The troubles of two notable suppliers of optical switches for the core of service provider networks reveal the current dynamics of the core optical switching market.
Service provider capital expenditures have slowed dramatically, which would stall any market – the core optical switch market notwithstanding. Moreover, demand for meshing wavelengths takes a back seat to grooming at the edge of the core. Carriers want their STS-1s and they want them now, money or no money to spend.
The inability to groom is what killed Cisco Systems Inc.’s ONS 15900 and backlogged Sycamore Networks Inc.’s SN 16000. Grooming enables more efficient transport of traffic by essentially multiplexing 52Mbps STS-1 signals into higher-bandwidth (2.5Gbps OC-48) wavelengths.
Meshing, meanwhile, enables more efficient link restoration and dynamic provisioning.
Cisco was telling only half the story when it said lack of demand for meshing wavelengths in the core was the reason for discontinuing the ONS 15900 Wavelength Router, which cost Cisco US$500 million to obtain through the acquisition of Monterey Networks in 1999. Indeed, there was a lack of demand for Cisco’s wavelength mesher.
“The Cisco switch was in essence an electrical fabric that tried to emulate a photonic switch,” said Dave Krozier, an analyst at RHK. “It did wavelength switching; it didn’t have the grooming function. And as a wavelength switch, it was kind of a small one. It wasn’t that competitive.”
And Sycamore would have had a less disappointing third quarter if it had the components for line cards that would have added STS-1 grooming to its SN 16000 switch, analysts say. Sycamore had to drastically reduce third-quarter revenue forecasts, record a loss for the quarter and lay off 13 per cent of its workforce, due in part to its inability to meet carriers’ demands for grooming at the edge of the core of their networks.
“The largest demand, rather for the version of the SN 16000 that offers wavelength routing, is for the version that offers grooming,” Krozier said.
That’s not to say that there is no market for optical switches that mesh wavelengths in the core. The worldwide market for optical cross-connects – all-optical and optoelectrical – will grow from US$76 million in 2000 to US$5.7 billion in 2005, a compound annual growth rate of 137 per cent, according to IDC.
Cisco may think a US$76 million market in 2000 is not one that’s red hot, but a 137 per cent compound annual growth rate indicates a market that’s rapidly heating. And abruptly killing a product designed to address future requirements indicates a problem with the product – not the market.
If the ONS 15900 was a competitive product for an emerging market, Cisco would have incubated it a little more and made sure it was a viable offering once the market developed. It would not have killed the switch.
“The most direct competitors to the 15900 from a functional and practical standpoint are really Tellium [with the Aurora switch] and Ciena’s CoreDirector to some extent,” said Chris Nicoll, an analyst at Current Analysis. Both are doing quite well, Nicoll reported, as a core wavelength router and edge optical grooming switch, respectively.
Tellium has lined up service providers Cable & Wireless and Dynegyconnect for the Aurora switch, while Broadwing Communications has implemented a meshed optical core with Ciena’s CoreDirector grooming sublambdas for Corvis’ CorWave optical switches.
Broadwing committed at least US$200 million for its groomed optical mesh. It has revenue generation and cost benefits, the service provider said.
“It enables us to implement capacity and restore capacity relatively quickly and efficiently,” said Chris Rothlis, vice-president of engineering at Broadwing. “The ability to provision is what’s winning business. We receive customers from several of our competitors who simply cannot provision.”
In the cases of Cisco and Sycamore, the issues with their optical switch offerings for the core were more product-related than market-related.
“What you’ve run into is not necessarily the absence of a market, but really the absence of the right product to fit the market at this time,” said Sterling Perrin, research analyst at IDC. “That grooming is in strong demand.”