cover story

Leasing Capa City by color

By KATHLEEN RICHARDS

The choices for leasing bandwidth will soon expand from dark fiber and full-service "lit" capacity to individual wavelengths. By the end of this year, many wholesale customers will have the option of leasing a wavelength for a point-to-point route.

Envisioned early on in the development of dense wavelength-division multiplexing (DWDM) technology in theory, wave services promise to multiply each fiber's revenue potential by the number of wavelengths a carrier's DWDM systems can support—as high as 32 today and up to 128, or more, in the near future. DWDM is evolving beyond its traditional role as a fiber-relief solution in long-haul networks after less than three years on the market.

For wholesale carriers, leasing lightwaves may indeed lead to a pot of gold. "If I want an OC-12 (622-Mbit/sec) service to interconnect my data centers, I have to use an entire fiber for that service," observes Mat Steinberg, director of optical networking for market researcher RHK Inc. (South San Francisco, CA). "But with a wavelength, let's say you have a 40-wavelength system, you use only one-40th, so you have 39 other wavelengths to offer additional services on.

"We talked about wavelength services about two years ago," continues Steinberg. "What is significant is that the products are becoming available. There is bandwidth available to actually go and do it, and there is demand for that high-speed bandwidth."

RHK based its 1998 five-year North American metropolitan forecast on wavelength services. The short-haul, metropolitan market is expected to reach $300 million in 2002, according to the market research firm. Despite serious discussion among the regional Bell operating companies (RBOCs), the first wave-based services will come from long-haul network providers.

Williams rides the waves

Indeed, for wholesale carriers such as Williams Network (Tulsa, OK), the economics make sense—more capacity to lease on a single fiber to wholesale customers that can manage their own bandwidth. The first national provider to roll out a "wave" service, Williams announced its Optical Wave Service in June at the SUPERCOMM '99 trade show in Atlanta. It is scheduled to debut in the fourth quarter.

The Optical Wave Service will allow Williams's wholesale customers to lease point-to-point OC-48c (2.5-Gbit/sec) wavelengths on a short (one- to five-year) or long (15- to 20-year) basis. This unprotected service is targeted at data carriers who want to complete Synchronous Optical Network (SONET) rings or diverse routes in their mesh networks. It is marketed by Williams as a cost-effective alternative for data carriers with the in-house expertise to use their own transport—Asynchronous Transfer Mode (ATM), Internet protocol (IP), or frame-relay switches—and to provide their own restoration and protection switching.

"It basically allows the customer to define the service," says Sunita Krishna, product manager of Williams Network's Optical Wave Service.

The current industry pricing standard for leasing dark fiber, according to analysts, is $150 per fiber-mi per month, although actual pricing is heavily dependent on a particular route's supply and demand. The pricing for the Optical Wave Service, Krishna says, will fall somewhere between leasing a dark fiber and full-service capacity.

"Say you have protection switching at the core of the network as well as at the customer's own ATM switches," explains Krishna. "This eliminates [the need for] the core protection. It also eliminates the costs, so it reduces the price from a full service."

To access the new wave service, the wholesale customer connects its network to a building with a Williams point-of-presence. Then the customer's ATM, frame-relay, or IP switch is connected to a digital crossconnect, which links to a Williams transponder (Sycamore Network's SN 6000). The transponder converts the customer's handoff—a 1310-nm intermediate-reach SONET framed signal—to a 15xx-nm, concatenated, transparent OC-48 wavelength between 1530 and 1560 nm. The wavelength then goes through a Williams DWDM box and out into Williams's OC-192 (10-Gbit/sec) long-haul network (see Figure on page 4). In its initial operation for the Williams service, Sycamore's SN 6000 transponder supports 14 wavelengths, according to Krishna.

Williams's unprotected wave service offers data carriers the entire OC-48 capacity. Unlike traditional full-service capacity, carriers are not billed for an additional OC-48 for protection. The fact that the Williams service is concatenated provides some additional benefits.

"For a concatenated service, a packet does not use the whole of its overhead, so part of that overhead can be used by our [wholesale] customer for their services if they need to send some information," explains Krishna.

"Concatenated [operation] also allows our wave service to be transparent," adds Krishna. "It's a clear channel; that means it's interoperable with different vendors' equipment so that customers that want to complete their SONET rings can do so through a wave service."

Waves up and down

One of the major benefits of a wave service for carriers is the ability to quickly turn up services and react to customer demand, when and where its needed. "Williams had estimated that it takes them about six months to deploy OC-48 on their traditional network," says Jeff Kiel, director of marketing at Sycamore Networks Inc. (Chelmsford, MA). "They'll be able to reduce the time to six weeks with the optical-networking technology, so that in itself is very powerful."

"A SONET channel can take up to six months to get, so this is a huge leap above that," says Scott Clavenna, principal analyst at market researcher Pioneer Consulting LLC (Cambridge, MA).

Running high-speed data services over waves rather than traditional SONET is more efficient from both a bandwidth and cost standpoint. In addition to offering more usable bandwidth, optical wave services typically require less power and reduce space requirements. "We can support 28 OC-48s in a 7-ft bay, whereas an equivalent SONET system can support six," says Kiel. "We also consume about a third of the power for the same space."

The greater the reward...

Of course, no reward comes without some risk. For example, while unprotected wave services push restoration, protection switching, and diverse routing responsibilities on the customer, they still place more demands on the host carrier than simply leasing dark fiber. Williams is responsible for deployment of the optronics, technology upgrades, and managing its own national backbone network.

The carrier also has some responsibility for performance monitoring. "I think it is much easier to lease dark fiber than it is to lease a wavelength because there are some performance issues," observes Pioneer's Clavenna. "If you have other wavelengths traveling on that same fiber, the carrier has some responsibility to actually monitor the performance of that optical channel.

"In this case, it would be Sycamore's equipment. You have to pass through Sycamore's equipment to lease that optical channel. If that equipment fails, then that's out of your control and it's up to the carrier to guarantee some kind of restoration or reliability with that," says Clavenna.

Performance is also an issue with regard to the transport protocol. SONET has built-in performance monitoring that checks the bit-error rate of the signal going through the network equipment. Because DWDM systems are protocol transparent, it's not possible to track the traffic going through DWDM systems to the same degree. "A lot of these systems hauling DWDM are still piping SONET through because of its traffic-management capabilities and will be doing that for some time until DWDM gets to the point where it can stand on its own," says Tom Valovic, research manager at International Data Corp. (IDC—Framingham, MA).

Other carriers testing the waters

Williams isn't the only early adopter of wave services among wholesale carriers. TouchAmerica, a division of Montana Power, has a long-haul network based on utility fiber that goes from Seattle through Montana to Chicago. The long-haul carrier has quietly offered leased wavelengths to wholesale customers for more than a year.

Millenium Optical Networks, a Manhattan-based competitive local-exchange carrier (CLEC), is building optical rings in the city to provide OC-48 wave services to other carriers and to Fortune 100 companies. Like Williams, the CLEC will use network equipment from Sycamore Networks.

Meanwhile, the RBOCs expect to offer wavelength services and are discussing their options with vendors and analysts. "When we spoke to the RBOCs," says RHK's Steinberg, "They were all talking about wavelength-based services, like you have dedicated SONET-based services today."

Brian McCann, president of ADVA Optical Networking Inc. (Ramsey, NJ), says his commercial customers started to investigate leased wave services last year. "Our customers buy dark fiber from providers like MCI WorldCom, TCI—now AT&T, Cox Communications, and [Metromedia Fiber] Networks," says McCann. "Then they buy our multiplexers and do it themselves. But last year, some carriers came in and basically changed the model. They said, 'Hey, we can do that. We can offer DWDM with the dark fiber as a turnkey service, keep it flexible, and offer leased wavelengths. Whether the customer runs data, voice, or video traffic is irrelevant as long as the carrier knows what the ranges are and it fits within the equipment."

Early adopters

As a wholesale carrier, Williams will focus on selling wave services to other carriers and to Internet service providers (ISPs). Williams declines to divulge specific customers. "Today, we have many proposals that we are working on, so it is still in the works," says Krishha.

"I think this year what you'll see is carriers providing services to other carriers: ISPs basically backboning their networks as well as carriers completing their networks through another carrier," asserts Sycamore's Kiel. "Next year, high-speed services will start working themselves down to the Fortune 100 customers."

Analysts point to the increasing demand for high-speed data services as a driver for wavelength leasing. "It wouldn't make sense unless there was demand for it," says RHK's Steinberg. "We have seen a lot of demand from the Fortune 1000s. For example, a company has product development centers on both the East and West Coast. I've seen connections between offices on the West Coast, in India, in Europe, and then back on the West Coast. You actually have data centers and engineering teams working around the clock."

For many customers, the advent of wave services will greatly improve the flexibility of fiber leasing. "If you lease a dark fiber with the DWDM technology available, you can put an incredible amount of data on it," says Jilani Zeribi, senior analyst at Current Analysis Inc. (Sterling, VA). "Very few carriers need that kind of capacity right from the start.

"As a customer, just being able to lease the capacity that they need on a wavelength-by-wavelength basis makes tremendous economic sense," he adds. Moreover, carriers can lease wavelengths from multiple wholesale providers to develop redundancy by duplicating routes on different fibers—a practice that doesn't make economic sense when leasing dark fiber.

Only the first step

Point-to-point wave services mark the beginning of a slew of wave-based applications envisioned by carriers and analysts. These wave services will be enabled by DWDM technology, and by the first generation of optical switches and optical crossconnects, which will reportedly support wavelength routing and dynamic service provisioning.

CIENA Corp. (through its Lightera acquisition), Monterey Networks, Alcatel, Lucent Technologies, and Corvis Corp. are among the companies expected to introduce first-generation products later this year and early in 2000.

"With the new optical crossconnects that are coming out, it will be much easier to provision a wavelength across the country," says RHK's Steinberg. "A wavelength from Dallas to San Francisco requires that you have a number of truck rolls go put equipment in place throughout the network."

Pioneer's Clavenna holds a similar view. "In the future with the wide-scale deployment of optical crossconnects and switches, you really will have optical channel services available to carriers and major end users, which is very attractive for a lot of reasons," says Clavenna. "If the carrier can offset the risk of the optical channel with the benefit of the optical-layer restoration or routing, then they'll have a value-added service to offer."

Although wave services are in their infancy, a lot of carriers are investigating the possibilities of wavelength-on-demand types of services. "Today, if you get these channels, they are fixed," explains Clavenna. "You get an optical channel between point A and B. Williams would have to physically establish it for you and it would have to be engineered into the network.

Channels on demand

"But in the future, there is the potential—when you get into more dynamic DWDM systems—that you could have optical channels on demand," he continues. For example, a large e-commerce business could lease three or four wavelengths to its Web site for the Christmas season. Such short-term leases would be more preferable compared to an expensive full-year commitment—not to mention a 20-year lease.

"That's a few years off, when you have deployment of optical crossconnects and switches and dynamic DWDM systems," Clavenna explains. "But I think it indicates the direction that it is probably going."

Potentially, customers could connect to fairly sophisticated optical networks and access wavelengths-on-demand themselves without having the carrier establish the optical channels. The length of lease contracts may also radically change with the option to lease a wavelength from one to five months, or even one to five days.

Shorter leases aren't the only potential benefit from future wave services. "The next opportunity is protected services because that doesn't exist today in the long-distance network," says RHK's Steinberg. With the optical networking enabled by the optical switches and crossconnects, carriers could offer customers per-channel protection with different grades of service, for example, ultra-reliable, one-minute-to-restore, or unprotected.

Another option might be to lease wavelengths to support private networks. "Each one of these wavelengths could carry an enterprise customer's entire network and their backbone traffic," observes IDC's Valovic. "Since DWDM is bit-rate and protocol independent, it could handle an ATM network, an IP network, and so forth. In essence, because of the security of fiber, you have kind of a virtual-private-network phenomenon."

From pipes to paths

Many factors bode well for transporting high-speed data services over individual wavelengths on optical networks. DWDM technology is evolving to support applications other than fiber exhaust. Vendors such as Charlotte's Web and Avici Systems Inc. are developing terabit routers. There is also a growing abundance of ATM switches and IP routers that support OC-3 (155-Mbit/sec), OC-12, and OC-48 interfaces.

"Carriers really have a fundamental choice of how they are going to grow and scale the network for the high-speed data users," says Sycamore's Kiel. "They can grow and scale it in the electrical domain—continue to build SONET-based networks, SONET rings, and use DWDM to multiply fiber—or they can scale the network in the optical domain and offer the high-speed services directly over waves.

"We are kind of in the phase now that I would describe as the wavelength creation phase, where carriers need to be able to take this technology and implement it when and where it's needed," states Kiel. "It's not a wholesale upgrade of the existing network. It is taking this [core] optical network that is already there and changing its role from pipes to paths."

At the end of the day, the economics of leasing wave services offers the most compelling argument for carriers to embrace this technology.

"DWDM has been a pure fiber-relief solution, and I think what is happening is that the technology is being understood well enough that people are going beyond that and offering it as a service," says ADVA's McCann.

"But it's still dumb pipes," he opines. "It's just 32 times the capacity of the previous pipe. Carriers can't get 32 times the revenue, because customers no longer have the benefit of moving to DWDM themselves, but they can, at the very least, get five to 10 times the revenue."