Telefonica de España to build a 540-km DWDM network link in Spain

March 1, 1999

Telefonica de España to build a 540-km DWDM network link in Spain


Spain`s dominant telephone carrier, Telefonica de España (Madrid), announced its intent to construct a 540-km high-capacity optical network between Madrid and Seville. Telefonica has awarded a contract to Lucent Technologies (Murray Hill, NJ) to provide equipment for the dense wavelength-division multiplexing (DWDM) network, which will better enable transport of both data and voice traffic across the country.

"We are seeing the dawning of Europe`s golden age of transport networks, with DWDM solutions resolving fiber exhaust situations," heralds Wayne Edwards, product marketing vice president, optical networking, Lucent Europe Middle East and Africa, commenting on the deal.

The project represents the first operational link on the Spanish public network that will deploy Lucent`s DWDM technology. Under phase one of this project, Lucent will supply its WaveStar OLS 80G, a high-capacity DWDM system that combines 16 wavelengths, or channels, on one fiber pair--each with 2.5-Gbit/sec capacity. With a total capacity of 40 Gbits/sec in both directions on one fiber pair, Telefonica will be able to transmit the equivalent of a half-million simultaneous phone calls. Completion of this major network upgrade is scheduled for April 1999.

"The main driver for WDM today," says Barry Flanigan, senior analyst at Ovum (London), "is the need to increase network capacity and relieve fiber network congestion. This is a direct result of the explosion in telecommunications traffic, particularly data. However, WDM is also part of a much bigger story: the transition of telecom networks toward `all-optical networking` technology. This will have profound implications on the way in which the next generation of telco networks evolves, dramatically impacting the cost of transmission and the development of high-bandwidth services."

Telefonica has an existing national long-distance network of 3500 km in Spain and plans to upgrade its network during the next two to three years. Luis Fernandez Vega, Telefonica`s planning manager for the internal transport unit, agrees with Flanigan that the same fiber exhaustion that all major European network operators are reporting has started in its domestic network. Telefonica planners expect that advanced DWDM capacities will help to cope with future traffic growth caused by multimedia services such as data communications between corporate users and, in the future, new services such as video-on-demand and digital-TV distribution. "Telefonica plans to spend more than 2000 billion pesetas [$143 million] per year to enhance their domestic long-distance network," Vega reports.

As part of this activity, Telefonica has evaluated other Synchronous Digital Hierarchy offers from major European suppliers such as Ericsson, Alcatel, and Siemens, as well as Nortel Networks. Ericsson touted its relationship with the carrier during a recent media event in the United Kingdom. However, the relationship with Lucent Technologies recently has moved closer. For example, Telefonica has signed a memorandum of understanding to give Lucent the status of preferred global supplier of telecommunications systems. Also, Lucent has shown its aggressive interest in the Spanish market by the recent purchase of Telefonica`s 24% stake in Ampers (its principal domestic telecommunications supplier). The sale reflects Telefonica`s desire to shed its equipment subsidiaries and focus on its role as a communications services provider.

Telefonica S.A. is the world`s fifth largest telecommunications carrier (with 1997 revenues of $15.6 billion) and has many interests in South and Latin America. Outside Spain, Telefonica operates in Argentina, Brazil, Chile, Colombia, Peru, Puerto Rico, and Venezuela, where a majority of the outbound network traffic goes to the United States and Europe. "This means that Telefonica is the key network provider for the European gateway to South America," says Flanigan.

Spanish customers of Telefonica also should benefit, as the carrier moves quickly to solidify this position in the face of the new deregulated telecommunications market. Telefonica hopes deals like this will enable it to beat the alternate carriers in bringing advanced networking to market.

"European-generated traffic growth is now approaching levels that North American carriers have been already managing for the last few years," Flanigan adds. "Operators must develop strategies for evolving WDM and optical networking throughout their networks. Telcos must boost capacity and avoid network congestion in the short term, and in the longer term, handle traffic more efficiently in the network, whilst driving down the cost of transmission.."

Meanwhile, this deal represents another major commercial victory for Lucent in Europe. "Lucent is investing heavily in Europe to catch new opportunities as the deregulated market dynamics permit all operators to expand their network capacities," states Edwards. "Lucent`s center of excellence for Optical Networking is in Nuremberg, Germany, and we are also actively building up our local support presence in all major countries." q

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