Tending the flame: Keeping the fires burning for multiservice switching

Nortel has done its part to grab some of that share and maintain its leading position in the space. Despite the turmoil the company has experienced over the last several years, its multiservice switching products brought in $218 million in the first quarter. The second quarter was even better at $266 million, according to In-Stat. With last year's first two quarters coming in at $161.1 million and $175.6 million, Nortel has far outpaced the market in general.

“Nortel still puts a lot of emphasis on these products,” In-Stat's Goldberg said. “They have a strong product and R&D staff that continues to develop these products, and I would expect they will continue to be the leader in this market.”

Although, numbers aren't out yet for 2005 by either analyst firm — mainly because the maturity of the market has led them to forgo continued quarterly monitoring, and the year isn't quite over — Nortel had a 34% market share after 2004. Alcatel, the other large vendor that stuck with the market, took over Lucent's No. 2 spot with 22% market share. Lucent has hung onto third place while Cisco Systems and Marconi follow.

The Passport product, which took Nortel to the top in market share, has been renamed the MSS, or multiservice switch. But so far, people still call it the Passport. The product was positioned in the mid-1990s as an ATM/frame relay solution. It still is, despite the addition of Ethernet and IP/MPLS capability.

“The argument over ATM versus other technologies is still somewhat in play, but ATM still dominates in places like wireless backhaul. And ATM still has a good stranglehold on the enterprise market,” said John Casadonte, marketing manager for multiservice switching for Nortel.

He says that North America is still very much a T-1 world and that any box that purports to do multiservice switching has to take into account that infrastructure. Having developed its product that way in the beginning was an advantage, Casadonte said.

It also was an advantage to keep the core development group together in Ottawa, Canada, slightly removed from the corporate turmoil. The group has been producing data switching products for more than 30 years, long before multiservice switching came to be.

While development has continued — adding Ethernet, IP and MPLS capabilities — and the requirements have grown to include interfaces for these new technologies (at least new to telecom), the demand and the growth has come through traditional applications.

“IP/VPN as a service play has been slow to materialize in this industry,” Casadonte said. “Our product has great capability for it, but it just hasn't been exercised.”

Instead, wireless backhaul and the trend toward distributed mobile switching centers (MSC) have made wireless operators the fastest-growing segments for multiservice switching. “We position the MSS as a revenue generator for service providers, but it is equally used as a cost-reduction mechanism, and wireless backhaul is a good example of that,” Casadonte said.

In fact, according to Seery, “wireless backhaul is keeping the market alive. It's the one bright spot for these vendors.”

It may not be the only one. “Vendors have also been helped by strong upgrade cycles by carriers like BT as they push to make the European mandates on penetration rates for DSL,” Seery said.

However, even as these opportunities expand, they also constitute the beginning of the real end for multiservice switching as we know it. Seery sees 2006 as an important year for a variety of architectural changes, particularly in DSL aggregation and wireless backhaul. And because of these changes, vendor investment in their ATM-based multiservice switching products will begin to taper off in 2007.

Changes include migrating wireless backhaul and DSLAM aggregation to Ethernet technology and the long-awaited adoption of IP/MPLS.

In the meantime, there's that $2 billion revenue pie sitting on the table.

“The strategic importance of this market has probably peaked,” said Jim Guillet, vice president of marketing activities for Alcatel's IP division in Ottawa.