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The Road Ahead

For the first time in 24 months, industry analysts are talking about an upturn and not a slump. With the economy regaining its strength, wallets are finally starting to be opened again.


November 1, 2003  


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Predictions and perspectives abound, but on one point there is consensus. The slump is over. A resurgence is underway in the cabling systems market – with optical leading the revival.

Last year marked the bottom of the market, according to Michael Howard, principal analyst and co-founder of Infonetics Research Inc., a market research firm based in San Jose, Calif. Starting in 2004, he says, there will be quarter-over-quarter increases through at least 2006.

Forecasts about the performance of the optical sector range from cautious, to hopeful, to unequivocally optimistic.

Illustrative of the latter are Infonetics Research predictions about the dramatic revival of the global optical network hardware market. In a recent quarterly worldwide market share and forecast report, Infonetics estimates total revenues in this sector will reach US$10.8 billion by 2006 (up from US$8.6 billion in 2003) – a growth of $2.2 billion in just two years.

Even more impressive is the growth of Optical equipment metro CWDM – an emerging category that Infonetics began tracking only this year. The report predicts that this market, which hit US$26.7 million in the second quarter of 2003 will jump to $243 million by 2006, an increase of nearly 900 per cent

On the user side, the battered long-haul optical market appears to be finally recovering. “Perhaps the most shocking market characteristic at this point is relative stability,” notes Carlsbad, Calif.-based telecom market intelligence TeleGeography in its International Bandwidth 2003 report.

It concludes that for this industry that has been extremely volatile in the past few years, “no news may be good news.”

TeleGeography’s first systematic report on Internet traffic also has promising news for optical. Titled Global Internet Geography 2004, the report suggests that growth rates are remarkably robust, at least on international routes, and if present trends continue, International Internet traffic will double every 16 months.

Traffic, the report observes, is growing as fast as the underlying IP capacity, which indicating a rational approach to bandwidth deployment by network operators. TeleGeography predicts that trans-Atlantic Internet bandwidth will increase to over 1 Tbps by 2005 to keep pace with traffic growth.

In Canada, a ruling by the Canadian Radio-television and Telecommunications Commission (CRTC) is expected to make dark fiber more widely available to customers.

The ruling, which requires telcos to file general tariffs for access to dark fiber in places where they have excess capacity, effectively establishes a baseline price for dark fiber.

“This could mean that especially on high traffic routes, we will see more opportunity for dark fiber,” says Ian Angus, president of Ajax, Ont.-based Angus TeleManagement Group Inc. The ruling, he says, “lays the basis for a competitive activity in places where it currently does not exist.

What it means is that the light seems to be breaking through again after the bleak networking climate of the past couple of years.

Howard sums up his outlook for 2004 and beyond in a sentence. “The economy is regaining strength in North America and other regions, and carriers are starting to spend again.”

And this observation could as appropriately be applied to the overall building cabling systems market in the Americas, which is expected to grow 16.5 per cent on a dollar basis through 2008, according to a study by Frank Murawski president of FTM Consulting Inc. in Hummelstown, Pa.

The study also indicates that fiber cable will grow 23 per cent and copper cable 7.7 per cent in the same period.

In a market that appears to have turned a corner three major trends emerge: A rise in strategic spending, renewed interest in fiber to the desk, and the rapidly growing importance of Voice over IP (VoIP).

Below, we examine each in detail and several other trends:

Strategic spending

The economic slump of the past two years acutely affected the building cabling systems market, as corporate IT spend was restricted to projects that brought quick returns.

As Murawski puts it, “Businesses would install new LAN networks only for applications that promised immediate payback or productivity increases such as Web server deployments with the potential to broaden a company’s geographical sales reach. Installing LANs for connectivity purposes was not considered a prudent investment.”

While, the situation is not expected to change immediately, Murawski predicts that by the end of 2004 we will begin to see some strategic spending on projects that promise longer-term benefits.

Video, he notes, is already a vital component of what resides on corporate Storage Area Networks. Over the next few years Murawski expects applications such as HDTV over IP and Tele-Immersion (that combines teleconferencing and virtual reality) to be commercially available.

“Broadband applications like these require humungous bandwidth and companies may need to replace or upgrade their current cabling infrastructure to take advantage of them.” As far as spending patterns go, Murawski anticipates a domino effect.

“To gain competitive advantage larger companies will opt for new technology fiber cabling and/or the replacement of copper cabling. Mid-sized and smaller businesses will follow suit.”

The PC replacement market is also likely to drive business spend on cabling systems, but not for all companies, according to John Bakowski, product manager of cabling and connectivity at Bell Canada in Toronto.

He says several large enterprises running mission-critical services over their infrastructure – such as banks and financial institutions – have already upgraded to Category 5e and Category 6 cabling available today. “For these companies, the next two waves of PC replacement will not exhaust the bandwidth their current infrastructure is capable of supporting, especially as Category 5e and Category 6 systems are billed as the perfect cables for high bandwidth applications.”

Bakowski concludes that “only folks who have not yet installed Category rated cable will want to do so, as well as companies that are replacing existing PBXs with Voice over IP (VoIP) systems.”

Most upgrades in 2004, he says, will be done by small to mid-sized businesses.

Desktop fiber debate

Just 12 months ago many experts scoffed at the very notion of desktop fiber going mainstream.

Their argument was that ongoing advances in copper cabling and the widespread adoption of Gigabit Ethernet over copper in the LAN made it absolutely unnecessary to run fiber.

“Not so,” says Murawski. His outlook for the desktop fiber market is much more sanguine. “New broadband applications emerging in the developed regions will need new technology fiber cabling to replace the existing copper cabling, especially for horizontal cabling subsystems.”

While current applications for optical-fiber cabling are mostly in the system riser or backbone, over the next two years Murawski expects fiber to the desk to become a mainstream application for optical fiber cabling, though “it will still be relatively small compared to the other mainstay applications for fiber riser backbone and campus applications.”

During this period, he says, enhanced fiber cables will be developed targeting fiber-to-the-desk applications. “These cables will provide longer distance capabilities, supporting a centralized all-fiber architecture that incorporates physical-hardened properties as fiber moves closer to workstations.”

Of course, from a manufacturer’s perspective, the biggest obstacle for wider deployment of fiber in the horizontal today are LAN managers’ comfort level with copper and the perception that fiber costs much more than copper.

Murawski, however, expects that as volumes come into play price will no longer be a major hurdle.

In addition, many enterprises are coming to realize that the long-term benefits and virtually unlimited bandwidth of fiber may more than offset the short-term, bottom-line difficulties in removing the old plant and installing fiber cable, patch panels, wall jacks, switches
, network interface cards, and media converters.

As one observer puts it, “the only question is whether one will take the plunge now or later.”

VoIP – cabling for convergence

When it comes to VoIP, much of the debate in the industry focuses on issues such as voice quality, security, call control and snazzy applications. Real life deployments over the next couple of years, however, may require taking care of more routine concerns such as cabling.

While not necessarily an afterthought, wiring often comes late in the VoIP planning process and this, according to Andrew Harrid, Principal Consultant at Brea, Calif.-based PlanNet Consulting, needs to be changed. “We always advise our customers to look at cabling and infrastructure concerns early on,” Harrid says.

“Issues tend to come up related to cabling that need to be addressed up front. For instance, these may relate to deployment over IBM Type 1 cabling, and where companies split pairs in order to support two Ethernet connections. This is not standard Category 5 deployment and can cause problems with the introduction of power over Ethernet.”

When an enterprise gets around to dealing with wiring issues, perhaps the most fundamental decision is whether the old plant can handle VoIP. While, in theory, legacy Categories 3 – 6 cables are reasonably capable of supporting VoIP, “the recommendation is for Category 5 cabling or better,” says Harrid.

As many enterprises would need to upgrade to 100-Mbps switched Ethernet, the old plant often has to be changed out. And that may not always be a viable option.

There’s also the question of whether it makes economic sense to replace a working PBX system with an IP system. According to Angus, it’s hard to make a case for a straight swap out. He says the advantages of the IP system – such as a single network (for voice and data) tend to be wiped out by the cost of making the conversion.

In 2004, he says, “IP will be the option for mainly for greenfield deployments. Only as existing systems become obsolete, need to be upgraded or significantly expanded, will we see IP replacements.” Despite the growing interest in this technology, Angus does not expect any explosion of the VoIP market in 2004.

The importance of Ethernet

The demand for higher bandwidth – especially to support data services – is expected to spark a dramatic growth in the metro Ethernet market. A recent Infonetics report forecasts that worldwide metro Ethernet equipment revenues, which stood at US $2.5 billion in 2002, will rise to $5.9 billion by 2006 – a 134 per cent growth.

This growth, however, will not be without its challenges, many of which have to do with access and aggregation methods.

Dealing squarely with these challenges is one of the goals of TOPS (for technical operations) – a 19-member council set up by the Alliance for Telecom Industry Solutions (ATIS) headquartered in Washington D.C. For instance, the TOPS Ethernet focus group is trying to determine a technique for encoding Ethernet signals on to copper, as well closely looking at emerging fiber access methods – such as passive optical networking.

In the metro aggregation area, the concern is more a protocol issue – how does one efficiently collect traffic and distribute it cheaply to millions of customers? In studying aggregation options, the focus group will attempt to harness Ethernet’s statistical multiplexing capability.

Category 7 controversy

What fate awaits Category 7 cabling in North America? A valid question, now that a standard for Category 7/Class F systems is fully defined and complete.

Don’t look for any consensus from the experts, because it just isn’t there.

Those who predict a big role for Category 7 cabling argue that this fully shielded cable provides a level of functionality that was just not possible with UTP (Unshielded Twisted Pair) cabling, as each pair can run its own application without disruption to other pairs within the same cable.

In addition, they cite labour and material cost savings from providing multiple services through a single cable channel (reduction in the number of cables pulled, fewer outlets and patch panels, less rack space and so on).

Others, however, argue that you cannot pose a shielded solution in North America.

“Shielded cable costs a lot, it is expensive to install and maintain – and there isn’t really a requirement for it,” says Bakowski. He adds the only reason Category 7 cable exists in Europe is because the European continent does not have as clean a power grid as North America and consequently requires shielded category cables.

Murawski agrees. “Basically it’s (Category 7 cabling) is a bear. Contractors and installers will reject it because it is very difficult to install.” He also points out that copper has its limitations.

While the upswing in the cabling systems sector is expected begin in 2004, many industry pundits say the market will have to wait at least a year or two for the next big revenue influxes.

That being the case, carriers need to put in gear and technologies today that will continue to be useful beyond 2005, when the service base is likely to change dramatically.

These include multi-protocol label switching and generalized MLPS (GMLPS) that allows for centralized control, automatic provisioning, load balancing, provisioned bandwidth service and Optical Virtual Private Network (OVPN).

These protocols also support bandwidth-on-demand, which, for businesses large and small, is fast becoming the new magic mantra. Also needed is infrastructure and technologies that reduce the cost of provisioning subscribers to a point where potential services suddenly become profitable.

In the last analysis, the greatest challenge is this: Prepare today for a dramatically different environment that is not likely to occur until 2005.

Joaquim Menezes is a freelance writer based in Mississauga, Ont. He can be reached at joaquimmenezes@rogers.com.