Investment climate hostile to optical sector: Alca-Lu
Turning bit-pipes into bottlenecks
Alcatel-Lucent is warning that the telco sector is skewing its investment cycles – and that could have disastrous affects down the track.
At issue is that investments in the boring business of science into products don't rate as highly as the more sexy flavour-of-the-month sectors like software defined networks (SDN) and network function virtualisation (NFV).
That's a problem, since there's no sign of any abatement in peoples' appetite for bandwidth, but to keep up with that, the optical sector needs to keep lifting the bar for the huge pipes that form the backbone of the Internet.
LightReading reports Tim Krause, Alca-Lu's chief marketing officer, told the European Conference on Optical Communications in Cannes that the optical sector is feeling “marginalised” alongside the SDN/NFV investment magnets. As a result, the optical sector is in danger of becoming the 'net's bottleneck.
Those two sectors are not-so-quietly revolutionising the economics of networks inside data centres. The business of replacing proprietary silicon with general-purpose servers and abstracting functions into virtual machines is hot stuff for people shifting lots of flows around – but there's a problem.
Both inside the data centre, and just as importantly when the data leaves the confines of the bit-barn to interact with end users, the foundation technology of the industry is optical communications. Unless the big pipes can get bigger at a rate commensurate with the way the Googles, Microsofts and Apples create new demand, the networks won't keep up.
Customers want the economics of networks to change, Krause said, with LightReading quoting him as saying “customers ... want quantum change in the economics of how networks are built and run”.
Problem is, investment cycle times aren't aligning with reality, Krause said. From the time a board will sign off on a new development project to shipping first product is two to three years, he told ECOC, and that's too long for impatient investors – and, by the way, for the carriers Alca-Lu is selling to.
The sector needs more flexible business model, Krause added: “The technology has to deliver something ... the cycle times in optical are just too long. Don't just think about what you can develop, but how.”
Krause's comments are hardly landing in a vacuum. The market that companies like Alcatel-Lucent inhabit has been undergoing pretty much constant restructure for more than a decade (in the 1990s, would anyone have believed that Nortel would exit in ignominious bankruptcy and break-up?).
Optical vendors are, to a large extent, caught in the same vice that squeezes carriers – the perceived value of shipping bits around is low, right up to the point where the network becomes too congested to be useable.
Krause is probably in a privileged position here: he's got an insider's awareness that development investment is needed, but can only happen if customers will fund it. At the research end, for example, the industry knows that the next big increments in speed are going to need new modulation schemes for optical networking – but the science only lands in front of customers (and helps along our download speeds) if the industry can fund the development.
It's a sobering consideration, even if (as his speech reportedly concluded) Krause believes the industry can innovate its way to the future. ®
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