Wavelength services have gained popular- ity during the past year as a cost-effective alternative to dark fiber and private lines for network builds and are positioned for strong future growth due in large measure to an emerging retail play.
The Yankee Group estimates revenue from waves will top $1 billion this year. The research firm predicts revenue will increase seven-fold by 2005. Much of the demand will come from large enterprises and multinational corporations, which will see considerable bandwidth growth, Yankee predicts. With 20 percent of U.S. multinational corporations expecting to need 622mbps or more by 2003, wavelength services are expected to be a lucrative opportunity, the firm notes.
Most current wavelength demand is from carriers seeking wholesale-unprotected point-to-point connections. However, there is a growing market for managed and custom-built wavelength services providing long-haul and, particularly, metro access services to large enterprises, such as universities, health care facilities, government agencies or financial institutions. These enterprises will look to managed wavelength services to connect their main offices or to tap into the metro core with a large data pipe. Enterprises will use wavelengths to support multiple protocols for emerging bandwidth-intensive applications, such as storage and content delivery. Lambda's protocol-independence makes them particularly attractive for enterprises with complex data needs, supporting simultaneously ATM, gigabit Ethernet, TDM and FICON (a common storage protocol) traffic.
By the end of 2002, The Yankee Group expects all established carriers and many of the fiber-based competitive providers to have a retail wavelength offering and a combined total of more than 200 customers.
"In order to avoid commoditization, [wavelength providers] will move to customization, mirroring what AT&T is doing with Ultraavailable," said The Yankee Group analyst Seth Libby, in a December 2001 audioconference on use of waves in the metro market.
AT&T's Ultraavailable Broadband Network, introduced in January 2001, is a custom, managed service that provides private fiber optic networks and optical networking technology to interconnect client data centers and business sites in a secure metropolitan area network for the purposes of mirroring data and applications and transmitting large quantities of data at high speeds.
The service is based on wavelengths so as to shorten provisioning intervals for new services and to support multiple protocols. Importantly, it comes with proactive monitoring and performance management from AT&T's Global Enterprise Management System platform as well as professional services from AT&T's Global Client Support Centers.
AT&T is using the Ultraavailable Broadband Network to support an outsourcing contract with financial services firm Merrill Lynch to network 11 of its campuses in the New York-New Jersey area.
One of the other carriers to make a formal move to sell retail wavelengths is Global Crossing Ltd. The carrier launched in late November 2001 the first worldwide optical wavelength communications service, connecting more than 90 cities in Asia, North America and Europe. The company has offered waves in select areas for the past three years, but the new offer is the culmination of six months of planning to combine the product, provisioning process, pricing and billing, says Tony Palma, Global Crossing's vice president of global product management for broadband services. Significantly, it has developed its subsea wavelength network to complement its terrestrial capabilities, he says.
In a December 2001 interview, he said 100 percent of the company's revenue for wavelengths are coming from carrier sales, but expects the new offer also will have appeal for enterprises.
"There has been a significant shift in purchasing decisions from dark fiber to wavelengths and some private lines to wavelengths," he says, adding it is a logical evolution for enterprises and multinational corporations to substitute waves for OC3s and STM1s.
Scott Erickson, director of product management for global wavelengths at Global Crossing, explains multinational corporations can hang their own SONET or SDH multiplexer on the unprotected waves or turn them into an IP network rather than paying the carrier to put the equipment in at the core of the network. In addition, he says, waves offer an alternative to buying an OC48 circuit that contains Layer 3 protections that may not be needed for a particular application.
"Wavelengths are taking on the characteristics of private lines," adds Palma, explaining they are being sought to provide route diversity, access and shortened provisioning intervals.
"Wavelengths are an excellent option for companies looking to quickly and cost-efficiently complete key portions of their networks," says Nick Maynard, a Yankee Group analyst in a press statement in response to the Global Crossing offer. "Global Crossing's international footprint will allow their large enterprise customer to connect to their multinational sites."
At the metropolitan area networking level, metropolitan optical network provider Telseon is looking to large enterprises -- in addition to carriers and service providers -- as potential customers for its Bandwidth Mobility service, which debuted in fall 2001.
The service offers OC12 equivalent wavelength connections between any two Telseon network locations within a metro area. If bandwidth demands shift, the service can be relocated between any two network locations within the same metropolitan area or both end points moved to another Telseon-enabled metro market.
"Telseon's OC12 with Bandwidth Mobility offers SONET-like OC12 services without any of the hassles: high capital expenses, slow capacity upgrades, lengthy installations and route lock-in," says Mike McHale, president and COO at Telseon.
Executives at the company explain this offering is in contrast to those of traditional SONET-based service providers, which often require customers to agree to multiyear fixed bandwidth agreements. If traffic priority changes among locations, businesses with these SONET deals must either keep unwanted connections or pay substantial contract exit penalties and purchase additional connections, they add.
While the outlook for retail wavelength offers is positive, providers are cautioned to manage the service offering, which is likely to become a commodity. "They are competing with essentially the same offering," says analyst Libby, noting quality of service, footprint, support and pricing all will be differentiating factors.
"Carriers are rolling out wavelengths as a defensive measure," he says. "They need to demonstrate that they can manage the service and migrate customers up the chain (to higher bandwidth and managed services offers)."
"There has been a significant shift in purchasing decisions from dark fiber to wavelengths and some private lines to wavelengths."
Tony Palma, vice president, global product management for broadband services, Global Crossing Holdings Ltd.
