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Enron Mail |
This gives a little flavor of how we factor into the backbone capacity market.
Category: Backbone, DWDM, Enron Communications Description Building A Better Backbone - And Business Plan : Detail: By Carol Wilson, Inter@ctive Week September 6, 1999 6:23 AM PT The numbers are staggering: Six major new national fiber-optic networks will come on line during the next two years at a cost of $18 billion. Those new networks are in addition to those already built and operated by the Big Three of long-distance: AT&T, MCI WorldCom and Sprint. Thousands of miles of fiber-optic cable are being installed in ducts to which new fiber can be easily added by companies such as Enron Communications, Frontier Communications, IXC Communications, Level 3 Communications, Qwest Communications International and Williams Communications. And that's just a piece of the story. While competition in the backbone network business is booming, new technologies coming into the market will make it much easier to increase bandwidth available on any fiber-optic network tenfold or more. Dense Wavelength Division Multiplexing (DWDM) systems now exist to put data traffic onto 160 different wavelengths on a single fiber-optic cable. Technology exists today to enable each of those wavelengths to transport 10 gigabits per second of data. Within two years, that will reach 40 gigabits per wavelength per second. "In effect, the backbone of the Internet is being rebuilt. The next step: Recover all those costs of construction,'' says analyst Peter Bernstein at Infonautics Consulting. "And that step may be more difficult than building the networks themselves.'' The combination of major new network construction and new technology for adding network capacity has led industry analysts and executives to predict a bandwidth glut that is likely to drive down prices in backbone transport of data much as the price of long-distance telephony has plummeted in the past few years. Frontier Communications admitted as much earlier this year when its second-quarter earnings weren't up to expectations. Rather than a free fall in prices, however, expect the market to quickly find new ways to use bandwidth, both in terms of network-based applications and bigger backbone networks to support the rapidly growing field of faster access via Digital Subscriber Line (DSL) and cable modems. The challenge for network operators is to create new business models that capitalize on something other than cheaper bandwidth. "I think the danger isn't so much of a glut as a lack of planning for the backbone network that could cause some major problems," says Claudia Bacco, an analyst at TeleChoice who studies the development of DSL. "Once DSL starts selling as a volume service, it will very quickly increase the demand for bandwidth in the backbone. Service providers need to have planned ahead." It's not surprising, then, to see a growing number of alliances between the new backbone builders and the competitive local exchange carriers (CLECs) that have been building DSL networks in major markets across the U.S. Qwest invested in both Covad Communications and Rhythms NetConnect-ions, for instance, and a third data CLEC, NorthPoint Communications, includes Enron, Frontier and Level 3 among its strategic partners. That doesn't mean, however, that all of the companies investing billions in burying fiber-optic cable stand to reap rich rewards, cautions Bernstein at Infonautics. "The problem isn't a glut of bandwidth, but a glut of service providers," he says. "If everyone has the same business model and is going after the same customers, that's a problem. In addition, there are timing issues . . . If you build it, they will come - but not necessarily when you need them to." At least nine players have built or are building national fiber-optic backbone networks. These look very similar, says Fred Harris, director of network planning and design at Sprint. "There are generally three East-West routes and three or four North-South routes that everyone builds," he says. "New York to San Francisco, Atlanta to Los Angeles, Seattle to Boston - everybody has fiber either in or near those corridors." In earlier network deployments, the fiber was buried, never to be exhumed. But today's fiber cables go into ducts, allowing fibers to be pulled out or slid in later. Capacity can be added without any backhoes. Today's newer fiber-optic cable, from companies such as Corning and Lucent Technologies, is designed to support higher transmission speeds without the light dispersion problems that limited speeds or distances on other fiber-optic cables. DWDM technology and optical amplifiers, which boost the power of a laser's signal over a given wavelength, enable bandwidth to be added and allow signals to travel farther without the need for as many repeaters to boost signals along the way. Eliminating repeaters in a long-distance network wrings out installation, maintenance and power costs. As Harris points out, if every company building a national backbone has 30 fibers along each major route, and each fiber can carry 80 different wavelengths of light, that's more than 20,000 different signals. Today, most of those signals would be powered by Synchronous Optical Network (SONET) gear, which operates at 2.5 gigabits per second, but a growing number have moved up to gear that operates at 10 Gbps. Both Lucent and Nortel Networks have announced equipment that supports 160 wavelengths on a single cable, and other vendors will have similar equipment within the next two years. Also coming into the market by 2002 will be new SONET gear that quadruples the current transmission rates from 10 Gbps to 40 Gbps. MCI WorldCom is testing these systems, known as OC-768 transmission systems, and expects to have one commercially available by early 2001, says Rama Nune, senior manager of optical and data network technology development. Nune stresses, however, that what's more important than having all the bandwidth is knowing "how to intelligently provision services over it and manage it." New Models Not surprisingly, most of the newer network operators have quickly moved to talking about services, not bandwidth. There are exceptions to this: Enron is building a network that transmits Internet Protocol (IP)-based traffic directly over a fiber-optic network, with no intervening transport systems or protocols. But its network is built to provide backbone bandwidth for Internet service providers and content providers, says Stan Hanks, vice president of research and technology at the company. At Level 3, falling backbone service prices would be good news, says spokesman David Powers. "We want to drive prices down by reducing the underlying cost of the network," he says. "We think we can do it because we are building a green-field network that doesn't have the cost of legacy technology like circuit switches." Most other network operators are looking to add services to their mix, including Web hosting, to create a differentiated service. MCI WorldCom through its UUnet subsidiary, Frontier, Qwest and others have announced Web hosting services. Greater bandwidth and lower prices also will enable new video services to be delivered over the Internet, says Vab Goel, vice president of IP engineering and technology at Qwest. "One of the things Qwest is doing is building its own access rings in 25 major markets," Goel says. "We think this network will drive cost down and increase performance for value-added applications which can be delivered over an IP network. Today, most video is compressed. With faster access speeds, you can watch TV shows over the Internet. This becomes interesting when you talk about having access to any TV show broadcast anywhere around the globe." In addition to enabling new services, however, the sudden availability of bandwidth will dramatically change the way services are priced and sold. "It's the next great challenge of the Internet - deciding how you are going to bill customers and what they will be willing to pay for," analyst Bernstein says. "I'm not sure anyone knows yet." Part of that challenge is matching a service that customers value with the need to recover the high costs of expanding a network. "George Gilder likes to say that bandwidth will be free - well, putting in 20,000 channels of OC-48 [2.5-Gbps transmision] isn't free; it costs billions," Sprint's Harris says. "And the same thing goes when you build up the local copper network to do DSL or cable modems." Already, however, DSL prices are dropping to $30 to $40 per month for a consumer service that offers up to 1.5 megabits per second. Businesses still typically pay $125 to $400 per month for higher-speed services that offer the same bandwidth in both upload and download modes. That compares very favorably to the $2,000 per month most companies paid for a T1 line until the past two years. But with customers assuming bandwidth will be cheap, how will nine backbone network providers recover their billions in investment? "I don't have a crystal ball," says Nune at MCI. "With the access speeds going up - whether it be ADSL [Asymmetric DSL] or gigabit Ethernet - we anticipate many rich applications to drive the bandwidth of our customers." Providing those applications - or at least building into the network the right hooks for new services - is the best hope for building a new revenue base, Harris agrees. There will still be room for charging higher rates as well for levels of reliability and transmission speeds, says Qwest's Goel, but those charges will likely be packaged as part of the application cost. In a world where everyone has access to the same technology, it will be the business issues that ultimately decide who succeeds at building - and sustaining - the backbone of the next Internet.
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