Market Studies

Next Generation Network
Will the RBOCs be Googled Up?

Publication Date: December 2005

Overview | TOC | TOF

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The Next Generation Network (NGN) – these are magic words to many in the telecommunications business. They invoke an image of a new network that will correct all of the problems of the existing network (s). The nature of the problems to be corrected and the resulting nature of the envisioned new network depend largely on the background, training, and beliefs of the observer. Maybe this is a relativistic view of NGN! These words also invoke images of new opportunities for equipment sales, new service revenue opportunities, and improved operating efficiencies.

A major question to be considered when thinking about the NGN is the impact of the coming changes on the traditional carriers, particularly the RBOCs. We must evaluate the unprecedented changes now taking place in the network as they will impact the RBOCs who have a vast, undepreciated investment in the current, but now obsolete, technologies. They, uniquely of all players in the communications game, will be stressed by the need to continue to earn on their embedded investments, while making major investments to replace their network assets, and while making substantial investments to complete their network structures (e.g., SBC buying AT&T..

This report uses an empirical approach to forecasting the NGN. It first reviews the current market drivers of the network and our forecasts of market impacts that will likely change the directions of major telecommunications companies. It also considers what the major players are now doing or are saying they are going to be doing (how they are investing.) We will consider the direction of major standards bodies in a separate chapter (the author has a great respect for their activities, having been a founder and vice chairman of T1M1 for its formative years) but our emphasis will be on following investments, market influences, and business drivers.

The first section of the report describes how the very nature of the network has been changing since the beginning of this decade and how that change is accelerating. In addition to a change in the nature of the network, its growth pattern is changing. The growth of the network (in terms of traffic carried) has continued through the telecommunications slowdown of the early 2000’s. The overbuilt condition of our backbone infrastructure kept this growth from being translated into accelerating equipment sales. Now we see a new driver – FTTP – that will cause the growth to accelerate even more, and again the nature of the traffic is going to further change.

There are numerous conferences and standards efforts underway projecting what the NGN will be. But as noted before, the outcomes of these efforts will likely depend on the participants and their built-in prejudices rather than on any rationally derived likelihood of the design of the NGN. While some very elegant solutions will be developed to problems generated by trying to visualize the NGN to fit a given set of preconceived notions, it is problematic as to the utility of these solutions.

In addition to the main purpose of the report, i.e., forecasting and describing the Next Generation Network, this report

  • Identifies major technologies and/or services that are driving change toward the NGN, including FTTP, IPTV, R-OADMs, and VoIP.

  • The report includes extensive descriptions of each of these technologies/services as well as market forecasts for each.

  • The report describes the change in the network in terms of traffic carried and type of traffic, and provides extensive forecasts of traffic by type.

  • The current competitive market situation is described and analyzed.

  • The report includes extensive material on the impact of the NGN drivers on the RBOCs, and the increasingly difficult situation surrounding the RBOCs.

  • The new competitors – Google, Yahoo, MSN and others are identified in their threat to the traditional network competitors. The Internet service providers become major network players, because they are the ones that are actually making money on the network!

  • Describes how these new competitors could in fact become major network players in the development of the NGN. CAN the RBOCs BE GOOGLED UP?

Table of Contents

Table of Contents

Table of Figures

The Lightwave Network Series of Reports

Executive Summary


State of the Network

Network Traffic

FTTP Traffic Impact

The Traditional Competitors

The Competitive Landscape – Threats in Every Direction

RBOCs vs. the CLECs (IXCs)

The RBOC Counterattack – Long Distance

RBOC Purchase of IXCs

Cable Companies vs. Satellite Companies

Current Competition Summary

Emerging “Super Competitors” and New Competitors

Network Activities of the Super Competitors




Network Activities Summary

The Non-Traditional Competitors

Market Power of the New Competitors





Comparison of New Competitors vs. Super Competitors

Net Income

Current Assets


The Threat of the New Competitors!

The Problems of the RBOCs

The Next Generation Network

NGN - Architecture

NGN – Access

NGN – Transport


·      Soft switches

·      MSPP

·      Metro DWDM

·      R-OADMs


·      R-OADMs

·      OC-768 and SONET Advances

·      IP

·      “Big Iron”

NGN – Control

New Competitors vs. Super Competitors View of Control

Control Forecast – A Compromise

1.     Direct Control

2.     Common Control and the Intelligent Network

3.     NGN Control

Summary of NGN Forecast

The Technologies of the Next Generation Network

NGN Standards Activities



Comparison of ITU and IEFT NGN Views


FTTP Rationale

The FTTP Architecture

Other Approaches for Access Architecture

Fiber to the “X”

xDSL Versions






FTTP Forecast


IPTV Architecture

Super Hub Office

Video Hub Office

Serving Offices

IPTV Forecast





Overall IPTV Forecast

Network Modernization – R-OADMs

Summary of R-OADM Description

R-OADM Forecast

Assumptions of Model


R-OADM Forecast


VoIP Implementation Example

VoIP Forecast

Telecom Service Market Impact of VoIP


Report Summary

The Marketplace
The Next Generation Network

Table of Figures

Figure 1, The RBOCs in Danger of Being Googled!
Figure 2, Network Traffic 1999-2001
Figure 3, H-S Accesses vs. Dial-Up Penetration
Figure 4, FTTP and Network Traffic Forecasts
Figure 5, Market Matrix
Figure 6, RBOCs vs. CLECs (IXCs)
Figure 7, RBOCs in Long Distance
Figure 8, RBOCs Subsume IXCs and CLECs
Figure 9, RBOCs vs. Cable Companies
Figure 10, Cable Companies vs. Satellite Companies
Figure 11, Current Telecommunications Competition
Figure 12, Summary of Super Competitors' Network Activities
Figure 13, Super Competitors Network Activities
Figure 14, Non-Traditional Competitors
Figure 15, New Competitors becoming Super Competitors
Figure 16, Net Income of Super Vs. New Competitors
Figure 17, Current Assets - Comparison of Super Competitors and New Competitors
Figure 18, Capitalization – New Vs. Super Competitors
Figure 19, RBOCs in Danger of Being Googled!
Figure 20, Next Generation Network
Figure 21, Control Migration to Network Edge
Figure 22, Identified Technologies of the NGN
Figure 23, Differences between ITU and IEFT NGN Views
Figure 24, Five Reasons for ‘Why FTTP Now?’
Figure 25, FTTP Architecture – Central Office Portion
Figure 26, RFP PON – Outside Plant Portion
Figure 27, RFP PON Service Assignments
Figure 28, Fiber to the 'X' Varieties
Figure 29, Chart of Various xDSL Technologies
Figure 30, FTTP Forecast - HPs Cumulative Passed vs. Served
Figure 31, FTTP Forecast - Comparison to H-S Accesses
Figure 32, IPTV Global Architecture
Figure 33, IPTV Access Architecture - xDSL
Figure 34, FTTP Architecture for IPTV
Figure 35, IPTV Hub Office Architecture
Figure 36, IPTV Forecast
Figure 37, R-OADM Concept
Figure 38, R-OADM System Unit Forecast - US
Figure 39, Price Forecast for R-OADMs
Figure 40, R-OADMs Market Forecast – US
Figure 41, OADM vs. R-OADM Market – US
Figure 42, Cable Company (or CLEC) VoIP Network
Figure 43, Forecast for Gross VoIP Market
Figure 44, Forecast of Net and Gross VoIP Service Markets