Network suppliers see room for growth

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Hype about mobile gadgets headed CeBIT 2002. But network providers also saw opportunities for growth.

By Antony Savvas

At last month's CeBIT show, in Hanover, Cisco, the world's leading networks supplier (market value: USD130bn), had plenty to say about what it thought would happen in the vertical IP data market. European VP Chris Dedicoat said that so far only 60% of US businesses had adopted any Internet business solutions; and in Europe, the proportion was only 45%.

While areas like e-marketing, customer service and support, e-commerce, finance, and human resources had formed the first wave of Internet business solutions, he said developments such as procurement, sales force automation, supply chain management, and e-learning would further boost IP data activity.

Dedicoat rejected calls to counter the rapidly decreasing number of IP addresses, despite warnings from the European Commission. Earlier this year, the Commission said action was needed immediately to find a replacement for the existing IPv4 protocol because the number of IP addresses would have run out by 2005.

With more and more people logging onto the Internet and the number of mobile Internet devices in circulation set to spiral, the issue had been seen by many as the next big test for the IT industry after the millennium bug. It had been predicted that companies and carriers would have to install new networking hardware designed to work with IPv6, because the protocol creates new strains of IP addresses and provides added security for data.

"The issue of IPv6 was really driven by the rapid expansion of China's networking and Internet infrastructure. There is no real issue in the short-term. IPv6 hardware has been tested and it works but there is no real reason to do something about it now." Dedicoat reassured the industry, "IPv4 should be used and installed instead at the moment. IPv6 will only be needed when we have multiple devices which are more private and discrete."

Effectively, users do not need permanent IP addresses that can always be used to connect to the Internet. To counter-act the declining number of IP addresses carriers can instead use technology like Network Address Translation (NAT).

NAT is used by BT, for example, for users of its broadband ADSL service. Every time users log on they are given a different IP address to gain access. When they log off this is then taken away and redistributed to someone else. The real need for a permanent IP address is when they need to host their own web site or need to connect to a virtual private network operated by a corporate LAN.

Lucent Technologies used CeBIT to promote its new emphasis on the carrier market, after spinning off a number of businesses that did not fit this strategy.

Lucent's aim is to target the world's top 50 carriers. Bill O'Shea, president of Lucent's Bell Labs and executive vice president of corporate strategy and marketing, said that 2001 was a "transition year" for the company, with the main aim of cutting cost and re-organising. The world's top 50 service providers made up 75% of the spend in the telecoms market, and that Lucent was the only company exclusively to target service providers, he added.

O'Shea reckons that the strategy is already starting to pay off, and revealed a number of new contracts potentially worth Euro500m. Worldcom is to use Lucent's routers to deliver a managed IP VPN service in Europe, while Deutsche Telekom is to trial Lucent's first all-optical router.

O'Shea admitted however that the biggest service providers reduced their capital expenditure by about 10% last year. He said that R&D would now only be targeted at growth areas in the market. Bell Labs, responsible for developing many of the world's telecoms technologies, was very much part of the new Lucent - despite being the subject of spin-off rumours itself.

Lucent's large facility in Nuremberg, Germany would also continue to be part of Lucent, despite cut-backs there as a result of volume production being outsourced.

Meanwhile, the sale of Lucent's stake in Agere Systems has been put on hold, pending a recovery in the stock market and hopefully an increased valuation.

Alcatel, which claims to be the leading supplier by sales volume in the USD28bn global optical transport market, reckons that real sales growth for suppliers until 2005 will be in the metropolitan area network market.

Jean-Luc Beylat, vice president of network strategy and technology at Alcatel's optics group, said that this would help the total market to rise from USD9.7bn now to USD12.5bn in 2005.

Alcatel says it already has 300 metropolitan customers worldwide, including giants like France Telecom and Deutsche Telekom, so Beylat was at CeBIT to boost Alcatel's efforts in this market.

Beylat also promised that April would see Alcatel announce the first customers for its new 1696 DWDM Metro Span solution.


Antony Savvas
Networks and Telecoms writer

Antony Savvas is a freelance networks and telecoms journalist and can be reached at a_savvas@yahoo.co.uk

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