Healthy appetite for bandwidth >BY LARRY LANNON, Publisher

What's the bandwidth business like today? "You've got the best of all opportunities," says George Chase, senior vice president of sales and marketing at Fujitsu Network Communications. "It's awfully good."

"The reason our business is doing so well is that the appetite for bandwidth is increasing," adds Senior Vice President of Planning and Development Ron Martin.

Success generates new challenges. The two Fujitsu executives see important changes on the horizon. Among them are technical challenges as the consumer's appetite for bandwidth grows more ravenous and business challenges created by probable changes in customer expectations. The technical challenge of adding more bandwidth, up to the terabit level early in the next decade, is projectable and manageable. The customer challenges involve managing competitive fallout-specifically the need for service providers to differentiate services in a market lacking traditional competitive restraints-and the likelihood that they will expect suppliers to provide some level of "exclusive" support.

So in Fujitsu's case, the present illuminates the future, but perhaps not totally.

Three factors dominate now: The public's thirst for data services, particularly over the Internet; the wave of competition sweeping their customers' world; and the strong national economy. Chase notes that while a recession would slow the momentum behind the other two factors and change the market in the process, Fujitsu is not bearish on the economy or on the demand for bandwidth.

Network competitors focus on new competitive opportunity-and the fear of not seizing opportunity. With the passage of the reform legislation, everyone is in motion, everyone is eager to expand their customer base and retain current customers. Network operators without bandwidth-enriched networks can't. Fujitsu's customers, particularly the Bell companies, know the future has begun-and are investing accordingly. Their short-term focus: data and the Internet. Their longer term focus: more data, more Internet-and video. Their strategic commodity: bandwidth, more bandwidth, the most bandwidth.

The Fujitsu strategists believe there is no limitation on the demand for bandwidth. Adding bandwidth accelerates the demand for more bandwidth. In fact, large though the demand looks, the buildout will be larger because no competitor can afford to be caught with a bandwidth deficit and not all competitors will succeed.

This year, Fujitsu has seen demand for its OC-48 product "just explode," Chase says. The OC-48 product has flowered in the projected three-year cycle. Next year will be the trial year industrywide for OC-192 products, Chase says, and the original idea was that 1999 would be the takeoff year. But with bandwidth demand accelerating, Chase believes the cycle will be compressed, moving the takeoff point forward into 1998.

The Fujitsu execs see a parallel between the OC-48 experience and the OC-192 market. When Fujitsu's OC-48 product, the FLM 2400, was developed, "we were not targeting it for our BOC customers," Martin says. "The target market was the IXCs. Just the opposite happened. We can't make enough for our BOC customers. The same thing will happen with OC-192." Video-compatible infrastructures will be funded by demand for data and Internet services, not video. But once the infrastructures are built, video services will rapidly evolve.

Video "will be here," Chase believes. "Is that the year 2000? 2005? I don't think we know." Whenever it hits, Fujitsu is more than ready, its execs say.

"We invested a lot on the thought that video would be here by now," Martin explains. "We developed a large ATM switch on that assumption. We weren't wrong, just early. The consumers decide what they want, and it was data."

So Fujitsu has shifted to developing products for the data-driven demand that will also be "players in the video market," Chase says.

"Unbridled" competition, in Martin's phrase, among service providers begs a new strategic question: How do they differentiate their companies if their service sets are indistinguishable from their competitors'? One answer is likely to be unique features developed under "exclusive" relationships with strategic manufacturing partners. Fujitsu is receiving informal inquiries about its interest in developing these new relationships and in general is receptive to the idea. But a key element, Chase and Martin emphasize, must be risk-sharing. Asked if some form of revenue-sharing would provide the same level of assurance, the Fujitsu executives declined to comment specifically. But Chase adds, "It's creative things like that that you need if you're going to do exclusive feature development."