Evolving telecom landscape tests the testers
The test and measurement industry has been experiencing a similar roller-coaster ride to that experienced by the network equipment and component manufacturers in recent years. It was not so long ago that the biggest challenges in the test industry were building up manufacturing capacity and fighting component lead times that stretched out for months.
The decline of the equipment and component segment had a knock-on effect on the test and measurement industry. A large percentage of the test and measurement market at that time were manufacturing test systems. The downturn caused the manufacturing portion of the test industry to decline sharply.
The good news is that this situation has improved and there are many promising signs. First of all, the service-provider market has stabilized; carrier debt is decreasing while capital expenditures are reaching a sustainable 14% of revenue. Additionally, residential broadband adoption is way up, enabling a new revenue stream for carriers. A few careful build-outs at the metro edge are also going forward. All these factors seem to imply that the worst is over.
That is not to say there aren't any challenges. With higher broadband adoption rates come ever bigger file downloads, which is one of the main causes for data traffic increasing by 70%–80% per year. Competition between broadband cable and DSL has forced carriers to supply these data services at lower prices. In addition, declining voice revenues put additional pressure on the carriers to cut their operating costs.
To get revenues up, carriers are trying to turn commodity bandwidth into higher-value services such as virtual private LAN services, storage applications, and residential broadband access. The need for service innovation has spawned a whole set of new technologies and paradigms: carrier class Ethernet, Internet protocol-virtual private networks (IP-VPNs), MPLS, Generalized MPLS, next-generation SONET/SDH, and so forth. And all these technologies need to be tested, which has led to new contributions such as virtual private LAN services and next-generation SONET from Agilent Technologies and other instrumentation companies.
Since many of these protocols are dependent on firmware and software design, the nature of testing changes. Instead of a heavy focus on manufacturing, the new opportunities are in development, system verification, and the carrier labs themselves. The instrumentation must be able to make a deep and comprehensive dive into the depths of MPLS, VPNs, and next-generation SONET to ensure the capability and interoperability expected of this equipment once it is deployed in the network.
Innovation is also occurring in the components that go into the network equipment. Moore's Law doesn't slow for economic cycles, and device innovation continues at a rapid rate. CMOS speeds are now forcing the use of serial communications methods and microwave design techniques for the development of next-generation digital buses. PCI-Express is just one example of a serial protocol that is being widely adopted in the computer industry to replace lower-speed parallel architectures.
The shift from parallel to serial results in a big jump in line speed, as many parallel channels must travel on a single transmission line. Digital board designers must quickly jump from megahertz speeds to gigahertz speeds and face a whole new set of problems. For test vendors with deep experience in both digital design and serial telecommunications protocols, these difficulties can be turned into new test opportunities designed for the convergence of telecom and datacom technologies.
As traffic continues to grow at about 100% per year, packet transmission costs have to be in synchronization with respect to bandwidth per dollar. ADSL in the current infrastructure and fiber to the home for the next-generation infrastructure are hot topics again. Technology and cost trends are also setting the stage for device innovation in optics. Size and cost reduction demands are forcing the move to integrated optics, requiring new measurement techniques that cannot be found in today's standard products.
The last few years of decline and restructuring have been starkly different from the growth boom of the late 1990s. The industry has made an enormous shift from a focus on capacity and bandwidth to the new direction of service and device innovation. Once again, we are entering a phase with new and unique challenges. While there has been a shakeout of the players in the telecom industry, the survivors are those that recognize the new paradigms and find news ways to add value.
Test and measurement will play the critical role it has always played in enabling these new solutions. As in the parent industry, those that survive and prosper will be those that most ably recognize this shift and adapt to meet the new challenges.
Werner Huettemann is vice president and general manager of communications network solutions, Electronic Products and Solutions Group, at Agilent Technologies (Böblingen, Germany).