Preparing for data optimization while profiting from voice

Optical switches provide competitive advantage in a cost-constrained environment.

Richard Thompson
Sycamore Networks

When new technologies come along that promise to fundamentally alter the way an industry operates, companies are faced with two options. They can adopt the new technology or they can wait. By waiting, companies allow the dust to settle and eliminate the risk of implementing technology that may not be successful. But waiting can also backfire. If the technology is successful, waiting can allow competitors using the new technology to gain a significant competitive edge.

When optical switches were introduced at the end of the last decade, competitive local exchange carriers (CLECs) and other emerging carriers building green-field networks from scratch immediately took advantage of the cost savings and flexibility offered by this new class of switch. While these emerging carriers were building their networks from the start with state of the art technology, the incumbents -- ILECs, IXCs RBOCs, and PTTs -- had existing infrastructures to consider. Because their networks were built with tried, tested and venerable equipment -- digital crossconnect systems (DCS), add/drop multiplexers (ADMs), and the like -- the incumbents were not as motivated to adopt untried switching technology.

In the recent market downturn, many of the emerging carriers have been affected by economic conditions more than their incumbent counterparts. The decline of these emerging carriers has temporarily slowed the widespread adoption of optical switching technologies, but the progress of switching has far from stalled.

In fact, the dust is now beginning to settle, and it is evident that optical switching is a technology that is here to stay. A number of large, well-respected incumbent service providers have begun to deploy optical switches to scale their existing voice-centric networks. These innovative incumbents are seeing benefits from optical switching -- cost savings, flexibility, and new service options -- that would be significant in any market. But in today's difficult economic times, where any competitive advantage is exaggerated, carriers that have begun a transition to an all-switched infrastructure will have an advantage. In the next several years, carriers that are slower to adopt optical switches will lag behind their more progressive competitors in terms of service margins, offerings, and velocity.

Switching drivers

There are several factors driving carriers to transition to an optically switched network, in spite of (and perhaps because of) the financial concerns that permeate the industry.

Data traffic is continuing to grow. J.P. Morgan Securities, in its "Telecom Services 2001" report (November 2, 2001), forecast data to account for 70% of long-term industry growth and wireless to account for 40% (with voice contributing negatively). Because both data traffic and wireless traffic are less predictable, they require rapid provisioning and more flexibility than traditional voice traffic -- two inherent weaknesses of a manually provisioned incumbent network.

The growth numbers, however, tell just a part of the story. Despite the fact that data now accounts for the majority of traffic in the network -- a difference that will only multiply in the future -- the majority of carriers' revenue still comes from voice traffic, and is predicted to do so for the foreseeable future. At the same time, revenues from data are significant; they are expected to reach nearly $350 billion by the year 2005, according to IDC Research (January 2002).

Carriers are now faced with the dilemma of how to manage and capitalize on the growing data and wireless traffic without slaughtering the cash cow that is their voice services. The predicament is only exasperated by today's difficult market conditions. In an increasingly capital-constrained environment, every capital outlay must have immediate and corresponding returns in terms of revenue, customers, operational expense, or preferably some combination of the three.

Enter the optical switch. Today's optical switches offer the same benefits that attracted emerging carriers a couple years ago, but are more advanced, contain more features, and offer better cost savings. Most importantly, they can be implemented into carriers' networks non-disruptively, effectively consolidating racks of traditional equipment into a single bay or less.

A smooth transition

The transition is one that carriers will be able to make at their own pace -- more than likely it will not be a step-by-step process. But for illustration purposes, the transition can be broken down into steps according to the level of adoption and functionality of optical switches. The first step starts with strategically positioning intelligent optical switches into carriers' existing networks. Carriers can integrate optical switches into their networks and use them like a DCS to relieve congestion and reduce costs at network pressure points.

Such an approach offers many immediate cost and operational benefits. Optical switches have a much smaller footprint than DCS equipment. A typical DCS can require 20 line bays to support 64 OC-48/STM-16 ports, while an intelligent optical switch can provide the same port count in a half of a standard line bay. The difference in density leads to dramatic floor-space savings of 90% or greater in most configurations. Since central offices and points of presence are often in metropolitan areas, the lease savings can be significant and the change opens floor space for the collocation of equipment from a range of partners.

Optical switches operating in networks today most commonly function as DCSs. However, it is only the first step in a transition to fully switched, data optimized infrastructure (Figure 1). Even at this first level, the operational and capital savings are significant. The next step, in which the optical switch also performs the functions of an ADM as well as metro transport (through the integration of intermediate and long-reach optics), further consolidates equipment and reduces costs.

In this application, as carriers begin to replace increasing numbers of legacy ADM and DCS boxes, they can begin to realize benefits beyond the capital and operation savings. Specifically, because optical switches, unlike DCSs or ADMs, are network aware, provisioning and service management can be automated, making possible a number of services that until recently have only existed in marketing collateral -- bandwidth on demand, scheduled bandwidth, and optical virtual private networks, among others.

Benefits

With their high degree of automation, intelligent optical switches will eliminate most of the costly manual tasks that network technicians perform with legacy equipment. The resulting network will be simpler to manage because it will consist of a single, integrated data transport mechanism rather than a mix of voice and data protocols, and carriers will have the flexibility to keep pace with wildly fluctuating, unpredictable bandwidth requirements.

Intelligent optical switching gives service providers the ability to instantly provision a lightpath across multiple optical network segments, and carriers even have the choice of completely automating the process, or automating the actual provisioning while maintaining a degree of manual control (i.e., select the routes manually). If a customer wants to deploy a high-bandwidth Gigabit Ethernet service between two main hubs, the provisioning process can be completed in minutes, rather than the weeks or months it takes over traditional networks. Additionally, the service can be provided for a limited duration to support a specific business requirement, avoiding the cumbersome multi-year commitments that are required for high bandwidth services today.

The new data-optimized infrastructure is designed to support the rapid deployment of advanced services and service enhancements, such as tiered restoration options, new flexible private line services, and a range of service level agreements. It also places carriers in a position to design unique services and target specific customer segments, which in turn helps defend margins and competitive differentiation.

Despite current market conditions, the transition is already underway. Incumbent carriers in the U.S. and abroad are deploying optical switches to optimize their voice, data, and even wireless networks. Incumbent carriers who have extended their networks with optical switches are enjoying the flexibility and cost benefits a new all-switched optical infrastructure delivers.

In any environment, competitive differentiation, margins, and ease of operation are key factors; in a market as difficult as today's telecom industry, these become ever more important. In such a market, carriers who are a step ahead in the transition to an all-switched infrastructure are also a step ahead in their business.