Telecom Exchange — CEO Roundtable — Beyond 100 Gbps

At the Telecom Exchange at Cipriani on Wall Street, fiber buyers and sellers met in a market where the highest bandwidth and lowest latency links are bought and sold. Midway through the conference, the leaders of key companies met at an on the record session called the CEO Rountable.

Veteran internet journalist Dave Burstein felt that the most interesting thing said at the rountable was the price of bandwidth in or near Wall Street: 50 cents per megabyte.

The CEOs also discussed why people buy bandwidth. Bjarni Thorvardarson of Hibernia Atlantic said that people buy large volumes of bandwidth for any one of three reasons: they may be trying to add capacity in order to meet demand for video (“Netflix consumes the network”), they may need diversity so that if one fiber line goes down, another will be there.

Or they may be interested in speed. “This is a whole different customer segment. They like 10 gigabit ethernet not because they need the capacity but because they’ll run multiple streams in parallel, even if they use it to the full for less than one second. We’re laying the lowest latency connectivity between New York and the UK, going from 65 ms to below 60 ms. We could not justify this new cable for video, or sell service on it for $10,000 per month per wave, but for those in the speed game, a 10 percent cut in latency is a material difference.”

Jeff Young of Factset Research Systems, Inc., said that it can cost more to get into a building in London than it costs to rent transport from New York to London. This then gives some customers an incentive to build rather than buy.

Edward Evans of Neutral Tandem said that part of the problem is that people are usually not aware of all of their options. His company build a data repository of all buildings and all fiber. “So if I’m a carrier in New York city, I can find who connects to a specific circuit in Tokyo. If you have a relationship, you can contact them, or we can provide the connection and even manage it down to the CPE on both ends. Obviously, we want to sell some long haul ethernet as well.”

The equipment of the future

Len Bosack, co-founder of XKL, said that the equipment needs to change in order for it to deliver the bandwidth of the future. As he is the co-founder of Cisco and a former Bell Labs researcher, everyone listened closely.

He said that equipment is about to reach its limit, when fiber providers reach 100 Gbps “(though some vendors won’t say so), the equipment will deliver 100 Gbps on 50 GHz wide optical channels but it will be easier or harder depending on the age of the fiber and the equipment. If things have gotten wet or crushed, that may matter. You may have already experienced this. If the fiber’s the problem, the provider won’t want to take it out of service for testing. And the equipment may have been upgraded from 2.5 Gbps and maybe from an OC-12 before that.”

“If you want to go beyond 100 Gbps, it’s time to think about new plant. You’ll need newer fiber. The losses of newer fiber are less. Newer fiber is also better in terms of nonlinearities. If you are planning for a future beyond 100 Gbps, the future starts today. The industry approach can get you to 100 Gbps, but with no future.”

“We’re pretty sure you can get to a terabit. We won’t tell you when, but real soon.”

Here’s the part that Dave Burstein focused on. Bosack said, “the past, in which each generation of product was four times faster but the costs were the same, is over. Now, the next generation will still be four times faster, but costs will double. This will impact bandwidth costs in the future.”

In response to questions from Burstein, Bosack said that a terabit interface could cost $5 million fully featured, could cost $2 million with fewer features.

Hunter Newby, CEO of Allied Fiber, said that fiber providers with older fiber are starting to find that the fiber they had leased for 15 years will not sell right now, because “the dirty secret is that all new equipment has been trialed on new glass in the lab, but new glass does not currently exist in the long haul.”

Thorvardarson of Hibernia Atlantic said that current fiber prices do not allow providers to lay fiber, let alone pay for the hardware to light it. “The cost of the plant itself does not play a role in pricing. It’s sunk cost. Providers can only charge for marginal costs at today’s fiber prices.”

The networks of the future

Evans of Neutral Tandem said that the new fiber and old fiber will create different networks delivering different speeds. “There will always be a market for high latency data movement, especially consumer stuff. There will also be a market for low latency data movement. Customers will expect to be able to access lower latency pipes with more intelligence.”

Evans added that his company is working with a startup that is making video transcoding from Skype to Google work.

Thorvardarson of Hibernia Atlantic said that he’s worried about the growing market power of content owners such as Google.

Newby warned that most of America will not have access to these networks of the future. “Too many people have been taking for granted the prices achieved through the overinvestment in infrastructure that happened in the past. We need new infrastructure. How will last mile network access the superstructure that we’re building?”

“Allied fiber places access points every 3,000 feet along a long haul fiber network. There have been long haul networks and there have been metro networks, but never before has there been a combination of the two. How do last mile networks access the superstructure? A last mile network without access is pointless, we’ve seen it in stimulus projects. Fiber, broadband — all are meaningless terms without definitions. North Carolina reclassified broadband as 768 Kbps by 128 Kbps, essentially preventing the construction of new networks. Munis need to build open fiber networks.”

“We in this room are the bleeding edge of this industry. But we should remember that there are people in the U.S. and in other countries that have nothing and would love the OC-12 that Len disparaged. Look at the transformation of the African continent in the past two years. There are numerous new new fiber lines landing on the continent and fiber is feeding new cellular towers. I’m an angel investor in a mobile banking company that’s doing quite well. In the U.S., the credit car companies won’t let it happen because they fear that peer to peer money would put them out of business.”

“Pay very close attention to China, which is winning big in equipment sales. Companies won deals in Africa because they don’t expect to get money for their equipment. In 10 years, China will dominate sales to emerging economies for this reason.”