Tending the flame: Keeping the fires burning for multiservice switching

Whether revenue for multiservice switching reaches the 5% to 6% growth rate predicted by In-stat's Henry Goldberg for the current year or whether as others suggest — it is flat or slightly down at best — hardly matters. What matters is that at $2 billion annually, it is still a significant market, and those who have not given up on it are being rewarded for their persistence.

Sure, the market's days are numbered. Networks based on IP/MPLS are beginning to make their presence felt. Ethernet is making inroads in the backhaul space. But as Aragorn, son of Arathorn, said to his minions before the Black Gate of Mordor, “It is not this day. This day we fight.”

The day still belongs to ATM-based multiservice switches. And the ATM-based multiservice switch market still belongs to Nortel Networks.

Wireless operators — and service providers being pressured to accelerate the pace of broadband DSL deployments — still turn to multiservice switches to aggregate their traffic. And their traffic keeps growing. This, combined with the less than enthusiastic embrace of IP/virtual private network (VPN) technology, is prolonging the life of this segment, which Lucent Technologies once left for dead.

Year-over-year, revenue in general for multiservice switching is down from last year. The first two quarters of 2005 registered $456 million and $486 million, respectively, according to analyst firm Ovum/RHK. Last year, they rang up $503 million and $505 million.

“This is a very lumpy business, and there is potential for the awarding of large contracts that skew the view temporarily,” said Mark Seery, vice president of IP service infrastructure at Ovum/RHK. “But I expect to see decline as a general trend in this market.”

Lucent saw the decline several years ago and, according to Seery, echoed that sentiment to the market back in 2000 by making it clear it wasn't going to be investing in its product line. As it shifted its gaze to IP/MPLS, Lucent may have been a little premature.

Although Lucent still makes $80 million per quarter on its multiservice switching product line and has taken steps to improve its position in this category, Seery said, it hasn't been very successful.

“I am reluctant to say they haven't tried, but they did a lot of damage to the perception of where they were going four or five years ago and haven't recovered from that,” he said.

The consequence? “Everyone in this space, including start-ups like WaveSmith (now part of Ciena) has considered the Lucent customer base up for grabs.”