WINTERGREEN RESEARCH, INC. REPORT # SH29821299 360 PAGES 122 TABLES AND FIGURES 2003 $2,800 Next Generation Digital Loop Carrier Market Opportunities, Strategies, and Forecasts, 2003 to 2008 Next Generation Digital Loop Carrier Picture by Susie Eustis MOUNTAINS OF OPPORTUNITY WinterGreen Research, Inc. Lexington, Massachusetts www.wintergreenresearch.com
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Opportunities, Strategies, and Forecasts, 2003 to 2008
The service provider converged voice and data network promises to be implemented as nodes in a neighborhood or remote switches in regional locations. Digital loop carriers are the base for broadband services delivery.
The Internet is poised to spin off thousands of specialized broadband services. The access network needs digital loop carriers (DLCs) that provide the platform for delivery of these services.
NGDLCs extend the reach of connections to remotely located subscribers and improve overall service quality. Over the past three decades, DLCs have evolved to next-generation digital loop carriers (NGDLCs) capable of simultaneously providing POTS and advanced broadband services, such as digital subscriber lines (DSL).
NGDLCs are economical and scalable vehicles to deliver POTS, narrowband, and broadband services. Lack of broadband capability in the majority of the DLC installed base is a factor prompting spending by carriers.
Broadband services shifts, regulation, and technology influence the pace of change in the access network. There is ongoing demand for broadband connections. Broadband will completely replace narrowband within ten years.
Any significant changes in broadband regulation could trigger growth in the access market by encouraging carriers to invest in upgrading neighborhood networks with new equipment that delivers broadband services. Congress’ enactment of the 1996 Telecommunications Act (the Act) created an environment in which carriers accelerated their offerings of voice, data and video services. In February 2003, the Federal Communications Commission (FCC) adopted new rules concerning incumbent local exchange carrier obligations for elements of their networks.
NGDLC technologies make broadband rollout economical for a higher percentage of the population. Six-circuit card NGDLCs are efficient. Innovative evolution helps drive down deployment costs. Over time, these three factors are expected to stimulate an increase in investment in the access network.
Micro-DLC solutions enable service providers to meet growing demands for additional phone, fax, and data lines in residential and business areas with limited copper deployment. Systems reduce equipment and labor costs associated with line installation. They provide a quick solution for filling held orders.
At of the end of 2002, 45% of the U.S. equipped lines and investment in the major telcos access networks was unused. Only 36%were unused in 1997. That is a 20%jump in unused local network capacity in 5 years. Stranded capacity is a significant aspect of broadband communications network planning. NDLCs are being combined with Metro DWDM platforms. Platforms promise to further increase the access capacity with the transport platforms taking on some access capability.
Growing market demand for high bandwidth services is forcing telecom providers
to reevaluate their network planning models and create new ones. Network planners and engineers responsible for this emerging network face a complex problem: how to effectively implement a network that optimizes diverse such as voice, video, and data services.
Overlay networks and discrete network elements are being replaced with integrated platforms. Existing investment needs to be protected while maintaining the design requirements for a packet, digital network.
An integrated multi-service access platform provides a foundation for multi-service deployment, with an evolutionary path to networks of the future.
Functional Partitioning / NGDLC Platforms Embrace Access In Neighborhood Nodes
The metropolitan and the local access markets are changing simultaneously. This leads to the opportunity to build bradband services capability out to the neighborhood, replacing the narrowband circuit swith functions in the neighborhood instead of the central office to bring IP to homes and businesses. Switching and routing functions work from remote boxes in neighborhoods to implement converged systems.
The functional split between access, switching, and transmission is changing. Metro DWDM platforms are evolving access and application capability. The split in access, switching, and transmission functionality is a result of the fact that high-value service terminations are best concentrated in the network core.
High-value service terminations depend on use of expensive equipment and personnel. The network edge is more appropriately the place for access devices.
Bringing switching and routing functions to the access network goes against all past and current practices in functional partitioning. Field technicians are trained to deal with copper and fiber-transmission. Field technicians manage multiplexing issues. Complex functions including switching are left to the central office or network operations center.
Specially trained personnel are available. Some scenarios predict the separation of incumbent carriers into wholesale and retail entities. This market division is designed to facilitate loop unbundling. Access multiplexing and service processing become even more distinct and stratified if this occurs.
Disruptive Operations
Network equipment vendors tend to believe deeply in their product technologies, but this belief can blind innovators to a less attractive-but no less important-element of the network business equation: manageability.
A product that can be managed easily ultimately determines that it can be deployed successfully. Unless it is stationed in an entirely new network, a product best chance of success lies in its ability to fit the telco PMO. Converged systems NGDLC vendors leverage the value proposition of a product that can be placed in the neighborhood along with existing equipment.
Carriers that are incumbent cannot justify retooling an entire back office along with massive retraining of personnel. Vendors design interfaces and operations methods to fit existing technologies. This strategy supports the legacy software and interfaces for which legions of central office, NOC, and field personnel have been laboriously and expensively trained.
Digital loop carrier (DLC) market dollar shipments at $1.8 billion in 2000 declined to $945 million in 2002, and are expected to remain flat through 2005, reach $1 billion by 2006 and $1.4 billion by 2008.
Companies Profiled
Market Leaders Alcatel
Advanced Fibre Communication (AFC) Marconi
Lucent Technologies Zhone Technologies
Huawai Reactivity
Forum Systems
Other Market Participants Actelis Motorola Adtran Occam Calix Redback Networks Catena Siemens Cisco Systems Telstrat Entisphere UT Starcom Hatteras Valo
Next Generation Digital Loop Carrier Market Strategies and Forecasts, 2003-2008
REPORT METHODOLOGY
THIS IS THE HUNDRED AND THIRTIETH REPORT IN A SERIES OF MARKET RESEARCH REPORTS THAT PROVIDE
FORECASTS IN COMMUNICATIONS, TELECOMMUNICATIONS, THE INTERNET, COMPUTER, SOFTWARE, AND TELEPHONE
EQUIPMENT. THE PROJECT LEADERS TAKE DIRECT RESPONSIBILITY FOR WRITING AND PREPARING EACH REPORT. THEY
HAVE SIGNIFICANT EXPERIENCE PREPARING INDUSTRY STUDIES. FORECASTS ARE BASED ON PRIMARY RESEARCH AND
PROPRIETARY DATA BASES. FORECASTS REFLECT ANALYSIS OF THE MARKET TRENDS IN THE SEGMENT AND RELATED
SEGMENTS. UNIT AND DOLLAR SHIPMENTS ARE ANALYZED THROUGH CONSIDERATION OF DOLLAR VOLUME OF EACH
MARKET PARTICIPATION IN THE SEGMENT. INSTALLED BASE ANALYSIS AND UNIT ANALYSIS IS BASED ON INTERVIEWS AND
AN INFORMATION SEARCH. MARKET SHARE ANALYSIS INCLUDES CONVERSATIONS WITH KEY CUSTOMERS OF PRODUCTS, INDUSTRY SEGMENT LEADERS, MARKETING DIRECTORS, DISTRIBUTORS, LEADING MARKET PARTICIPANTS, OPINION
LEADERS, AND COMPANIES SEEKING TO DEVELOP MEASURABLE MARKET SHARE. OVER 200 IN DEPTH INTERVIEWS ARE
CONDUCTED FOR EACH REPORT WITH A BROAD RANGE OF KEY PARTICIPANTS AND INDUSTRY LEADERS IN THE MARKET
Next Generation Digital Loop Carrier (DLC) Industry E-5 Demand For Faster Speed And More Reliable Communications Services E-6
Digital Loop Carrier Market Shares E-7 Next Generation Digital Loop Carrier (NGDLC) Market Forecasts E-10 Accelerated Migration From Circuit-Based Networks E-13
NEXT GENERATION DIGITAL LOOP CARRIER MARKET DYNAMICS AND MARKET DESCRIPTION
1. NEXT GENERATION DIGITAL LOOP CARRIER (DLC) MARKET DYNAMICS AND MARKET DESCRIPTION1-1 1.1 Digital Loop Carrier (DLC) Network Nodes 1-1 1.2 Market Conditions 1-2
1.2.1 Broadband Connectivity In The Access Network 1-2 1.2.2 Substantial Restructuring Efforts 1-4 1.2.3 Market-Driven Organizations 1-4 1.2.4 Key Business Drivers 1-5 1.2.5 Telecommunications in the Context of the Global Economy 1-7 1.2.6 Telecommunications Market Situation 1-10
1.3 Telecom Markets 1-12 1.4 Telecommunications Industry Shifts 1-13 1.5 Point Of Presence 1-15 1.6 Carrier Requirements 1-16
1.10.2 Upgrades to Existing DLCs 1-29 1.11 Integrated Multimedia Services 1-30 1.12 Integrated Video Services 1-30 1.13 Digital Loop Carrier Product Positioning 1-31 1.14 RBOC Use of Digital Loop Carriers and XDSL 1-32
1.15 Design Solutions 1-34 1.16 Coaxial Cable Internet Competition 1-35 1.17 Copper Loop Conditioning 1-36 NEXT GENERATION DIGITAL LOOP CARRIER MARKET SHARES AND MARKET FORECASTS
2. NEXT GENERATION DIGITAL LOOP CARRIER (DLC) MARKET SHARES AND MARKET FORECASTS 2-1 2.1 Next Generation Digital Loop Carrier (DLC) Industry 2-1
2.1.1 Disparity Between Bandwidth In The Fiber Optic Core And Bandwidth At Subscriber Premises 2-2 2.1.2 Demand For Faster Speed And More Reliable Communications Services 2-3 2.1.3 Access Networks 2-3 2.1.4 Cable Operators Aggressively Upgrading Facilities 2-4 2.1.5 Evolution of Multiple Access Networks 2-5 2.1.6 Next Generation Digital Loop Carrier (DLC) Functions 2-5
2.2 Next Generation Digital Loop Carrier NGDLC Market Driving Forces 2-6 2.3 Digital Loop Carrier Competitive Forces 2-7
2.16 Internet Impact on Access Network 2-105 2.16.1 Complexity Of Overlay Networks 2-105 2.16.2 Improve Capital Efficiency 2-106 2.16.3 Location problems 2-106 2.16.4 Obsolescence And Inadequacy 2-106 2.16.5 Promise And Threat Of Converged Systems 2-107 2.16.6 Reliance on IP 2-108 2.16.7 Functional Partitioning / Metro DWDM Platforms Embrace Access 2-108 2.16.8 Disruptive Operations 2-109 2.16.9 Consolidated Platform Strategy 2-110 2.16.10 Designing For The Telecom Market 2-111
2.17 Internet And Digital Loop Carriers As A Market Force In Local Access 2-113 2.17.1 Global Economy 2-113 2.17.2 Intensifying Competition On A Global Scale 2-115 2.17.3 Business Forces Driving Change 2-117 2.17.4 Pace Of Technological Change 2-117 2.17.5 Response To Change 2-118
2.18 Circuit Networks Vs Packet Networks 2-119 2.18.1 Convergence Of Voice And Data 2-120 2.18.2 End-To-End Internet Solutions 2-120 2.18.3 Rapid, Flexible Deployments 2-121 2.18.4 E-Services 2-122 2.18.5 E-Services Partnering 2-123
2.19 Internet Market Driving Forces 2-125 2.19.1 Web Based Supply Chain Exchanges 2-127 2.19.2 Exchange Infrastructure Functionality 2-127 2.19.3 Internet Explosion 2-128
2.20 Internet Users 2-130 2.20.1 Need For Digital Loop Carriers 2-131 2.20.2 Web Lifestyle 2-132 2.20.3 Packet Networks 2-133
3.14.1 UTStarcom mSwitch 3-88 3.14.2 UTStarcom Total Control 1000 Multi-Service Access Platform 3-88
3.15 Valo 3-89
NEXT GENERATION DIGITAL LOOP CARRIER TECHNOLOGY 4. NEXT GENERATION DIGITAL LOOP CARRIER (DLC) TECHNOLOGY 4-1 4.1 Technology Issues in the First Mile / Last Mile 4-1 4.2 Narrowband Services 4-3 4.3 Leased Line Services 4-4 4.4 Broadband Services 4-5
4.5 Network Layer Service Intelligence 4-9 4.5.1 Service Intelligence Network Application Layer 4-10 4.5.2 Service Intelligence Network Service Control Layer 4-10 4.5.3 Service Intelligence Network Transport Layer 4-10
Telecommunications Industry Shifts Table 1-5 1-16 Significant Technological And Architectural Advances Table 1-6 1-27 Market Environment Driving Increased Use of DLCs Table 1-7 1-31 Digital Loop Carrier Product Positioning NEXT GENERATION DIGITAL LOOP CARRIER MARKET SHARES AND MARKET FORECASTS
Table 2-1 2-1 Applications Supporting Rapid Internet Growth Table 2-2 2-6 DLC Market Driving Forces Table 2-3 2-7 Principal Competitive Factors In Digital Loop Carrier Market Table 2-4 2-8 Competitive Product Positioning For Digital Loop Carrier Markets Table 2-5 2-9 Digital Loop Carrier Market Success Factors Table 2-6 2-10 Digital Loop Carrier Functions Table 2-7 2-11 Next Generation Digital Loop Carrier Market Positioning Table 2-8 2-12 NGDLC Market Demands Table 2-9 2-14 DLC Competitors Figure 2-10 2-17 Worldwide Next Generation Digital Loop Carrier NGDLC Equipment Market Shares, 2002 Table 2-11 2-18 Worldwide Next Generation Digital Loop Carrier Equipment Market Shares, 2002 Figure 2-12 2-19 Worldwide Next Generation Digital Loop Carrier Equipment Market Shares, First Half 2003 Table 2-13 2-20 Worldwide Next Generation Digital Loop Carrier NGDLC Market Shares, First Half 2003 Figure 2-14 2-34 Worldwide Next Generation Digital Loop Carrier Equipment Market Forecasts, Dollars, 2003-2008 Table 2-15 2-35 Worldwide Digital Loop Carrier (NGDLC) Market Shipment Forecasts, Dollars, 2003-2008 Figure 2-16 2-39 Worldwide Next Generation Digital Loop Carrier DLC Fiber Market Forecasts, Lines, 2003-2008 Figure 2-17 2-40 Worldwide Next Generation Digital Loop Carrier DLC Copper Market Forecasts, Lines, 2003-2008 Table 2-18 2-41 Worldwide Digital Loop Carrier Market Forecasts, Shipments, Lines, 2003-2008 Figure 2-19 2-42 Worldwide Next Generation Digital Loop Carrier Large POTs Equipment Forecasts, Dollars, 2003-2008 Figure 2-20 2-43 Worldwide Next Generation Digital Loop Carrier Large POTs Equipment Market Forecasts, Lines, 2003-2008
Table 2-67 2-130 Major Factors Driving Local Access Value Added Services Markets Table 2-68 2-131 Key Strategies Of The Internet Digital Loop Carrier Providers Table 2-69 2-134 Packet System Market Impact
NEXT GENERATION DIGITAL LOOP CARRIER PRODUCT DESCRIPTIONS Table 3-1 3-6 Alcatel DLC Benefits Table 3-2 3-9 Alcatel DLC Applications Features Table 3-3 3-12 Alcatel 7201 Litespan Array Of Applications Table 3-4 3-15 Alcatel Litespan Key Features And Benefits Table 3-5 3-20 Alcatel 7201 Litespan NGN Access Platform Features and Benefits Table 3-6 3-22 Alcatel 7201 Litespan NGN Access Platform Connections Table 3-7 3-25 Alcatel 7201 Litespan Distributed Architecture Functions Table 3-8 3-26 Alcatel 7201 Litespan Distributed Architecture Applications Table 3-9 3-30 Alcatel 7201 Litespan Distributed Applications Table 3-10 3-36 Advanced Fiber Communications EMAXplus Flexibility Enables On-Demand Fulfillment For The Revenue Services Table 3-11 3-38 AccessMAX Group Of Products Table 3-12 3-44 Lucent Broadband Access Solutions Table 3-13 3-45 Lucent Broadband Digital Loop Carrier Positioning Table 3-14 3-47 Lucent AnyMedia Access System Family of Products Table 3-15 3-49 Lucent Technologies AnyMedia Benefits Table 3-16 3-51 Lucent High-Runner Service Set Table 3-17 3-52 AnyMedia Access System Capacity Table 3-18 3-57 Lucent AnyMedia Access System Building Blocks Table 3-19 3-58 Lucent Application Pack Services Table 3-20 3-62 Nortel Networks Switch Remotes Table 3-21 3-64
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