because of these reduced equipment costs, we’re able to deliver substantial cost savings to our customers."

With the creation of an optical networking group in September, Cisco became intent on extending its brand into the high-capacity, long-haul carrier space for the first time. In late December, the networking giant picked up Pirelli Optical Systems, a manufacturer of 10 Gbps optical transport systems that use a technology called dense wave division multiplexing (DWDM).

According to John Adler, director of marketing at Cisco’s core optical transport unit, the DWDM technology gives his company the means to offer an end-to-end optical solution for long-haul carriers because it can be used to increase the capacity of broadband networks and to carry a combination of phone, Internet, and video traffic.

"We have an IP-friendly enterprise device that’s capable of aggregating IP traffic and putting it into SONET [Synchronous Optical Network]; we have a SONET multiplexing technology that can take traffic and aggregate it into wavelengths; and now we have the Pirelli piece that creates wavelengths using DWDM," Adler says.

Even as Cisco and Nortel augmented their optical networking portfolios through these end-of-year acquisitions, several smaller companies -- themselves potential future acquisition targets -- were enabling optical networking technologies for metropolitan area network (MAN) implementations.

It is in the MAN space especially, Alunni says, that enterprises can more quickly realize the benefits of optical networking technologies.

"The Ciscos, Nortels, and Lucents are doing the big stuff, but a lot of the real innovation is being done by smaller companies bolstered by venture capital support," he says. "These same smaller companies will also likely become attractive acquisition targets to the Ciscos and Lucents as they shift their focus and attempt to augment their MAN portfolios."

MANs are attracting a lot of attention, Alunni explains. Studies indicate that roughly 75 percent of American homes and businesses are within a mile to a mile-and-a-half of an installed fiber base. Consequently, companies like Alidian Networks Inc. (www.alidian.com) and Quantum Bridge Communications Inc. (www.quantumbridge.com) are delivering solutions that enable MAN implementations over the "first mile" between corporate access networks and a service provider’s regional offices or points of presence.

Alidian’s Optical Service Network (OSN) architecture uses both SONET and DWDM technologies to bridge the gap of the first mile by leveraging existing fiber. For its part, Quantum Bridge Communications is pushing the development of its Optical Access Networking technology, a similar solution that allows service providers to deliver high-bandwidth services to business customers.