Product pioneers

Despite the economic booms and busts of the past decade, the period from 2000 to 2010 has seen a surge in innovation, arguably unparalleled by any other time in history. A nascent internet industry at the start of the 21st century, fed by the huge build-out of capacity and its subsequent low cost and ubiquitous availability, has become a global powerhouse 10 years later. It is creating and implementing new ideas and conjuring up new markets at a prodigious rate; meanwhile carriers – the owners and suppliers of the enabling infrastructure behind all this internet-driven innovation – are reaping the whirlwind in its wake.

In the first 10 years of the new millennium, carriers have faced extraordinary pressure to innovate in their own businesses, including the need to adopt innovative technologies to help them deal with the internet effect. They have found that their networks need to be capable of carrying volumes of traffic undreamt-of just a few short years ago. They have faced a crisis in their core communications service, voice, which is migrating, seemingly unstoppably, from their fixed legacy networks to competitors’ mobile networks and the internet. But carriers are also beginning to reinvent themselves as new beneficiaries of the internet value chain. They are making internet-driven innovations such as content delivery and the cloud their own as they create a next wave of revenue-earning services and start to go head to head with the internet pioneers.

Necessity is the mother of invention, as the saying goes, and carriers have certainly had large and urgent requirements over the past decade. Fortunately, the vendor community has stepped up to the plate and produced some truly revolutionary technologies in that time. Many of these have been adopted so rapidly that it’s hard to credit they have been in the market for less than 10 years. But without these new technologies, the telecoms industry would be sinking rather than swimming and the Web 2.0 phenomenon would be severely curtailed, if not grinding to a halt.

There are many deserving technology innovators that have contributed to the wholesale telecoms story over Capacity’s lifetime, but unfortunately it is not possible to feature them all. The five stand-out vendors share the fact that they were start-ups at the beginning of the decade – or later. Yet their innovations have been exceptional enough to build them a significant, if not a dominant, share of the carrier market in the past 10 years and their names are a byword for the particular markets in which they compete. They have each brought to the table an innovation that is helping carrier customers to grow their business and to reduce costs at a significantly greater rate than their competitors. As a result, they have grown into substantial companies that can be expected to stay the course for the next 10 years as well. 

Starting at the lowest level of the network infrastructure, Infinera revolutionised the way in which 10Gb wavelengths are delivered over long-haul fibre with its photonic integrated circuit (IC) technology that first hit the market in 2005. Infinera’s innovation was to collapse 10 circuit boards-worth of components onto a single chip, enabling carriers to turn up 10 wavelengths at a time instead of one, significantly reducing the time and cost associated with provisioning bandwidth. Infinera’s early adopters were thus able to drive down the price of 10Gb waves and gain a market-leading position in the wavelength business. Such customers today include Level 3, XO Communications, Interoute and Talktalk Telecom. Infinera won’t confirm that Google is also a customer, but its financial reports show that two unspecified content providers each account for over 10% of its business, so it’s a fair assumption.

Within 18 months of launch, Infinera topped the ranking for long-haul optical transmission market share in one of the most conservative procurement markets in the world: north America. Where 15 long-haul optical transmission equipment vendors once split the global market evenly between them, Infinera now claims to have a 40% market share and its rise contributed to the demise of former competitor, Nortel.

Infinera continues to innovate, recently trialling a 500Gb photonic IC with XO Communications, according to director of product marketing, Geoff Bennett. Breaking the 10Gb barrier has been the goal of the industry for the past 10 years – after all, 10Gb wavelengths emerged as a viable commercial technology a decade ago – but vendors have been struggling to develop and implement the new modulation techniques needed to transmit faster speeds over existing fibre. These techniques are typically being realised using expensive and fragile assemblies of discrete optical components: received industry wisdom suggested that it would not be possible to build complex modulation into a photonic IC. However, Infinera’s trial has proven the industry wrong and the company expects to have both the chip and its accompanying DTN optical system ready for market in 2012.  

Moving up the network stack to Layers 2 and 3, there is a plethora of innovative network equipment vendors to choose from. However, Juniper wins the crown as the router vendor that, in Capacity’s opinion, has done the most to help carriers meet their scale and performance challenges over the past decade.

Wholesale operators, anticipating the coming growth in internet traffic, were Juniper’s pioneer customers back in 1998, attracted by routers that broke the mould at the time by supporting throughputs of up to 100 times faster than competitors’ boxes. And 11 years later, Juniper is still setting industry standards with its 2009 launch of a new chipset and MX series routers able to support throughput of 2.6Tbps. “In the past, whenever we launched larger platforms, the industry commented that they were too big and overscaled,” says Paul Gainham, director of service provider marketing for EMEA. “I think everyone gets it now as they realise the scale of bandwidth demand there has been and will be in the future.”

At the same time, Juniper is at the forefront of moves to converge function in fewer platforms, with its 3D Universal Edge which “converges core network, content network, mobile and the broadband edge function in a single platform that can scale to meet the needs of all these capabilities,” Gainham claims. Juniper’s customer list is a Who’s Who of global operators – it has a powerful collaboration with IBM to help carriers move into the cloud market and its innovative software initiative, Junos Space, is aimed at encouraging operators’ in-house developers and independent software vendors to create new application function on top of its hardware platforms through which they can further differentiate their operations and services. 

In the voice market, the game-changing vendor has been Sonus, which now reckons to carry around 40% of the world’s long-distance voice traffic across its softswitches. Customers include AT&T, Level 3, NTT, KDDI, Softbank, KPN Ibasis, Centurylink (now merged with Qwest and therefore the largest VoIP wholesaler in the US) and most recently, BICS, which completed its next-generation VoIP network migration, based on Sonus kit, in December 2009.

Sonus’ innovation arose from its approach to the splitting of signalling and bearer capacity, which in softswitches are separated so that they can be cost-efficiently scaled. Sonus chose to create stateful and stateless softswitch elements so that the stateless routing database sits in a centralised policy and routing server, the PSX, and the distributed media element, the GSX, contains all stateful function, including some signalling. “It was an improvement on the softswitch model first proposed in 1998 by Lucent Bell Labs so it propelled us into pole position,” explains Aashu Virmani, director of marketing, who was working at Bell Labs with the co-founder of the idea at the time. “We could capture and replicate all the network intelligence in a central point, making it easy for operators to make daily routing table changes. Previously, large operators had to employ hundreds of people to update and synchronise all their switches – a costly nightmare.”

Sonus’ new ConnexIP platform introduces a commercial off-the-shelf-based form factor for session border controller function, the key technology for native IP voice interconnection. ConnexIP combines general-purpose CPUs for routing, network processors for IP security and policy control and transcoding processors in a single, blade-based chassis. “This platform will carry us forward into the next decade,” Virmani says. 

Cloud is the next big thing for carriers, enabling them to “get past the stigma of being big dumb pipes and to become the aggregators and orchestrators of cloud services,” points out George Hamilton, principal analyst, cloud computing, at Yankee Group. And no company is more synonymous with the cloud than virtualisation market leader, VMWare. VMWare was set up in 1998 with the vision of bringing to the Intel x86 platform a concept of partitioning workloads that goes back to the days of IBM mainframes.

VMWare’s hypervisor significantly escalated the adoption of virtualisation and laid the foundation for cloud services. In the process, VMWare gained itself an 18-month market lead, according to Hamilton, a gap which competitors such as Microsoft and Citrix have yet to close. Although VMWare dominates the market for enterprise private cloud, it has recognised the much greater potential in the service provider market for public/private hybrid cloud, which some pundits expect to grow at around 40% a year. As a result, VMWare has overhauled its licensing model to make its product more attractive for large carriers, with Singtel, Colt, Terremark, Verizon and Orange among those that have signed up.

VMWare’s next step is to improve the automation and orchestration involved in managing cloud resources, ensuring that service providers can cost-effectively, securely and optimally move workloads across a cloud infrastructure to gain the best performance. Like Juniper, VMWare is exposing product function through open interfaces that will allow third parties to “build their own management and automation capabilities,” Hamilton points out. “This is where the real battle of the cloud will be going forward.”

A further service opportunity for the wholesale market is undoubtedly content delivery. Carriers that are adapting their transport networks to meet the specific needs of internet content providers, and especially video content, are beginning to enjoy a lucrative new stream of revenue, once the preserve of internet era start-ups. Of those early content delivery specialists, none has done more to enable carriers to join the party than Edgecast, widely regarded as the carriers’ choice of content delivery technology partner. Edgecast supports a resale model for its content delivery network, where carriers and other resellers can co-brand or white label its CDN. Global Crossing, DT ICSS, AAPT in Australia and Dogan Telekom in Turkey are all resellers, with James Segil, president of Edgecast Networks, expecting that “five or six other carriers will sign up in the next 12 months”. In addition, Segil points out that large incumbents which had legacy CDN services, white-label Edgecast’s CDN to bring themselves up-to-date, but prefer their customers not to know.

Although one of the very few profitable CDN players, Edgecast raised $10 million in venture capital to ensure that it continues to innovate, including through its support for Microsoft’s Smooth Streaming standard, Dynamic Site Acceleration, and its launches of a cloud storage platform and a marketplace for CDN interconnection.

The noughties has proved a bumper decade for innovation but wholesale carriers will need new sources of inspiration in the years ahead. Their competitive advantage will increasingly depend on spotting the next wave of innovators ahead of the curve and implementing their products.