STRATEGIC OUTLOOK FOR TELECOM INITATIVES/ TECHNOLOGIES

GLGi: Telco Equipment Purchasing

Stephen SutkowskiPresident

Telecom Strategic Visions

© 2007 Gerson Lehrman Group Inc., All Rights Reserved

Council Member Biography

Stephen Sutkowski is the President of Telecom Strategic Visions, a consultant firm. He has working knowledge of business processes (service activation, provisioning, service assurance, and customer care), network functional and performance requirements, evaluation and analysis of suppliers for routing, switching, gateways, active and pasive fiber equipment, and optical networking equipment, and actual deployment. Mr. Sutkowski’s experience includes a practical working knowledge of wireless networks for broadband expansion, methodologies, and backhaul technologies. Previously, he has served as a Senior Manager for Verizon and Director for GTE.

© 2007 Gerson Lehrman Group Inc., All Rights Reserved

Topics

Outlook on fiber access and optical core, metro, and long-haul networking initiatives

The further expansion of Ethernet/IP platforms for telecom core and enterprise markets

Migration efforts from circuit switch/TDMA to packet switched environments with progressions for MPLS

3G and 3.5G deployment trends and projected 4G initiatives such as WiMax and LTE

© 2007 Gerson Lehrman Group Inc., All Rights Reserved

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Goals and Objectives• Projected business initiatives for next-

generation broadband and multi-service/ multi-application platforms

• New technology infusion where applicable for these platforms with consideration of maturity and scalability of equipment and components

• Efforts in core, long-haul, metro, and edge network architecture and infrastructure optimization

• Projection for capex and opex trends for next two-three year period for wireline and wireless networks

Scope of Telecom Areas of Interest• Expansions in fiber deployment for the edge/

access network or alternative measures for triple-play deployment.

• Optical core, metro, and long-haul network capacity, density, and optimization.

• Migration from traditional circuit switch/TDMA networks to packet switching with emphasis on MPLS, Ethernet/IP, T-MPLS, PBT, and related technologies.

• Continued 3G and 3.5 G wireless deployments with projected 4G efforts to include LTE, WiMax, CDMA Rev. C, etc. Also projections on wireless network traffic backhaul solutions.

FTTX and Triple-Play Progression

• Verizon continuing FTTH at rate of 3 million lines passed per year (9 million at end of 2007) with 18 million by 2010o Adaptation of GPON started in 2007; projected majority

of new lines passed as GPON in 2008o Progression to intra-city MDUs as either direct fiber

within buildings or VDSL2 deploymento Continued use of Switched Digital Video and video

over RF with IPTV as VoD; expect introduction of IPTV as broadcast mechanism within next couple of years

o Major vendors are Tellabs, Motorola. Alcatel/Lucent, Corning, and ADC

FTTX and Triple-Play Progression (cont’d.)

• AT&T’s U-verse FTTN target projections in state of fluxo Use of Home Zone (a hybrid satellite/high-speed DSL service)

as alternative for triple-play where U-verse not yet penetrated

o Stabilization of IPTV platform achieved in 2007

o Potential for acquisition of satellite provider (EchoStar) within 12 months to gain existing video market and regional penetration

o Use of FTTH in Greenfield areas; GPON also projected in future deployments for these areas

o Major vendors are Alcatel/Lucent, Cisco (Scientific-Atlanta) and Ericsson (for GPON)

FTTX and Triple-Play Progression (cont’d.)

• Asian carriers have seen growth in FTTH by 20% annual basis with 15% projected for 2008. GPON now technology of choice over EPON.

• France Telecom has adapted GPON for FTTH rollout with Spain’s Telefonica and BT following suit at least in Greenfield areas.

• Expectation for growth of 20% for fiber access in India on annual basis with slightly smaller projections for other emerging markets.

• Projected capex for FTTX growth in U.S. at slight increase over next 2-3 year period with peak estimated in 2009/ 2010. Long-term opex savings of fiber over cooper at 50-55%.

Next Generation Optical Networking for Core, Metro, and Long-Haul

• Expansion of Optical Switches in Network Footprinto Replacement of existing electronic switches with optical

gear (cross-connects) to increase switching capacity in high traffic areas

o Potential for replacement of 5 electronic switches with one optical switch

o Existing RFP by Verizon may see potential value between $500 million and $1 billion over 5 year period

o Potential vendors of interest include Ciena, Alcatel/ Lucent, Tellabs, Nortel, and Fujitsu

• AT&T also investigating network optimization for optical switching

Next Generation Optical Networking for Core, Metro, and Long-Haul (cont’d.)

• Continued progression for 40G capacity gains for network upgrades and intercity and long-haul traffic.o Major RBOCs developing scalable 40G platforms with

continued 2-3 year development for inter-city deployment.

o Verizon providing 40G scalability in Europe with ultra-long haul networking using Nortel solution. Provides seamless evolution from 10G to 40G.

• Selected carriers in US and international markets completing 100 Gbps field tests.

• Verizon looking to select vendor for major 100 Gbps optical long-haul transport trial next year.

Integrated Packet Switching on Optical Platforms (Multifunctional Approach)

• Concept also known as “God Box” since it is capable of Sonet, wavelength switching, and connection-oriented device with universal switching fabric

• Verizon has RFP out looking at approaches to include carrier Ethernet technologies, Multiprotocol Label Switching (MPLS), Transport-MPLS, and potentially Provider Backbone Transport (PBT)

• Verizon objective is to include solution as “second supplier” to Tellab’s ROADM deployment

• Potential vendors are Fujitsu, Alcatel/Lucent, or Nortel, among others

Present Optical Network Architecture

Future Optical Network Architecture

Core Nodes

Edge Nodes

End Users

Multiservice Edge Devices for Enterprise

• Another “God Box” concept that goes beyond conventional router/switch capabilities

• Provides interfaces to a series of technologies including IP, Ethernet, Frame Relay, ATM, and voice

• Verizon has existing RFP targeted for Tier 2 markets in Europe where they have multiple nodes for Frame Relay and ATM but less traffic

• Full interface capabilities not expected to be available until 2009 or 2010, but limited platforms are to be deployed in late 2008

• Potential vendors are Alcatel/Lucent, Cisco, Juniper, Siemans, and Nortel

Other Wireline Initiatives of Strategic Interest

• Graceful, long-term migration of Frame Relay and ATM consumers to IP and MPLS. Use of pseudowires to allow users to continue to operate ATM/Frame Relay while moving traffic onto carrier’s MPLS network.

• Launch of Virtual Private LAN Services (VPLS) as Layer 2 service targeting Ethernet customers in 2007 and beyond.

• Use of advanced edge routers with expansive Ethernet port densities and scalabilities, aggregation capabilities, and multi-service and multi-applications under increased consecutive user sessions. Vendors include Juniper, Redback, Cisco, Alcatel/Lucent, and Tellabs.

Strategic Outlook for Wireless Networks

• Continued progression for 3G (CDMA EvDo Rev. A, W-CDMA, etc.) and GSM deployments, with upgrades of CDMA Rev. A in U.S. coming to closure in 2008

• Growth in 3G deployments in emerging marketplaces (e.g., India, Middle East, and Latin America) in some cases concentrating on voice-centric services initially

• Trial and deployment of 4G initiatives to include WiMax with Sprint and LTE (Long Term Evolution) with Verizono Sprint to reexamine WiMax timetable/milestoneso Verizon to run initial LTE tests in 2008

Strategic Outlook for Wireless Networks (cont’d.)

• New outlook on open platforms for new service and application innovations and developmento Google Android platform provides standardized

software development platform for multiple vendors and carriers

o Verizon Wireless introducing option for customers to use wireless devices, software, and applications outside of those in Verizon’s service package

• With CDMA upgrades being completed and 4G initiatives not to be deployed until the future in the U.S., wireless infrastructure capex will be flat (with potential declines) in the next 2-3 years

Wireless Backhaul Capacity Issue

• Traditional approach of using T1/E1 lines over copper (favoring cross-connects) cannot meet future broadband capacity expansions

• Various mechanisms under investigation to include microwave point-to-point, WiMax, Ethernet/IP platforms, fiber-optic networking, and hybrid radio access/leased fiber (such as provided by FiberTower in markets with overlapping carriers)

• Existing cross-connects will be continued for limited period (next 2-3 years) with provisions for other technologies in trial or under development in that period

Summary of Presentation• Wireline will see potential for slight/moderate capex

growth for next 2-3 year period in meeting priority objectives in fiber access and triple/play deployment and optical capacity and optimization

• Wireless will see flat to declining capex with completion of 3G upgrades and investigation into 4G platforms

• Expected growth in mergers/acquisitions of smaller vendors/suppliers by the larger companies in gaining synergies for core and enterprise markets

• Potential price wars between telco and cable industries in providing advanced triple/play services for consumers and increased mobile applications