By Peter Meade
Think "real estate" is the tip for the slew of long distance carriers
that have made recent announcements about buildouts of their fiber optic networks.
The market for building fiber networks has a lot of parallels with the real estate
market, says Hilary Mine, the Folsom, Calif.-based senior vice president for Probe
Research Inc. There is a definite "step function" among the market factors of
demand, price and capacity. Simply put, when demand is high but capacity is low, prices
are high. When capacity is high but demand is low, prices are low. Sound confusing? Ask
your friendly, local real estate agent to explain it.
While real estate prices are on the rise again nationally, the fiber market is reacting
to the bandwidth crunch of 1996-1997 brought on by the Internet becoming everyone’s best
friend. Right now, in real estate or fiber networking, everyone seems to be building.
Metromedia Fiber Network Inc. is furthering its penetration into Chicago, New York,
Philadelphia, Washington and the West Coast, while Frontier Corp. also is adding capacity
in the West as IXC Communications Inc. is purchasing optical gear for a coast-to-coast
Metromedia’s expansion will bring the New York-based company’s fiber infrastructure to
more than 380,000 miles and 1,000 route miles. Progress won’t stop there, says Stephen A.
Garofalo, founder, chair and chief executive officer. A long-haul route between Boston and
New York is halfway done and should be completed before the end of the year, he says.
Proving it knows a few things about real estate too, the five-year-old company has just
negotiated easement rights with Bay Area Rapid Transit Co. (BART) for network expansion
into the San Francisco and Silicon Valley areas. Metromedia is planning a 150-mile route,
ringing the Bay Area and including San Jose and Santa Clara, according to Garofalo.
Afterward, plans are in place for linking Silicon Valley to Seattle, he says.
Frontier also is busy in the Northwest. The company recently turned up two rings in its
"optronics" network, a name that comes from the network’s use of optical
elements such as dense wavelength division multiplexing (DWDM) and SONET (synchronous
optical network) blended with electronic gear.
The Rochester, N.Y.-based carrier also acquired a third ring in the region via a
capacity swap with Western Tele-Communications Inc. (WTCI), a subsidiary of cable giant
Tele-Communications Inc. (TCI).
The WTCI deal adds 1,661 miles to Frontier’s network, according to a spokeswoman. WTCI
is providing an OC-48 route through Seattle, Denver and Billings, Mont., that will be
added to Frontier’s existing fiber. In exchange, Frontier is giving WTCI the rights to
OC-12 and OC-48 pipes on its Seattle-to-San Francisco route as well as an OC-12 from
Denver to Sacramento, Calif.
The swap provides Frontier with improved network protection in case of an outage, says
Russ Shipley, vice president of network planning and development. Frontier has made a
concerted effort to protect its traffic with all its fiber rings being self-healing.
"Our network is a collection and combination of networks," he says.
"They all must work together as well as independently."
When completed, Frontier’s ring-based network will span 15,000 miles. More than 50
percent of the network has been lit, according to a spokeswoman. With most of its domestic
network nearly built (see map, page 60), Frontier is casting an interested glance at
beefing up its international presence. According to Shipley, Frontier already has several
E1 lines in place to London and now is looking at new sites.
IXC, meanwhile, is looking to construct a network from San Francisco to Los Angeles to
Fort Worth, Texas, to New York after signing a pact to buy more than $100 million in
network gear from Northern Telecom Ltd. (Nortel).
"Some carriers’ networks are running at frightening levels of capacity," says
industry watcher Mine. "No network engineer likes a network to run at 50 percent [of
capacity] and some we see are as high as 75 percent. Levels are so bursty and people want
Austin, Texas-based IXC will be purchasing Nortel’s Multiwave-length Optical Repeater
(MOR) systems as well as DWDM equipment to deliver OC-192 capacity. IXC previously had
deployed gear with a west-east split between Alcatel Network Systems Inc. and Nortel, says
Michael Vent, executive vice president of network engineering and operations. When this
expansion became necessary, Vent says he challenged the two vendors to see which could
respond with the needed high-capacity equipment within 90 days. As Nortel emerged
victorious, its gear will be overlaid over Alcatel’s as true vendor interoperability still
is lacking in much of the optical networking space, Vent says. At least IXC has inspired
Nortel to make strides toward reducing the proprietary element of much of the associated
software, he adds.
IXC currently is testing its recently completed Southeast route, which runs from
Washington to Houston, according to Vent. By the time the fiber is operational in about
two months, IXC should have completed installation of its New York to Washington route.
"It’s a great problem to have to sell so much bandwidth," says Vent. Adds
Metromedia’s Garofalo: "Customers understand fiber. They demand fiber."
But by 2000, Probe’s Mine says yesterday’s demand will result in excess bandwidth. By
the following year, look for fiber prices to fall sharply, she says. A fiber recession
will be underway.
But in the meantime, Garofalo says Metromedia’s customers’ demands for fiber have been
so loud that the carrier will be able to build out its network into 2000 without seeking
outside funding–a noteworthy achievement for a competitive local exchange carrier, many
of which rely heavily on Wall Street.
"Planning for capacity requires planning in advance," says Mine. "It’s
also about knowing when to stop."
Peter Meade is Executive Editor of PHONE+ Magazine.