Wholesale Metro IP Gets "GigE-boost"

Posted: 12/2000

Wholesale Metro IP Gets "GigE-boost"
By Khali Henderson

This month, IP Networks Inc. (www.ipnetworksinc.com)
turns up its 300-mile Gigabit IP backbone in Northern California, joining an
emerging group of wholesalers gobbling up dark fiber to offer fast pipes for a
fraction of the cost.

IP Networks and its competitors (see "Select
Gigabit IP Wholesalers" chart) are taking advantage of the increasing
availability of dark fiber from municipalities, utilities and long-haul
carriers. Such entities are laying fiber in quantities far greater than they can
actually use. Long-haul carriers, for example, were expected to deploy 95,000
route kilometers of fiber this year, nearly double the distance in 1998,
according to research by KMI Corp. (www.kmicorp.com).
In addition, The Yankee Group (www.yankeegroup.com)
reports that 50,000 route miles of fiber owned by public utilities is 97 percent
dark.

Yankee Group analyst Joanna Makris, explains that by lighting dark fiber,
gigabit IP companies are gaining blanket coverage in Tier 1 markets very
quickly. Speed to market helps of course, but in the end it’s not how much dark
fiber you have, but what you do with it that matters.

Souped Up Service

Like most of its competitors, IP Networks is implementing IP over gigabit
Ethernet over DWDM to deliver multimedia metro connectivity to wholesale and
retail customers. This architecture is in contrast to most IP providers that run
IP over ATM over SONET.

According to Pioneer Consulting (www.pioneerconsulting.com),
optical IP network platforms will account for a mere $110 million of the $1.15
billion spent this year on optical edge systems, which also includes
multiservice SONET and multi service DWDM equipment. This compares to more than
$6 billion that will be spent on traditional SONET and DWDM solutions this year,
the research firm reports, indicating that optical IP platforms are not in any
danger of supplanting their predecessors. By 2004, however, more than $1 billion
of the total $18.7 billion metro optical network spending will be for optical IP
platforms, they predict.

Chart: Select Gigabit IP Wholesalers

Gigabit IP over fiber offers several advantages–true bandwidth on demand and
streamlined service delivery. According to optical switch maker Extreme Networks
Inc. (www.extremenetworks.com), the
optical MAN architecture "enables carriers to provide capacities as high as
10 GigE as well as flexibility to provision individual data links down to
rate-limited bandwidths as small as 500kbps.

"In contrast to complex and expensive configuration changes that are
required to provision services or change circuit capacities in the traditional
SONET world, services on the new data-optimized optical MAN can be provisioned
or changed via software in a matter of minutes rather than taking weeks or
months."

By eliminating the overhead required by ATM/SONET networks, aggressive price
performance is possible. Gary George, CEO of IP Networks, explains that a GigE
IP network can offer the equivalent to a circuit-switched network at a 40
percent discount. An OC-48 (2.5gbps) router port on a traditional network costs
$80,000 per month. The equivalent 2.5 gigabits over Ethernet over DWDM, he says,
is between $800 and $1,500 per month. Carriers using SONET, he explains, must
deploy a SONET ADM costing $250,000 at the CO to support 8-10 buildings each
with OC-48 termination, plus each customer premises must deploy an IAD costing
between $75,000 to $100,000. With gigabit IP, the SONET terminal is eliminated
and the IAD is reduced to about $30,000.

Above all else, this disruptive pricing is expected to drive market share for
these emerging providers, says analyst Makris. Additionally, she says these
companies will exploit the bandwidth and distance limitations of other broadband
last-mile technologies like DSL and cable.

Asymmetric DSL, for example, provides speeds up to 8mbps downstream and up to
1mbps upstream, at 2 km depending upon loop and line conditions. Cable modem
speeds vary widely, depending on the cable modem system, cable network
architecture and traffic load. Downstream network speeds can be up to 27mbps, an
aggregate amount of bandwidth that is shared by users. Few computers will be
capable of connecting at such high speeds, so a more realistic number is 1 to
3mbps. In the upstream direction, speeds can be up to 10mbps.

Just in Time

While retail enterprise customers, by virtue of their installed
Ethernet-based LANs, are an obvious target for GigE IP providers, certain
service providers and property owners are ideal wholesale customers, according
to the Yankee Group. The research house says gigabit IP will meet the needs of
service providers that require high-speed trunking services between COs and/or
data centers, short-term bandwidth or "just-in- time" provisioning.

Besides CLECs and IXCs, gigabit IP wholesalers will be looking to serve
hosting companies, storage providers and ASPs that require high-speed metro
connectivity, as well as BLECs that require transport to MTUs.

While these wholesalers are focused on increasing demand for data transport,
they must contend with the challenge of delivering voice. They can deliver VoIP
using gateways or soft switches, but this prompts questions about QoS and how to
resolve latency and jitter. For this reason, some gigabit IP providers will not
use native Ethernet at all, but will rely on SONET framing to ensure quality.

IP Networks, in contrast, plans to offer voice over TDM switches using
PacketWave optical switching technology from Luminous Networks Inc. (www.luminousnetworks.com).
The manufacturer says its optical access switches make it possible for
telecommunications carriers to transport large volumes of IP data traffic along
with traditional voice traffic throughout a MAN.

Essentially, Luminous says that it is not necessary to introduce circuit
layers to achieve end-to-end QoS, asserting that SONET-level quality is
attainable by adding performance monitoring, automatic protection switching and
embedded operations support to an existing packet-oriented Layer 2 protocol. The
addition of extra circuit-switched layers, they say, adds unnecessary system
complexity and cost, decreases network efficiency and makes network provisioning
more complex and time consuming.

In late September, IP Networks completed an in-lab beta confirming its
ability to deliver voice as well as data and video over fiber.

Extreme Networks also uses IP TDM to allow circuit emulation on an as-needed
basis. This technique guarantees a transit path with fixed latency
characteristics necessary to support voice or video transmissions (see
Gigabit Ethernet MAN diagram). "Until recently conventional wisdom
assumed that only ATM could provide fixed-latency data paths required to support
voice," according to a white paper authored by the company. "However,
experience has now demonstrated that gigabit-level IP switches interfaced
directly to the optical WDM network can be designed with traffic prioritization
schemes that provide SONET-equivalent voice capabilities along with all the
advantages of flexible data handling."

Chart: Gigabit Ethernet MAN

Unlike VoIP solutions, Extreme Networks reports that this approach eliminates
the need to over-engineer networks to reduce latency and jitter.

Race Runners

There are half dozen startups in the metro wholesale GigE IP race. Most of
them have barely crossed the starting line; only a few–IP Networks and Telseon
(www.telseon.com)–have gained momentum.

To complete its Northern California backbone, IP Networks purchased an
indefeasible right of use (IRU) from an unnamed provider and built out six
segments totaling about 50 miles. Combined with its planned Southern California
backbone, IP Networks will cover 70 cities in the state. George says its
Southern California backbone is expected to go live in the spring to summer time
frame. Silicon Valley-based IP Networks will launch its metro ring service offer
in spring, rolling out five cities per month off its Northern California
backbone. It is also looking at similar network builds in Georgia and Florida.

Telseon, which launched in April, has maintained its early lead in the
category. It plans to enter 20 top U.S.s markets and 60 data centers this year.
Led by CEO John Kane, former ICG president and COO, the company secured $86
million in function from venture and investment banking firms. Level 3
Communications (www.level3.com), XO
Communications and Enron Broadband Services also have made strategic cash and
non-cash investments. Customers include Alta Vista, Enron, WebTV, InterNAP and
others.

Following close behind is Looking Glass Networks Inc. (www.lglass.net),
which closed on $200 million in funding. Looking Glass was founded in April by
telecom veterans Lynn Refer and Sunit Patel, former senior executives at
WorldCom and MFS Communi-cations. Its first-round equity financing led by
Chicago’s Madison Dearborn Partners with participation from Battery Ventures
based in Wellesley, Mass. The company has yet to provide commercial service and
is deploying much of its own fiber.

Back in the pack are Sigma Networks Inc., OnFiber Communications Inc. and
FiberCity Networks Inc. These startups each have websites, offering little more
than confirmation that they do indeed exist. All three declined to discuss their
rollout plans with PHONE+.

Sigma Networks, which has delayed its October launch until January, is led by
CEO John Peters, a former executive vice president for Concentric Networks. The
company is being incubated by Benchmark Capital, the same venture capitalist
that worked Scient, Ariba, NorthPoint and eBay.

OnFiber’s co-founders, CEO Jagdeep Singh and CTO Drew Perkins, come from
Lightera, which was later acquired by Ciena. Fiber City is the most tight-lipped
of all about its plans, but it has a backer in Samsung America Venture Capital.

Khali Henderson is editor at large for PHONE+ magazine.