METRO UNDERDOGS CONFRONT BLEAK REALITY

Despite their initial promise and a market that seemed poised to survive the harshest telecom environments, start-up suppliers of metro optical equipment are disappearing fast. The concept of multiservice platforms that simultaneously lower the cost of offering legacy services and allow for the creation of new services looks good on paper. However, convincing service providers to wager on new vendors is more complicated.

With carrier spending collapsing faster than a cheap tent, vendors going after the increasingly shrinking pie must offer service providers lower capital expenditures, lower operating expenditures and the ability to offer new services without stranding investments already made in legacy services. Those new economic realities now are translating into technical actuality.

Not long ago, many in the metro market were heralding the impending death of Sonet. However, the halt in spending and a large installed Sonet base has caused service providers to look for ways to keep the technology alive.

Now, start-up vendors such as Coriolis Networks and Native Networks are trying to bridge the gap between old and new. Both companies think they have the answer to how carriers can support legacy services in the metro area and at the same time tack on new services, essentially allowing them to squeeze more value out of their Sonet infrastructures.

Native lets service providers that have only legacy equipment migrate to new services over a few years rather than all at once, said Gilad Goren, president and co-founder of Native Networks. “We are enabling IP and Ethernet services with legacy service on top of the Sonet network so carriers can have low capex, low opex and new services,” he said.

Both companies' equipment essentially replaces a combination of Ethernet switches, Sonet add/drop multiplexers or ATM switches. In newer networks, the equipment is competing for space with Cisco Systems' next-generation Sonet box, the ONS 15454.

“Carriers that have seen it get really excited because it can provide real operational efficiencies,” said Greg Wortman, vice president of marketing for Coriolis. “We are a third more granular than the [newer multiservice players], and we don't strand bandwidth.”

Using virtual concatenation, Coriolis and Native group bursty data traffic together, allowing it to operate as one big pipe rather than multiple separate channels, which is inherently inefficient. The companies then use proprietary protocols to prioritize packets. Coriolis uses what it calls optical spatial division multiplexing, which is based on time division multiplexing (TDM), whereas Native Networks uses asynchronous packet transport, which is based on multiprotocol label switching.

Technical minutiae aside, the bigger question is whether the two start-ups can find a home in service provider networks and, more specifically, in ones with at least some money to spend. Short term, the companies also must be able to ride out the tumultuous environment on their current funding.

So far, Coriolis has amassed $74 million in funding, $32 million of which was secured only a few weeks ago despite tight venture capital markets. Native has secured $22 million.

Coriolis, which originally had visions of targeting competitive carriers, recently completed OSMINE certification, an arduous but necessary task to get into large carrier networks. OSMINE, or Operations Systems Modification of Intelligent Network Elements, is a series of tests run by Telcordia Technologies that certifies products for interoperability with incumbent networks. Native is initially concentrating on the European market and is relying on reseller agreements with LuxN and Sorrento Networks to sell in the U.S.

“[OSMINE] is more than most new access vendors have done,” said Mark Lutkowitz, vice president for consultancy CIR. “The biggest opportunity is in the [Bell company] space because there is so much unused capacity in the CLEC space.”

OSMINE certification doesn't necessarily always translate into future acceptance in incumbent networks, however.

“Coriolis' product and what they're doing with it is good, but it's hard to be a small company and compete with companies like Cisco,” said Doug McEuen, senior analyst at Pioneer Consulting. “Cisco has dominated the big hitters like the ILECs in the metro market.”

And while smaller start-ups typically have a development speed advantage — particularly when competing against a product like the 15454 that needs an upgrade — incumbency and size have their advantages. Companies such as Cisco can wrap their products and services into easy-to-consume suites. They also have the incentive to discount certain equipment and services, making migration to another platform even less attractive.

“A lot of [router] vendors came in with better, faster, cheaper products, and none of them is around today,” said Chris Nicoll, vice president at Current Analysis.

Coriolis is a living lesson. Its equipment has been generally available since June, but it hasn't uprooted any of the next-generation equipment. The company has, however, announced a contract with CLEC Marietta FiberNet. Native's product is not yet commercially available.

Critics of both companies say the preponderance of TDM-based traffic in today's network negates the need for equipment from either company. Advocates argue, however, that the equipment's migratory capabilities make it essential for it to be deployed now.

“If they can convince service providers they can offer legacy services less expensively, then they have a good opportunity,” said Nicoll. “No one wants to buy big cross-connects or dumb muxes. They want to buy something that is cost-effective.”