Private data to go public via fiber
Attracted by the potential for high profit margins, a host of communications providers, including telecommunications carriers, competitive- access providers, cable-TV companies, energy utilities and Internet service providers are focusing on private data communications lines.
These providers are expected to deliver multiple services for multiple customers over the same fiber-optic infrastructure. The converging infrastructure calls for protocols such as Asynchronous Transfer Mode (ATM) running over high-bandwidth optical-fiber networks.
In addition, the profit incentive forces telecommunications carriers to "move up the food chain from selling pipes to selling services," according to Albert D. Bender, president and chief executive of Netedge Systems Inc. in Research Triangle Park, NC, and a speaker at the ATM `96 Conference in Orlando, FL, this past February.
Bender, whose company sells ATM-based local area network (LAN) and internetworking products to both carriers and data communications vendors, feels that these suppliers need to swim even harder up an increasingly datacentric current.
"Carriers are poised to reap the benefits of a public data communications services market that is growing at 30% per year and is expected to equal the enterprise voice [communications] market by the year 1998," he explains.
Bender compares this growth to voice communications, the carriers` traditional source of revenue, which is creeping along at 3% per year. "This cash-cow voice market may total a respectable $50 billion today, but within just nine years, voice services may be given away free to attract users` data communications."
He observes that traditional carriers have staged "many unsuccessful attempts" to offer data services in the past. "But this time around, the planets of technology, end-user needs and service-provider needs are all lined up for success."
Private data going public
Bender cites several trends that could push users to put their private LANs and wide area networks (WANs) into public providers` hands.
End-user applications are running up against a need for the higher speeds offered by more-complex technologies. At the same time, users don`t want "to further complicate their networks, but cannot afford to risk technical obsolescence."
As private networks have become more complex and expensive to run, they have also grown more difficult to justify as a "competitive advantage." Bender says that this is moving corporations to "want to get back to the core competencies of doing the business they know best and to get out of the networking business. ...Companies are looking to outsource [networks] to a carrier."
Corporate mergers, acquisitions and partnering are intensifying the need for global data, voice and video communications among companies, suppliers, sales organizations and customers.
Users` ongoing migration from mainframes to multiprotocol LANs has created workable private data networks, but not always with desirable returns on investment. Users may not be able to justify another migration to switched-Ethernet or ATM technologies without the help of an outsourcing resource.
While downsizing is leveling or shrinking corporate information systems organizations, managers are required to increase productivity and network bandwidth at reduced capital cost.
The communications industry`s strong interest in ATM backbone standards may force future data, video and voice onto shared fiber cabling.
These signs portend that private data is expected to begin its long-heralded migration onto high-bandwidth public infrastructures--especially those based on fiber optics and hybrid fiber/coaxial cable. And, Bender observes, the 1996 Telecommunications Act means that users are not waiting for traditional carriers to provide attractive, high-bandwidth offerings.
But in the fight for users` data communications dollars, traditional service providers may find allies in unexpected places. In particular, noncarrier companies are trying to get a piece of both the Integrated Services Digital Network (ISDN) and Internet- access action. Although they are expected to steal service-access dollars from carriers, they may also increase billable data traffic over carriers` and alternative-access providers` fiber backbones.
For example, Intel and Microsoft do not handle long-distance data traffic but they are both pursuing strategies to capture some of the ISDN-access market. Intel Blue is a set of standards and procedures to help customers order ISDN data communications services from the regional Bell operating companies and compatible equipment from Intel`s vendor partners.
Similarly, Microsoft Corp. recently indicated it is partnering with telephone companies, hardware manufacturers and Internet service providers to "turbocharge access to the Internet using ISDN." As with Intel Blue, the "Get ISDN" program provides information about ordering the service from major interexchange carriers and regional Bell holding companies. But it also provides ISDN-ordering software through Microsoft`s World Wide Web site, online services and future versions of Windows 95. This software promises to configure ISDN lines for use with Windows-based PCs.
While this strategy is designed to bring more PC-based Internet-access business under Microsoft`s control, it also will bring more ISDN customers into carriers` networks than they would have attracted on their own. When companies such as Intel and Microsoft create more ISDN users, they will increase billable ISDN traffic over carriers` wideband fiber-optic networks.
Another data communications arena where carriers are expected to encounter new "competitive allies" is Internet-based corporate networking. Microsoft, for example, sees ISDN as an important pathway into this market. According to Brad Silverberg, senior vice president of Microsoft`s Internet platform and tools division, ISDN allows users to connect with the Internet, online services or remote corporate LANs "at speeds five or more times faster than today`s analog modems." This faster access begins to make the Internet a viable place for business data.
A series of reports released over the past few months by Forrester Research Inc. in Cambridge, MA, documents the early migration of business data communications to the Internet. When Forrester surveyed 50 Fortune 1000 companies about their plans for using the Internet, 22% were already using Web servers for corporate data communications, and 40% were considering such "intranet" applications.
In its report titled "The Intranet," Forrester says that companies` internal transmission control protocol/Internet protocol (TCP/IP) networks are going to expand into WANs for three reasons:
The Internet highway is built. Routers are everywhere and IP arrives with every Windows 95-equipped PC.
Network architects are not needed. TCP/IP and the Web are standard commodities, and 80% of Forrester`s respondents use TCP/IP in their corporate networks.
Chief executives already know about the Internet. Enthusiasts only have to point to articles in the business and technical press to sell the idea.
A Forrester report on "Internet Computing" adds that the private client/server networks most likely to move to the Internet are those that have supported geographically dispersed users, narrowly focused applications and time-critical tasks such as "just-in-time" manufacturing support.
"The Invasive Internet," another report, finds that a majority of the companies not planning to use the Internet for data communications applications cite one reason: security. But even this security "bogeyman...will be rock solid by the end of 1996," the report adds. So solid, in fact, that Forrester predicts that TCP/IP "may become the wide area network protocol of choice and may also consume the LAN. The Internet is expected to make access to corporate applications a simple matter of assigning user rights, rather than a nightmare of building special-purpose pipes. The ability to instantly provision new sites, support closed user groups and connect from anywhere leaves private networks without any advantage (see figure)."
Because Forrester sees the Internet carrying more corporate data traffic at higher speeds, it recommends that corporations "bulk up" their data networks. "Planners should budget for LAN switches, bigger routers and faster wide-area connections."
But while all Internet service providers are expected to compete against carriers for a piece of this data communications market, the carriers benefit again. Their fiber infrastructures offer needed bandwidth now and, as Forrester puts it, "carrier clout will grow." q
Dave Powell writes from Winchester, MA.