Even before Cisco spent $6.9bn on small start-up Cerent a few weeks ago, the demand for optical switching had precipitated a worldwide R&D race to cultivate a satisfactory technology for top-end switching devices.
This excitement has led to a plethora of technology options which will result in a surplus of bandwidth and equal opportunity for voice, video and data, while some products will focus on directing the surplus bandwidth where and when it is needed.
The initial deployment of dense wave division multiplexing (DWDM) in backbone applications has intensified the need for optical switching to achieve the benefits of optical communications. Although optical systems can transmit terabits per second of information across great distances, the data streams must be converted into electronic signals for switching and routing.
DWDM is an optical technology that multiplies the capacity of fibre optic links by sending data simultaneously within different colour bands or wavelengths.
According to Tom Nolle, president of Cimi Corporation, technologies such as terabit and wavelength routers, optical transport nodes and data-friendly DWDM enable service providers to deploy multiservice networks in a timely and dynamic manner. Central to most of these innovations is DWDM.
Nolle pointed out that optical transport has been around for decades, as it is the core of almost all large networks. Most use synchronous optical network (Sonet) , he said, because it is designed to be an optical extension of the electrical telephone networks.
Because the trend in backbone networks is shifting towards putting voice into datastreams, this has brought about the theory that the optical transport technologies should not be linked to the telephone infrastructure in the way that Sonet is, Nolle explained.
In parallel with the development of backbone networks independent of existing telephone infrastructure, DWDM has also replaced the Sonet strategy of one light beam per fibre.
"You can have multiple light beams sharing the same fibre, and much more information per fibre," Nolle said.
The technologies confirm the ongoing trend of innovation being led by start-ups such as Sycamore Networks and Monterey. With these products, names such as Sycamore Networks, Ciena, Avici and Juniper Networks will be more likely to be heard than Cisco, 3Com, Lucent Technologies and Nortel Networks.
Yet Cisco entered the optical transport market in grand style when it bought loss-making Cerent. John Chambers, chief executive of Cisco, justified the extraordinarily high figure by saying: "Anyone who follows our market knows that optical transport is going to explode. This is how the industry is going to evolve.
"This is going to be a $10bn plus market and if we can execute it right, we can reach between 20 per cent and 25 per cent market share."
Cisco hopes the acquisitions will help service providers quickly migrate from traditional circuit-based networks to more up-to-date technologies.
Cerent's 454 optical transport system is the first generation of transport equipment designed around the internet, Cisco claimed. It is a single platform that allows service providers to offer data and traditional voice services without having to invest in legacy Sonet equipment.
Using this technology, service providers can accommodate rapid changes in network traffic in a matter of minutes instead of days, Cisco said.
The networking giant also acquired Monterey Networks, which builds optical cross-connect technology that is used to increase network capacity at the core of an optical network, for $500m.
According to Cisco, combined with Cerent, Monterey gives it a complete Sonet infrastructure offering to help service providers' transition to packet-based multiservice networks and eventually to optical transport networks based on DWDM.
With the acquisitions, Cisco is gearing up to do battle with Lucent, Alcatel and Nortel Networks in a market that is expected to grow to $10bn in 2002, according to analysts.
It has entered a business sector, called optical transport, which is dominated by the telecom equipment suppliers, and has become a supplier of Sonet-based transmission gear for inter and local exchange carrier networks. Cisco has a valuable weapon with which to battle the entrenched telecoms giants for the core of the service provider networks.
Experts say the demand for bandwidth from telecoms carriers and ISPs in addition to the thinning ranks of next-generation networking equipment, will continue to drive prices, requiring Cisco competitors such as Nortel and Lucent to build their own optical point products or buy the remaining optical networking players.
There are more optical networking deals in the works. ADC Telecommunications is believed to be working on products in the long-haul optical networking sector, while Sycamore Networks, another optical networking company, recently filed to go public.
Lucent recently promised the ability to transmit the equivalent of 15 CD-Roms through the air in less than a second using its Wave-Star OpticAir networking system, and using lasers, amplifiers and receivers placed on rooftops or in windows to transmit voice, data or video communications through the air.
Harry Bosco, optical networking group chief operating officer at Lucent, said: "This is the first optical networking system to use DWDM technology through the air to increase network capacity in densely populated urban or campus environments where it may be impractical to install fibre."
Lucent expects a market introduction of one wavelength at 2.5Gbit/sec next March and four wavelengths at 10Gbit/sec by the third quarter of 2000.
One-year-old Cyras Systems, which claimed its technology is superior to that of Cerent's, will continue the development of technology that enables the transmission of voice and data over optical fibre cable, although it has yet to bring any products to market.
Cerent's switches transmit data at 2.5Gbps, but it is also developing products and both companies' products are aimed at telephone firms and ISPs.
The technical implication of the ranges questions whether ATM should be at the core of multiservice provisioning or whether IP can be directly transported over Sonet; or with DWDM, is Sonet necessary at all.
The products would protect existing investments in Sonet and still allow the flexibility to take any signal type, IP data, ATM cells or Sonet frames and put them over DWDM.
John Curtis, director of engineering at the Tolly Group, said an interesting point was whether the legacy telephone companies would take advantage of these emerging technologies and become more competitive.
Meanwhile, need for optical networking equipment, or any well-engineered networking equipment, is accelerating. As Cisco, Lucent and Nortel compete for large telecoms accounts, they're finding that they simply don't have a large enough portfolio of products to sell.
But many industry analysts claim that the emerging market in the long-haul optical networking gear is growing much faster than expected, and that these companies are likely to expand to support this expectation.
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