Wholesale Lambdas’ Second Wave

Metro fiber providers are reporting an uptick in demand for their wholesale wavelength services in recent months, logging new business among an ever-widening pool of service providers and carrier-class enterprise clients.

The Yankee Group forecasts wholesale metropolitan wavelength services to grow from $79 million in 2003 to $349 million in 2006.

The increase has moved one provider to productize an offer it previously provisioned only on an individual case basis. Level 3 Communications Inc. in mid-February launched (3)Link Metro Wavelength services - available at 2.5gbps and 10gbps speeds - in 27 U.S. and nine European cities where the carrier’s carrier already offers metro private line and dark fiber services.

Liza Adams, director of product marketing, transport services, for Level 3, says the carrier saw a significant increase in demand for metro waves over the last 12 to 18 months even though it has been offering them on an asneeded basis for more than two years.

Metro optical fiber provider OnFiber Communications Inc. also reports a large percentage of business coming in the form of wavelengths. “One of the main reasons is [despite the upturn in the industry] carriers are still conservative about expending capital,” says Boyd Chastant, senior product manager for OnFiber, which operates fiber-optic networks in 14 major metro areas. “A logical hedge is to look to metro waves.”

Wavelengths are an alternative to leasing lit bandwidth, such as traditional SONET circuits, on one hand and dark fiber, which must be lit with optronics, on the other.

Of course, wavelengths are created using wave division multiplexing equipment to split light into its component colors, each of which are transmitted over fiber as a wave. This so-called “virtual fiber” is protocol agnostic and so can be used to carry SONET, IP, ATM, Ethernet or Fibre Channel traffic.

Level 3’s Adams says reductions in the cost of WDM equipment, such as those possible with coarse WDM systems, as well as improvements in its ability to support multiple speeds and greater distances have made it possible for the carrier to offer a more cost-effective wavelength service.

According to a spring 2003 report from The Yankee Group, an unprotected wavelength can be 30 percent to 60 percent cheaper than comparable lit bandwidth services.

“As you look at traditional SONET services, customers often need multiple optical pipes” to meet their bandwidth needs, says Nancy Starcher, director of marketing for BellSouth Interconnection Services. She says SONET equipment will take up more space on the premises than will wavelength gear that enables greater bandwidth. Wavelengths are available at 1.25, 2.5 and 10gbps compared to commonly available 155mbps OC3 or a 622mbps OC12 circuits. 2.5gbps waves often are substituted for OC48 circuits.

BellSouth Interconnection services launched its wavelength services in competition with upstart metro-fiber providers in February 2003. 1.25gbps and 2.5gbps services are available in the Bell company’s nine-state region.

And, in contrast to dark fiber, waves offer the advantage of time to market and scalability. The Yankee Group cites the ability to add new capacity in two days for on-net customers.

Starcher adds that, unlike dark fiber, protected wavelengths are an endto- end service with features such as network monitoring and SLAs. In BellSouth’s case, for example, customers experiencing a service interruption of 30 minutes or more receive the full month’s charge as a credit, she says.

Another advantage wavelengths often have over dark fiber in the metro is availability. “It might be almost impossible to find dark fiber on a metro ring. The closer you get to the last mile, the more limited your choices become,” notes Anthony Christie, chief marketing officer, for Global Crossing Ltd., which operates metro rings in 26 markets, and was one of the first carriers to offer wavelengths back in 2000.

“The underlying application many, many times is faster time to market and the economics are more compelling in the near-term than purchasing optronics [required to light dark fiber],” says Christie, noting that some leases for wavelengths are short-term - a stop-gap measure for carriers that are planning to light dark fiber.

Other applications for traditional service providers - CLECs, ISPs, ASPs, etc. - might include redundancy or load balancing, Christie adds. “Independent of whether it’s a ring architecture or if the underlying carrier has backup mechanisms, you are going to think twice about having 100 percent of your traffic on one metro network, he says. “A lot of facilities-based resellers today, they will do that. It, quite frankly, helps them shop more competitively.”

OnFiber’s Chastant says his company is seeing a shift in the customer base and applications along with increased demand for waves. He says that while many traditional carriers - CLECs and IXCs - are using the 2.5gbps (OC48 equivalent) as network extensions in the metro, he sees a lot more interest in 1.25gbps services from ISPs or data divisions within traditional carriers looking to support gigabit Ethernet or provide MPLS or Ethernet network extensions. Another common application of waves for ISPs is Internet peering and traffic aggregation.

BellSouth’s Starcher says the appeal of wavelengths for Ethernet applications is that it can be transported at native speed without conversion from SONET.

On the higher end, 10gbps quotes tendered last year are now becoming sales, Chastant says. “In the last quarter of 2003 and moving into this year, we are seeing purchases of 10 gigabit services” for network extensions, he says.

“That is absolutely on track with what we are seeing now,” says Level 3’s Adams. “In fact, recently we have had a flurry of quotations for 10 gigabits, particularly from online content providers.” Adams says online content providers are using wavelengths primarily to connect from a server farm to the Internet or for disaster recovery for multiple data centers in the metro.

She also reports new business from wireless carriers and cable MSOs. “[Wireless carriers] are using the metro network to carry VoIP traffic between regional areas and wire centers,” she says. “Instead of paying the ILEC for metro or regional transport, they might build a metro network using a wavelength solution to transport that voice traffic.” MSOs, she says, are using wavelengths for aggregating data and/or voice traffic from the regional head-end onto an IP network.

Increasingly, however, metro fiber providers are reporting direct sales to carrier-class enterprises, such as brokerages and research/education entities. “There is a perception in the industry that only carriers buy waves,” says Global Crossing’s Christie. “That is not the case. Most of the quotes that we have given over the past four to six months have been for enterprises. Maybe there is a data center application that they are trying to mirror, or there’s latency-dependent apps that they are hosting. … To heck with DS3s and so forth, these folks are moving right to 2.5gig waves.”