Optics gear on parade at SuperComm

Companies such as Nortel Networks, Lucent Technologies, Corning and smaller manufacturers introduced a variety of new optical gear at the annual communications industry conference, despite sluggish sales in the past year. Equipment for metropolitan networks and systems capable of 40 gigabit-per-second speeds were particularly prominent.

Generally, fiber-optic gear continues to sell more briskly than other networking equipment, which is suffering from a downturn in customer spending. Equipment makers must work harder for every sale as phone service carriers like AT&T, Qwest Communications International and Verizon Communications spend less money on equipment and start-up carriers such as Covad Communications fight to stay in business.

As a result, the SuperComm show comes at a dark time for the industry.

"It's kind of like telecom Disneyland," John Mazur, an optical analyst at Gartner Dataquest said of SuperComm. "Everything looks fine, trinkets are being handed out, money is being spent, but that doesn't necessarily reflect the outside conditions."

For example, researchers at U.S. Bancorp Piper Jaffray expect that carrier spending will fall by about 10 percent this year, according to analyst Cary Robinson. A recent report by Epoch Partners, a technology investment bank, also estimates that spending will shrink by 6 percent to $92.9 billion from $98.7 billion last year.

"Service providers are changing the way they are spending their money," said Michael Howard, an analyst at Infonetics Research, who believes that carriers are looking for equipment that allows them to be more flexible in managing their networks and to add and drop capacity on demand.

Some analysts say there were few major announcements at the show, but expressed optimism that technology in the equipment industry is moving forward.

"Just a steady march toward more (capacity), higher speed and more intelligent networking," said Steve Levy, an analyst at Lehman Brothers.

Equipment makers are responding to the lean times with products that can help carriers increase revenue or lower costs. Some analysts predict that carriers will focus on their metropolitan networks, or networks that run throughout a city, as opposed to long-haul networks, which transmit information between cities.

Lucent Technologies was one of many equipment makers that announced a product line, called Metropolis, targeted at metro networks. The product line consists of equipment that uses different technologies like IP (Internet Protocol), the protocol that Internet traffic runs on, and wave division multiplexing, a transmission technology that increases the capacity of each fiber.

Corning also demonstrated metro equipment from Cisco Systems, ONI Systems and Sorrento Networks using its MetroCor fibers, which are glass fibers specifically designed for optical metro networks.

NEC introduced its MG8000, an optical hardware for metro networks that sends data using multiplexing technology, which is a way of increasing capacity on a fiber by sending many signals as one signal down a line and then separating them again on the receiving end.

In addition to metropolitan area networking optical gear, higher speed fiber-optic hardware was on hand.

NEC's new gear also sends data at 40 Gbps (gigabits per second), the next speed standard for the industry. The fastest equipment in widespread use today operates at about 10 Gbps.

Analysts think that widespread use of 40 Gbps equipment won't happen for a while, but that isn't keeping equipment makers from touting their wares in anticipation of an upturn in spending.

Siemens subsidiary Unisphere, among other companies, introduced a router that could transmit data at 40 Gbps. The ERX-1440 sits on the edge of a metro network and receives long-haul data then sends it into the metro toward its final destination. Optisphere Networks, another Siemens company, also announced that it will demonstrate its 40 Gbps product at SuperComm.

Smaller companies are making progress in this space, too. PhotonEx announced Monday that it successfully tested its equipment to transmit signals at 40 Gbps over 1500 kilometers. The company expects to announce trials with outside customers in the third quarter.

But all the new toys may have to sit on the shelf longer than some equipment makers would like.

Lehman's Steve Levy thinks spending will continue to fall until the first half of next year.

"The equipment companies are still in low visibility mode," he said. "Carrier spending has to get in line with revenue."

Levy said that, historically, carriers would spend between 15 percent and 20 percent of their revenue on capital equipment, but that has ballooned to the high 20 percent range over the last couple of years.

So even though equipment makers struggle as they put their best foot forward with new products, SuperComm might be just the place for everyone in the industry to forget the present reality.

"When you go to Disneyland, you don't expect to see suffering or starving," said Gartner's Mazur.