French players pray for another revolution
France Télécom and its main competitors, Télécom Developpement, and LD Com have completed their nationwide fibre backbones and equipped the networks with DWDM technology that will increase bandwidth capacity. The bulk of their metro fibre networks are also complete.
Profitability has become the absolute priority for 2003. Pressure from investors to reduce debt has forced telecoms companies to abandon the "build it and they will come philosophy" of the late 1990s. They have adopted pragmatic strategies to leverage their fibre and copper infrastructure. France Télécom et al are pushing copper to the limit with xDSL technology and using fibre only to connect large business customers.
French carriers are only installing fibre in response to demand as part of their pragmatic strategies. Telecoms companies are ordering mostly low-count standard fibre cable — less than 30 fibres in some cases — which they are using to connect business sites. This has driven down fibre demand.
According to industry estimates, French fibre demand plunged 70% from 1.5m km in 2001 to 450,000km in 2002. Little or no improvement is expected in 2003. This has hurt manufacturers, which had increased their production capacity in the late 1990s with the expectation that telecoms companies would deploy FTTC and FTTH architecture. FTTH deployment in Sweden and in Italy had sent encouraging signals to many vendors.
However, French operators such as France Télécom and LD Com say that these are not profitable business models. The fibre investment is too big and the payback is too long.
Manufacturers had also counted on new operators deploying fibre in the provinces. But because France's government and business sector is centralised in Paris, most operators have focused on the (central) Île de France region, which includes Paris and its suburbs. Île de France is today one of the regions in Europe with the highest level of broadband access service offerings. France Télécom alone has installed 700,000km of fibre of which 100,000km is in Paris. Nationwide, France Télécom has 2.6m km of installed fibre. Fibre is available to businesses local site interconnections in all municipalities with a population exceeding 10,000.
France Télécom has connected more than 7,500 business sites nationwide with fibre. Nearly 70% of these sites are in Île de France. In Paris itself, the company has connected 80% of the city's large company sites with fibre. All buildings in Paris are on average no further than 110m from France Télécom's fibre network.
Île de France has become the testing ground for new optical services. In October, France Télécom picked Atrica for a trial roll-out of an Optical Ethernet system in Paris. It plans in 2003 to evaluate the service, which is geared towards business clients. The Ethernet services are focused on high-bandwidth Internet access, Ethernet leased lines, and transparent LAN Services.
"We want to see customer reaction to the Atrica trial," said Patrice Collet, director of France Télécom's network architecture and planning department. "We will expand based on the demand. We see demand coming from companies that need a guaranteed broadband connection. We think Ethernet will advance into the MAN and the WAN."
Optical Ethernet could be added to France Télécom's broadband LAN-to-LAN service offerings. The company has created 320 dedicated optical rings in the country. Approximately 100 rings are for large companies and 220 for other telecoms companies.
Cegetel, a competitor of France Télécom in the French local market, also launched Gigabit Ethernet over fibre in Île de France in October. Cegetel has signed contract with Extreme Networks for its first deployment.
"Gigabit Ethernet over fibre will replace SDH, which is very restrictive since it is point-to-point," said Jérôme Bouvier, director, Services & Optical Network Marketing at Cegetel. "Ethernet over fibre gives a 20% to 50% saving over SDH. SDH requires weeks of engineering to connect sites. Ethernet can be configured in days."
Cegetel has branded the new service OneLAN and is deploying it in Île de France over its 17 fibre rings. The Île de France market is very big for Cegetel The ring networks connect 600 buildings via fibre. Cegetel connects an additional 100 buildings in its other metro operations.
From 2003, Cegetel will expand the service to other cities where it operates: Lille, Lyon, Castre, Albi and Toulouse. Cegetel's long-term plan is to offer Gigabit Ethernet nationwide using the 20,000km backbone network of Télécom Developpement, a company that it jointly owns with the SNCF, France's national railway company.
Gigabit Ethernet over fibre will be needed to handle growing bandwidth demands in France, Bouvier explained. Bandwidth demand is being driven at the access level by xDSL. In 2001, 12% of business customers in France asked for 2Mbit/s of capacity; in 2003 it will be 40%.
France Télécom has based its broadband access technology for the small- and medium-size business and residential markets on xDSL.
The company is working on 4–6Mbit/s DSL services and plans to launch next year a symmetric 2Mbit/s DSL service for small- and medium-size businesses. The efforts are part of France Télécom's EUR500m-plus, three-year (2001-2003) investment plan to deploy the technology on its networks. By the end of 2002 nearly 21m phone lines will have access to ADSL, bringing the nationwide coverage rate to 74%. The figure will be closer to 80% for business premises. As of November 2002, France Télécom had one million subscribers.
As with fibre-based services, Île de France is also the biggest potential market for xDSL. The service is available to nearly 98% of France Télécom subscribers in the region. As of September 2002, 375,000 subscribers had signed up for the service.
FT's Collet said,."ADSL is the killer application for the residential market, 99% of the residential broadband demand can be met with copper. There is no economic justification for overlaying our copper with fibre. We have not reached the limits with copper. We can still go higher. Sure, if everyone wanted 10Mbit/s tomorrow, copper would not be enough. The question today is what services can create the need for infrastructure."
LD Com also sees xDSL as important broadband access technology. The company has already invested EUR50m and will have a presence in 150 France Télécom central offices. This will allow LD Com to offer an xDSL line to 4.2m residential and 775,000 business customers by year-end. LD Com markets the service under its new brand named, 9 Online ADSL, in Paris, Lyon, Marseille, Nice and the Haut-de-Seine Departement.
xDSL is one of several access technologies that LD Com is using. The Paris-based company, which has acquired seven telecoms companies since 2001, is using other technologies inherited from these acquisitions, including Fixed Wireless Local Loop.
During 2003, LDCom's main technology effort will be to make all the networks work together. This will be done using the Sycamore DWDM equipment that was bought in 2002 to upgrade LD Com's network to 10Gbit/s (STM 64). The company also added Sycamore switches.
Commenting on the outlook for 2003, Bruce Bowden VP, Strategy and Corporate Development at LD Com, said, "2003 will be a slow growth year. The fixed voice and data telecoms market in France is growing at 4–5%. We expect to grow a bit faster than this thanks to our increased market share."
Bowden expects the market to pick up in 2004 but said that he did not "see metro and long-distance demand for equipment coming back until late 2004 or early 2005. The demand for access equipment will be sooner. In backbone network networks there is so much fibre that there will be only incremental bandwidth increases. It will be simply a question of adding slot cards to light up more wavelengths."
The debate continues among French fibre-optics manufacturers as to whether they are in a down-cycle or an unforeseen crisis. However, they agree that 2002 has been a terrible year, and that the situation will not improve much over the next 12 months. This bleak picture has many in the industry wishing that, when they wake up this coming 1 January, it will be 2004 — when the market is expected to begin rebounding.
Manufacturers are counting on growing bandwidth demands in France, driven by the Internet and data traffic, to create new a wave of equipment orders starting in 2004.
In the meantime, manufacturers including France's industry giant Alcatel and start-up component makers such as Highwave are increasing their marketing efforts in Asia, where demand continues to grow.
Alcatel, in a presentation entitled "Weathering the perfect storm", announced in November that, during the period 2001-2003, it would cut its workforce by 60%-70%, cut full-year fixed costs by 50%; R&D by 50%, and close 16 sites worldwide.
The company has begun refocusing its efforts and product offering, said Jean-Luc Beylat Deputy CTO, Optics R&D at Alcatel, emphasising that Alcatel does not have a country-specific strategy and that the company develops products for the global market.
"There has been a big change in Alcatel's global market. From 1998 to 2001, the focus was on backbone and submarine markets. Since 2001, the focus is on metro. We are in a different cycle. Metro will continue to grow in 2003 and 2004. The Internet has become more and more local; people are buying and accessing local sites."
Beylat said that cost will drive the market. Today, clients are asking for network elements that have multi-service capability. Like many in the industry, he expects the long-distance market to come back in 2004 or early 2005. "When operators fill 50% of their backbone capacity, they will reinvest. But, unlike three years ago, everything then will cost driven.
"We have learned in this crisis that we need to be closer to our customers. We must be able to respond to them. This is what we have learned since the telecoms boom. We must work with customers and not impose solutions."
Asked about future technologies, such as 40G, Beylat replied, "10G will be the most cost-effective technology. 40G is still expensive. We are along way from 40G. Today, most people are not asking for more capacity. They are asking for low-cost capacity. To my knowledge, there are no network processors working at 40G. 40G is not for tomorrow."
Looking back, some French start-ups concede that they made the error of thinking that equipment spending levels of the boom years — 1998 to 2001 — would not stop in the pan-European and long-distance markets. Investors who pumped millions into new fibre-optic technologies reinforced the manufacturers' optimism. The new network builders, especially, the pan-European operators marketed technologies rather services.
"We were surprised by the crisis in 2001," said Sylvain Boj, COO and co-founder of Highwave. "It happened very suddenly. It was the collapse of a financial system."
The abundance of venture capital money for new technologies transformed R&D in France when the country's telecom market opened to full competition in 1998. Until 1998, R&D had been carried out mainly in the country by France Télécom's research centre, the CNET, the CNRS (National Centre for Scientific research), a few universities and Alcatel.
Boj, and other colleagues at France Télécom, decided to leave the former monopoly operator and create companies that would create components for what was perceived to be a huge potential market. Venture capitalists and foreign investors pumped millions into the start-ups. Highwave, like many of the start-ups, set up shop near the CNET in the town of Lannion, Brittany. Highwave makes speciality fibres and optical amplifiers. Because of the start-ups, France Télécom scaled down its research efforts and began to focus more on its core telecoms business.
During the boom, Highwave's main customers were Alcatel, Corvis, Marconi and Lightscape. Fuelled by big network projects in Europe and in the USA, Highwave saw its turnover jump from EUR1.2m in 1998 to EUR72m in 2000, only to fall away in 2001. The company had 1,000 employees in November 2001. Today, the company employs 63.
"There is no activity today in Europe. A little in the US," said Boj. "Asia is the only growth market. Highwave is focusing on the Asian market, mainly China (Fiberhome) and Japan, NEC and Melco. Talks are underway with Korean companies." Highwave is counting on its new intelligent optical amplifier to help boost sales.
The end of the telecoms boom or bubble has had a sobering effect on Highwave and other manufacturers. They now realise the need to work more closely with clients. But this does not mean that the moment is not right to introduce new products, especially cost saving ones.
For example, Alcatel's cable spin-off Nexans is preparing to start production of plastic optical fibre for sale next year. Gilles Widawski, manager Nexans Research centre, Lyon, told LWE that Nexans will target the LAN market, connections to next-generation cross connects, and other markets requiring Gigabit transmission levels required by OTH (Optical Transport Hierarchy) that eliminates need for optical/electrical conversion. Alcatel and Lucent are working on this standard.
The fibre is made at Nexans plant in Lyon. It can handle transmission speeds of 1Gbit/s over a kilometre and up to 10 Gigabits over 100m at a wavelength of 850nm.
The demand is in the US, Germany, and France. There are other applications, Widawski said, including the connections to large flat screens in airports.
Asked why Nexans is developing POF during an industry crisis and economic downturn, Widawski said that the fibre will reduce installation costs and will be competitive with copper cable wiring systems.
He added that Nexans' POF is easy to install and can be cut like copper. This reduces the installation time. Multi-mode is not that easy to install. "Today, there is hardly any multi-mode fibre installed in the horizontal part of building wiring. More than 95% of horizontal wiring is copper. However, as long as there is no argument in favour of fibre, copper will dominate."
by Matthew Peach
Grenoble's OpsiTech designs, manufactures and markets high-performance integrated optical components and modules for optical networking systems. Its silicon-based planar waveguide platform not only offers the flexibility to design single optical functions but also allows for value-added, multi-optical functionalities to be positioned on the same chip (LWE September 2002). Taking advantages of established manufacturing techniques from the semiconductor industry, OpsiTech enables scalable, reliable and low-cost production. Installed into metropolitan, long-haul and ultra-long-haul optical networking systems, OpsiTech's components and modules make possible the rapid deployment of high-capacity optical networks in a smart and cost effective manner. Opsitech this year opened a US office in Summit, NJ.
Keopsys, based in Lannion, Brittany, targets the telecoms, test and measurement, scientific, military, medical and industrial markets. Bruno Lefévre, business development director, says, "Our VSP (V Groove, Side Pumped) technology program has been completed with the founding of an prototype manufacturing line and the Telcordia compliance of the VSP pump modules. We have launched a new generation of active devices dedicated to our markets."
Asked what is the state of French R&D in fibre-optics communications components and systems, Lefévre commented, "It's very low at the moment. The key factor to success is to find an innovative solution that is easy to implement on the market. "We perceive at the moment that there are more business opportunities in medical, military and scientific markets.
Photline is a relatively new company, based in Besancon, which produces integration-optimised LiNbO3 modulators for high-data-rate optical networks. Its range includes wide bandwidth modulators for 10 and 40Gbit/s applications. As a relative newcomer, Photline has been only weakly impacted by the collapse of the telecoms market. CEO Henri Porte says, "We have observed a reinforcement of 10Gbit/s developments and a strong delay to 40Gbit/s applications. The telecoms boom led to the emergence of many start-ups. But those numerous investments led to two things: acceleration of innovation; and emptying of the laboratories."
Porte believes that the "reverse trend" of the market seems to have blocked R&D inside the new companies. Meanwhile, the public network of research laboratories has not had time to restore itself.
"The fact that big companies like France Télécom are stopping support for component R&D is aggravating the situation." Thus, Porte concludes, in the long term, there is a risk of weakening France's R&D potential if the market does not pick up.
Tronic's Microsystems is a contract designer and manufacturer of custom MEMS devices for high-end applications, founded in 1997 by Stéphane Renard. Also headquartered in Grenoble, the company has 500m2 of class 10 and 100 cleanrooms. It manufactures 4" wafers for MEMS-dedicated development. Tronic's is a private company that has so far established 20 patents and licenses. Renard describes the company as a flexible MEMS foundry with technological know-how and years of experience in the contract development of silicon-based microsystems for high-end applications.
Focusing on "high-end, added-value applications", Tronic's specialises in the production of custom components such as sensors, optical MEMS, RF MEMS, microfluidic devices, and precision microstructures. Another player that has been spun-off from LETI, Tronic's has inherited a strong technological know-how and patent portfolio. Its areas of expertise include: thick SOI surface micromachining; metal surface micromachining; bulk micromachining; SOI High Aspect Ratio Micromachining; and wafer-level micro-packaging.
Teem Photonics, also based in the Grenoble region, develops integrated photonic solutions for high bandwidth optical applications. Founded in 1998 as a spin-off from R&D consortium GeeO, Teem says it has leveraged its technological lead over other start-ups by developing "commercially ready" products. Teem markets three ranges based on its proprietary planar technology, runs a manufacturing plant in France, operates a US subsidiary (opened in 2002), employs 85 staff, has extended its patents and licenses to 52, and so far has raised USD34m in two funding rounds.
CTO Denis Barbier says, "For technology start-ups, the Grenoble area offers a good base to develop activity due to the long-time presence of strong public and private R&D, and a highly developed start-up company culture.
"The majority of Teem's business is conducted abroad. In our markets, the US represents 41%; Asia and the RoW 35%, and Europe 24%.
Two out of the five Grenoble optical component companies have recently acquired intellectual property from competitors. Teem recently extended its portfolio through the acquisition of Northstar Photonics' technology.
Despite the current telecommunications downturn, Teem does not believe that private R&D efforts will disappear in France, thanks to government support via various funding bodies (ANVAR, RNRT, and RMNT).
Teem also hopes to benefit from the government's decision to promote broadband deployment with an initial funding of EUR230m for some municipalities.
ICTL-Liaisons Optiques, Lyon has specialised in optical fibre connections since its creation in 1988. The company says it has gained a "significant share" of the market, as well as becoming distributor for related companies such as Amphenol, 3M, Radiall, Miller, Prior, Pinacl, and Acterna.
Ludovic Robert, the 34 year-old company president, says, "Our young and dynamic team —.average age 33.— is the key to our success. Both salesmen and technical staff are involved in the development of new products."
Since the beginning of 2002, ICTL-Liaisons Optiques says it has launched a new product every month and that the company continues to remain profitable even though, as Robert puts it, "the Télécom years have passed out of sight".
Today, the company offers a range of fibre-optic interconnection components and comms solutions. It is currently considering distributors in Europe for its new brand, named Folan. This is a local area network solution that includes adaptors, connectors, patchcords, pigtails, patchpanels, wallmount, fibre-optic cables to suit Ethernet, Fast Ethernet, and Gigabit Ethernet active network devices.
Société des Céramiques Techniques (SCT), based in Bazet in the French Pyrenees, offers expertise in the field of technical ceramics and ceramic/metal-brazed assemblies. Created in 1922, the company develops ceramic components from powder (alumina, zirconia, and dielectric materials) for applications in fibre-optics, high-vacuum feedthroughs, medical imaging, power electronics, aerospace, and defence.
SCT's customers include Tyco, Diamond, General Electric Medical Systems, Siemens, Thales, Philips, and EADS. In its fiscal year 2001 SCT turned over EUR17m and sales for 2002 should show growth of 5.2 %.
The company claims to be the only European source for the supply of zirconia sleeves and ferrules. Compared to other suppliers of same products, SCT doesn't manufacture complete connectors and adapters and thus is not in competition with its customers.
SCT says the drop in the telecommunications market has affected all players and the company is consequently suffering from a significant drop of activity in this product line. Nevertheless, it is active in other growing market segments such as medical imaging and ultra high vacuum. The strategy is to continue its growth for 2003 relying on these activities and is expecting a telecoms market recovery for Q2/2004.
At this time, in its core markets, SCT expects to be the only European alternative to Japanese and other Asiatic suppliers of zirconia sleeves and ferrules. "The currently troubled market is very uncertain in term of activity and prices. Compared to other suppliers, we will benefit from its innovative and original process and from its ceramic expertise, to remain competitive and to adapt to market variations."