1. It's the services, stupid. This is a trend so big, it gets the first, second and third slot on the top 10 list. Simply put, the companies building very-high-bandwidth networks are quickly discovering that they must also develop revenue-producing services to fit onto those network pipes, or get caught in the crossfire of falling prices for bandwidth. This trend holds true for the Covad Communications' of the world that are building wholesale Digital Subscriber Line (DSL) networks and for the Level 3 Communications', with their packet networks and optical pipes, as well. And those services can't just amount to Internet access or basic data connectivity, since these are also becoming commodity items very quickly.
2. Moving up the food chain can include selling bandwidth to other service providers, as Level 3, Metromedia Fiber Networks and others are doing. It can involve adding voice services to packet networks, as many DSL network operators are doing or plan to do shortly. After all, the small businesses they target spend six times as much on voice services as they do on data. But there is a wide range of other possibilities, from security and screening to more business-specific options, such as work force management, billing systems and payroll.
3. There are plenty of options for how to add value. Last year's No. 1 trend - separating switches from service software via softswitches - is one approach. Building in voice gateways for voice-over-DSL (VoDSL) is another. Creating more intelligent customer devices - either by adding client software to a PC or by adding a new integrated access device (IAD) - represents yet another approach. And a number of new players - Abatis Systems, Ellacoya Networks and Sedona Networks, to name three - are emerging; they are focused entirely on developing network software to make it easier for all the broadband network players to more rapidly design and provision new services.
4. Optical, optical, optical. Backbone networks have been on a steady march to the optical realm for the past two years and continue in that direction, although there are significant missing pieces to the all-optical network puzzle. Specifically, what's lacking is a commercially available optical cross-connect that can handle the thousands of wavelengths that will be generated by Dense Wavelength Division Multiplexing systems moving toward the 200-wavelength-per-fiber barrier. Currently, optical technology is moving into the local access network to tie together very-high-bandwidth local area networks (LANs) with those fat backbone pipes. The metro space initially included scaled-down versions of long-distance DWDM systems, but over the past 18 months, a plethora of small companies has emerged with new optical access gear designed from the ground up to be deployed within the metro network.
5. Data at native rates - can you say Gig-E? Once fiber-optic connections are widely deployed to businesses, it makes sense to allow those businesses to connect their LANs directly, without using telecom technologies - such as Asynchronous Transfer Mode (ATM) or Synchronous Optical Network - that don't carry high-speed LAN traffic as efficiently. Native-data-rate LAN interconnect services are already being offered by companies such as Bell Atlantic, MFN and SBC Communications within its Ameritech region. Most native-rate LAN services are Gigabit Ethernet-based, since Ethernet remains the most widely deployed LAN technology. But other networking protocols, including Enterprise System Connection and Fiber Channel, can also be offered.
6. Own the customer. If a wholesaler is providing the DSL network, the incumbent is providing a physical line and an integrated communications provider is delivering voice and data service over that DSL line, who owns the customer? The simple answer is the ICP - but only if that company is providing its own bundled billing system and can manage the subscriber's information at a point within its own network, so that subscriber can add or change service delivery parameters at will. In other words, subscriber management is becoming part of the service delivery paradigm and, as it moves up the value chain, is showing up in more places in the network. Redback Networks coined the term "subscriber management," and is building its system at a much larger scale and offering optical connections into the system. But Cisco Systems is building subscriber management into its DSL network gear, and other equipment vendors offer it at the customer premises as part of an integrated access network.
7. M-commerce, or e-commerce goes mobile. There are probably many who wonder how this red-hot trend could fall all the way to No. 7. In truth, m-commerce is part of the general trend toward wireless ubiquity. Within a few years, a vast majority of computing devices will be handheld and mobile, creating a captive market for those who want to use phones and personal digital assistants as the means for delivering commercial services, whether it is banking, travel, buying groceries, getting a soda from a vending machine or ordering concert tickets. This looks great on paper and on television, but I don't type as fast as that lady in the commercial who manages to book her next ticket using her PC, with its wireless connection, before the rest of the crowd on her cancelled flight has begun running to the next gate.
8. Access via whatever. When AT&T says that after spending megabillions of dollars on cable networks it will reach more than half of its full-service network customers with wireless technology, it's hard to deny that multiple access technologies are a reality. Whether it's copper, cable, wireless or fiber optics, the goal of service providers today is to create a single services platform that can interface with multiple forms of access technologies.
9. You want to merge when? In our annual Cheap Shot Department, we look again to the Federal Communications Commission and its counterparts in Europe. To date, not a single major merger has been derailed by regulators, but some have been significantly delayed. Bell Atlantic and GTE have been living together without formal blessing for so long, they'd be common-law partners in many states. It appears WorldCom and Sprint are also in for a long and painful examination of exactly which part of the network they stand to monopolise once merged. These excruciating regulatory reviews have not substantially slowed the trend toward global mergers, nor will they.
10. Consolidation among competitive local exchange carriers. The CLEC has been among the most courageous and farseeing industry segments, blazing most of the technology trails mentioned here, including DSL, VoDSL, and Gigabit Ethernet LAN connections. But building high-tech networks isn't cheap, and investors often aren't patient. This could well be the year we see consolidation begin in the CLEC arena. One particularly intriguing possibility: Deutsche Telekom or another European carrier buys its way into the U.S. market with the acquisition of a Covad or a NorthPoint Communications. It could happen.
As in the past, we believe in full disclosure, so here's the report card on last year's predictions:
1. New network architecture emerges that - finally - separates switching from applications, and speeds the transition from circuit-switched to packet-switched networks. (Well, it is emerging - I think I can see its little beak poking out. Actually, some smaller companies are pushing this envelope, instead of Cisco and Lucent Technologies, as expected.)
2. Network operators develop and deliver more network-based services, as bandwidth becomes a commodity item. (Moved up the charts into the No. 1 slot for 52 weeks running.)
3.Access gets faster. (For many, DSL and cable modems are making fast access a reality. For the masses, it will still take at least another year to turn the corner.)
4. Services go multimedia, starting with integrated access. (IADs are now hitting the market, although the services aren't always ready to support them.)
5. Wireless begins to replace wireline services. (Wireless penetration hit 90 million subscribers in the US, and for many younger people, wireless is all they know.)
6. Interconnection between carriers becomes electronic, creating a true network of networks. (Whether this is working is a matter of opinion, but Bell Atlantic convinced the FCC of its success, gaining the long-distance business in New York as a result.)
7. Network management systems evolve to manage thousands of devices, and begin to rely on common object request brokerage architecture-based systems. (This is one of those foolproof trends that could be added to each year's list.)
8. Start-ups innovate, but quickly become absorbed into larger companies or go the initial public offering route. (Can you say Cerent? Nexabit Networks? Siara? So can Cisco, Lucent and Redback, respectively.)
9. Regulation trails technology. (Another foolproof trend that could be added to each year's list.)
10. Carriers consolidate into global network operators. (This continues to unfold - wait until Deutche Telekom really gets its act together.)
