CISCO, CIENA EARN APPROVAL FOR AT&T'S MESH NETWORK

But good news fails to bolster vendor's stock prices

One week you're down, the next week you're up. Equipment vendors are accustomed to the roller coaster ride, but even good news doesn't appear to be buoying stock prices in this economic downturn.

AT&T last week proclaimed faith in Ciena and Cisco Systems, announcing it has deployed and will continue purchasing Ciena's CoreDirector optical switches and Cisco's successful Cerent box, the ONS 15454.

Interestingly, AT&T's announcement may be part of an out-of-court settlement between it and Ciena, which may have been threatening the carrier with legal action for reneging on an equipment deal several years ago, according to Mark Lutkowitz, vice president for CIR. The settlement likely stipulated that AT&T would use Ciena's metro dense wave division multiplexing equipment and announce its CoreDirector use, Lutkowitz said.

“AT&T is not one to mention manufacturers in a press release. The timing is very interesting,” Lutkowitz said.

Although much of the work was done last year, it provides evidence of carrier interest in optical networking. Perhaps an even greater sign of the times is that AT&T isn't using the new network to blast fat OC-48 or OC-192 pipes to dotcoms; instead, it is being used for a variety of smaller bit rates ranging from 45 Mb/s to 10 Gb/s.

And with the use of a mesh backbone, the network will restore service much faster in the event of a failure, said Dan Sheinbein, vice president of AT&T Labs network architecture and development. By using a mesh, optical switches are able to re-route traffic intelligently because each one has a map of the best available routes.

AT&T deployed Ciena's CoreDirector switches in 40 cities to create the mesh. For the metropolitan portion, the Cisco 15454s serve as multiservice platforms, aggregating lower-rate customer traffic up to OC-48 and OC-192 levels.

According to Sheinbein, the amount of lower-speed traffic is continuing to grow. “It's the OC-48s and OC-192s being used by dotcoms that have slowed,” he said.

Naturally, future deployments are tied to the demand for more services. “It's not a question of if, it's a question of how much,” Sheinbein said.

The announcement means Ciena and Cisco have been able to sink their teeth deeper into a coveted service provider account. Cisco is proud to have survived the rigors of AT&T's testing process, according to Jayshree Ullal, group vice president of Cisco's optical networking division.

“But more importantly, it is more of a milestone of acceptance of [optical innovation],” Ullal said.

Indeed, the adoption of a mesh architecture is significant to the industry. Carriers using older Sonet ring technology are resigned to higher costs and idle bandwidth, said Beth Perry, Ciena's core switching division vice president.

“It's all about reducing opex,” she said.

With AT&T taking a stand by building out a new optical mesh network, others are likely to follow. Sprint already has bought some CoreDirectors, and others are expected to start deploying more domestically, according to Lutkowitz.

“When the biggest long-distance carrier makes a bold statement, everyone else is going to want to keep up,” Lutkowitz said.

Providers such as WorldCom have yet to opt for any bandwidth intelligence device, although there is some speculation WorldCom may go with optical switch vendor Tellium. “Tellium may be in trouble if they don't,” Lutkowitz said.

Even though Ciena and Cisco had a big win with the AT&T deals, the companies didn't achieve the long-lasting stock price boost they were seeking. But at least the two vendors had good news to report. Sycamore Networks and Nortel Networks weren't so lucky.

Like many other vendors, Sycamore reported its revenue outlook is flat for the next few quarters. Meanwhile, Nortel not only had to disclose Chief Financial Officer Terry Hungle's embarrassing resignation, but it conceded that it might not meet its first-quarter targets.

“The last 25 days has indicated even more resolve by customers to minimize spending in the near term than originally anticipated,” said Frank Dunn, Nortel CEO. “This will make delivering our first-quarter sales outlook more challenging.” Despite the news, Dunn remained steadfast in his belief that Nortel will return to profitability.

“I have tremendous faith in [Nortel], the industry and the Internet,” Dunn said.

AT&T'S INTELLIGENT OPTICAL NETWORK

THE LONG-HAUL SEGMENT

• Intelligent optical switches (CoreDirectors from Ciena) carry traffic at rates between 45 Mb/s to 10 Gb/s

• Provisioning service features a point-and-click interface

• Switches are capable of restoring circuits via the mesh backbone

THE METRO SEGMENT

• Cisco's ONS 15454s serve as multiservice platforms at the edge

• Traffic is aggregated up to higher speeds

• Long-haul portion of network routes traffic across the optical switches

Source: AT&T