Internet-driven bandwidth hunger is spreading worldwide, which has European carriers scrambling for options.
In the second year after full telecommunications deregulation in Europe, there is now a tidal wave of data traffic heading for the public-switched telephone network (PSTN). Analyst groups such as Yankee Group and Ovum are predicting that by 2003, paying traffic will be 90% data. However, that data traffic represents only 25% of a carrier's service revenue. This means that today, nearly all telecommunications operators are examining the implementation of a full public network that employs Internet-protocol (IP) technology to transmit voice through voice-over-IP (VoIP), data, and image traffic simultaneously.
With these statistics, business planners are clearly developing "New World" strategies for a network architecture that transports IP traffic in the most efficient and economical manner possible. The current opinion is that an IP-centric network will streamline optical-network deployment, and neither the new-entrant carriers nor the former monopoly telecom operators can ignore the need for prompt action, while still ensuring the current quality of service (QoS) and required data-traffic engineering.
"The fact that it is now possible to transport voice on IP makes it feasible to integrate voice with data on a packet network," says Margaret Hopkins, Analsys UK telecommunications consultant and author of a May 1999 report called "Next Generation Networks: Integrated IP Architectures."
The availability of new IP products implies that some major enhancements of optical-backbone networks must occur. These enhancements will reduce the protocol layers needed for IP transport, not to mention the amount of equipment previously used for protocol conversion, and will result in an enrichment of the services provided by the optical layer (layer 1). In the new IP-centric world, the optical layer will have to perform functions previously offered by upper protocol layers.
The current market acceptance of dense wavelength-division multiplexing (DWDM) in Europe implies that broadband capacity of core/national networks can be quickly upgraded to keep pace at an accelerating rate. Recent enhancements in IP routing-such as multigigabit bandwidth switching of IP datagrams at rates ranging from 5 to 60 Gbits/sec-are producing routers with interface speeds of up to 2.5 Gbits/sec. DWDM systems can now transport up to 128 channels at oc-48/stm-16, for a total bandwidth of more than 1 Tbit/sec.
One of the intriguing features of the current IP-network market is that carriers are taking some risks in moving ahead of the standards organizations. Dr. Juha Heinanen, director of technology at Telia, summarizes the heated debate about the likelihood of IP emerging as the dominant network protocol as centering around three hypotheses:
- DWDM combined with optical add/drop multiplexers replaces traditional sonet/sdh networks.
- Virtual circuit layer (layer 2) is useful between IP and transmission layers for data-traffic engineering.
- Multiprotocol Label Switching (MPLS) may be too little for those network operators already deploying Asynchronous Transfer Mode (ATM), or too late for those pioneers who deploy optical switching first.
This complex issue also has legacy implications, particularly for the dominant European operators such as BT, Telefonica, KPN, France Telecom, Global One, Deutsche Telecom, and Telecom Italia. After a decade of refining ATM as a multiserve platform, some operators are deploying IP on ATM for congested urban links and plan for near-future deployment to ensure the QoS that VoIP lacks.
"The likely evolution path for existing networks is to create a packet network along the PSTN," explains Hopkins. An example of this strategy is Swisscom's IP network.
The fact that the move toward IP networks will be revolutionary rather than evolutionary was highlighted by Andy Reid, head of transport network strategy at BT, and one of Europe's leading optical-network planners. Reid presented a paper entitled "Exploiting, Implementing, and Evolving DWDM: Moore's Law or Moron's Law" at a recent IIR seminar. "Moore's Law says that the capability of silicon technology doubles every 18 months. Moron's Law is the inability of the traditional telecommunications industry to follow Moore's Law," Reid explains. His opinion reflects the current concern over the pitfalls of rushing into the next-generation products before customers are readyto connect.
During 1998 and through this year, most major European carriers have built or announced their plans for IP-compatible optical networks. "DWDM and optical networking are essential to keep on the bandwidth cost curve," explains Dr. Barry Flanigan, an Ovum consultant specializing in telecommunications. Dr. Flanigan sees the bandwidth market from a supply-and-demand perspective, in which each side affects the near-term market dynamics. Short-term uncertainties and business risks are expected because of the explosion in networks that are built without bandwidth demand growing in smooth incremental steps. As one of the authors of Ovum's report, "The Bandwidth Explosion: August 1999," Dr. Flanigan has raised the most important question for network operators: "Will increased bandwidth stimulate enough extra IP traffic to fill the network to peak capacity at commercially sustainable prices?"
The market factors driving explosive IP bandwidth demands are:
- A rapid growth in Internet usage
- A growth in the bandwidth required for business applications as PC computing power continues to follow Moore's Law
- The arrival of high-speed access in Europe
- The catalytic effect of the decreasing price of IP bandwidth on the up-take of new bandwidth-hungry applications.
In Europe, one of the key obstacles to accelerated broadband-services demand is the access bottleneck for end users, both in their offices, and at home. Ovum and other analyst groups speak about this access-network issue in terms of bandwidth needs and usage pricing. However, the access-network bottleneck can also be examined from the regulatory perspective and from a wide assortment of technological solutions.
On the regulatory front, both the European Community and national regulatory forums have challenged the dominant carriers to sell off their shareholder's stake in cable-TV networks as a quick fix to ensure some market liberalization in the local loop. For example, approval of the merger of Telenor (Norway) and Telia (Sweden) by the European Community has been withheld until the carriers dispose of their cable-TV holdings.
Even Swisscom has decided to follow European Community directives and will sell off its equity stake in Switzerland's leading cable-TV provider, Cablecom. The regulators' aim, it would appear, is to foster imitation of the strategies of some of the leading cable-TV operators, who are starting to offer new Internet-access services. For example, UPC, Europe's leading cable-TV company, has recently ordered two million cable modems.
As for the fixed-line access offered by alternative carriers in the local loop, the "last-mile" connection via leased lines is the last phase of an end-to-end network build. Dominant carriers have no incentive to cut access fees in the near term as the local loop represents their last monopoly. The current "halfway" service offering is with ISDN access in national markets with high Internet usage (e.g., Switzerland, Germany, Netherlands, Norway, Sweden, Denmark, and the United Kingdom). Of course, all dominant carriers are currently running asymmetrical digital-subscriber-line pilots in key metropolitan markets.
"Despite the significant advantages of competition, the local loop has tended to retain its prerogative as the incumbent's territory," says John Matthews, Ovum analyst. "For new operators, the problem is critical mass. Proving the business case for rolling out your own access network is rather difficult until you have a significant number of customers."
The current local-loop thinking at the European Commission is to require the incumbent operators to "rent out" their existing local loops. Of course, such a ruling will just further delay new entrants from amassing the customer base necessary for local-access builds.
In the technology arena, choices may be more plentiful. In the not-too-distant future, says Bell Laboratories' Dr. Ton Koonen, Europe will benefit from new network- deployment strategies in the access market. These strategies include:
- Using flexible wavelength broadcast-and-select in fiber/coax networks (e.g., as demonstrated in the tobasco project in Ghent, Belgium)
- Linking the last kilometer via flexible wavelength routing in a fiber-wireless network (e.g., the prisma project using UMTS)
- Using WDM in metropolitan area networks (e.g., cobnet in Sweden, and menton and DEMON in the United Kingdom).
These government-sponsored projects have demonstrated that hybrid solutions will complement DWDM and other optical-network technologies in the local-loop market and provide a time-to-market performance common in mobile-telecommunications developments.
One wild card in the regulatory and technology deck is the attractiveness of existing Internet service providers (ISPs) as takeover targets by carriers looking to enter the business of providing Internet access. "In 1999, independent ISPs [there are more than 2000 in Europe] have been targeted as takeover prizes for European carriers hungry to fill their IP networks," reports Marco Fasoli, an investment banker at Broadview International.
Fasoli has followed recent acquisition deals that affect the top tier of local ISPs. This investment trend in independent ISPs matches the amount of "greenfield" investment in next-generation IP networks from all the major ISPs. In this context, all of the transborder international IP networks have announced their intentions to migrate to STM-16 Pan-European core networks (e.g., UUnet, E-bone, World On-line, KPN/Qwest, EUnet, Telia Viking Net, Level 3, and Interoute).
Whatever IP scenario takes shape in 2000, the consequences will be far reaching. "The threat is already clear," concludes Arun Netravali, Bell Laboratories-Lucent Technologies. "Operators who fail to adapt to the new technology will fall behind in the new world of converged communications."
Ed Harroff writes on telecommunications issues from Bellevue, Switzerland.