Virtually all telcos have a large install base of legacy equipment acquired over years of organic growth that is simply no longer suited to the dynamic nature of today’s telecommunications networks, writes Wayne Moulton.

As spare capacity on networks dwindles and equipment ages or approaches the end of its service life, telcos find themselves at a crossroad: continue to invest in outdated, inefficient equipment, or transition to a new mode of operation to capture additional market share and drive higher revenue while lowering expenses by saving on power costs and reduced real-estate charges.

While the choice might seem obvious, timing is everything. The decline in traditional, high-margin voice services, along with increased competition, has stagnated revenues, while the rise in demand for data transport has increased costs.

According to the Australian Bureau of Statistics, “The total volume of data downloaded via the Internet during the December 2012 quarter saw a 33% increase in comparison to the June 2012 quarter.”  The survey also revealed an increase in mobile handset internet usage: “Data downloaded by mobile handset subscribers increased by 38% to 13,700 TB [terabytes].”

The advent of 4G networks will only accelerate this trend, with some operators suggesting that download speeds could increase tenfold once 4G networking is widely deployed. Cloud computing is yet another consideration, with enterprise IT budgets fast moving away from capital expenditure towards applications and services operational expenditure, telcos would be remiss not to address compete for these changing demands.

On the flipside to this seemingly irrepressible challenge is the global financial slowdown. Greater uncertainty and tighter restrictions on funding for investment are forcing operators to seek an ever-faster, low-risk return on capital expenditure. This means that any network modernisation program must provide the best technical solution to create the most efficient network possible, while still meeting the financial objectives of both the telco and its customer.

The telco needs to see a return on its investment into a modernised network within 12 months to justify the program, while the customer needs a network that can support its business and increase profitability.

Out with the old
Many service providers are saddled with older transmission platforms (SONET/SDH and WDM), typically sourced from multiple vendors .

The technical issue here is that there is no standard protocol for mapping client traffic to the WDM transport, and no way to monitor signal integrity and quality over service provider boundaries. This means traffic must be de-multiplexed down to the lowest common protocol at these boundaries, which is inefficient and decreases performance due to the added latency.

Not only is legacy equipment approaching the end of its service life, it is not suited to the needs of today’s highly dynamic and multimedia centric network requirements. Telcos  therefore must upgrade; but to what, and how?

The market is generally split in two directions: Optical Transport Network (OTN) and Multiprotocol Label Switching (MPLS) technology. More and more providers are opting for OTN as the foundational network technology, which is expected to reach 80% market saturation by 2016 according to research group Infonetics. The reason for adopting OTN is significant cost reduction benefits.

OTN is a well-defined ITU standard, more mature compared to other standards. It also offers better management and monitoring capabilities that can extend across equipment and service provider boundaries, allowing a detailed view of overall network and link performance capabilities that far surpass those available by other standards Additionally, OTN is also aligned with existing operational paradigms within service provider domains, thus ensuring resource churn and costs are kept to a minimum.

OTN, simply explained, is like a shipping container for the myriad of traffic types that exist in the world – TDM, Packet, Voice, Video and Storage protocols, among others – and they can all be carried at the same time in a highly deterministic fashion, ensuring the end-to-end service quality for each. 

OTN is also the only standard available today that allows Telcos to leverage the huge amount of optical capacity enabled by coherent optical transmission technology; 100G, 400G, and even a Terabit.

But to take full advantage of OTN, the standard must be adopted in greater numbers, and Telcos are beginning to see the benefits in doing so. Already we are seeing take up of the OTN standard across the world, with tier one Telcos adopting the standard into the core of their networks in the US, Canada, UK, Germany, Saudi Arabia, India and China among many others.

As a natural upgrade path for SONET/SDH networks (OTN was designed specifically to replace these old platforms), OTN offers three key benefits that elevate it above all other technology options:

•    Encapsulation – which allows for end-to-end performance management;
•    Multiplexing – which combines lower-rate ODUs into OTN for transport; and
•    Multiple service tiers – which are optimised for latency, distance, efficiency and cost.

But perhaps the biggest benefit is not technical, but financial.

The value of modernisation
OTN can effectively be used to free up spare capacity in the network that was previously set aside for ring-based protection schemes.

By increasing availability and capacity and reducing latency, operators can diversify their service offerings and generate new revenue streams. Moreover, OTN’s automated management, monitoring, and inventory capabilities lead to faster turn-up of new services, adding top line revenue, while the lower cost and increased efficiency of OTN networks impacts directly on the bottom line.

Increased traffic volumes put particular emphasis on the scalability of any new platform choice. SONET and SDH transport standards are capped at 40G, while the adoption of coherent technology means long-haul OTN transport at 100G and above has become economically viable. 

This leads to higher efficiency on the transport backbone, reducing the need to deploy additional (and costly) fibre.

Core router bypass is another area where OTN delivers significant cost savings. Approximately 60% of core router traffic processed is transit, and therefore does not require the optical-electrical-optical regeneration from the router.

Using OTN switches to send the router only the traffic it needs to process leads to reductions of up to ten times the power consumption alone.

Despite the benefits – both technical and financial – telcos remain at a crossroad. The main hurdle to justifying the legacy network upgrades is ensuring the business case  is supported for the  investment needed, so many Telcos make the ‘safer’ choice of upgrading their networks on a piece-by-piece basis, keeping the legacy network in place longer and adding new services as demand requires.

While this approach does constrain the capital invested, it ignores the service innovation, the improved reliability, efficiency, power and space savings that is available to the operator.

Fortunately, as OTN-based transport and switching gain greater momentum, the choice on how soon and how quickly to modernise the network is getting far easier to make today.

Wayne Moulton currently serves as the Managing Director, Australia and New Zealand at Ciena. In this role he is responsible for developing strategic initiatives into new customers in Australia and New Zealand Business. Wayne has worked in the telecom industry for over 20 years.

He joined the Ciena team in April 2012 from Alcatel Lucent, where he was Vice President for Global Customers, Marketing and Strategy Communications. Prior to that, Wayne was employed by Nortel for 16 years.

Wayne holds a Bachelor Degree with Honours in Electrical and Electronic Engineering from Monash University and has been awarded the Institute of Engineers of Australia Medallion.

Visit www.ciena.com.