Fujitsu as Metro 100G Barometer in US

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The arrangement that US-based Fujitsu Network Communications (FNC) has with Fujitsu Limited is extremely unique in the optical industry given the extraordinary amount of independence provided by the latter to the former – especially unusual for a Japanese corporation. Our understanding is that while FNC can obviously take advantage of technology development done by the firm as a whole, it has a lot of flexibility in directing its own R&D and marketing efforts targeted to the States (in particular, the three largest incumbent service providers) in any way it deems fit. As long as the required payoffs to the parent are adequate, it is not nearly as burdened as its competitors with having to prematurely design (which can result in higher cost and lower performance gear) or with feeling compelled to hype new solutions that are not ready for prime time in terms of the customers’ requirements. (Consequently, FNC’s product line more accurately reflects the current state of US public metro optical networks than any other player in the space.)

For metro 100G at Verizon, there is an exceptional amount of rhetoric about it taking off in the near term. The typical response is that FNC has not released a device directly targeted for this application, and both Cisco Systems and Ciena are fighting it out to get the business from the carrier. There is also the contention, especially in the case of this service provider, that it has been deploying this data rate in the long haul for several years now, and the cost structure is there to roll it out further into the network.

However, deployment of metro 100G at Verizon may be more than just a short push-out indicated in a recent Finisar earnings call. (It is interesting that another components company told us that it was just an off-the-cuff remark by Finisar’s CEO.) We believe that deployment by Verizon at the higher data rate in the metro will be a slow process. At the service provider, it will only be driven by a relatively small number of 100-gig client interfaces, which by the way, is not growing that rapidly.

Metro 100G at Verizon will not be deployed as a result of muxponding functions because the carrier does not have enough additional traffic coming online to justify the cost of ten 10-gig wavelengths between any two points. So, a lot of discussion by various vendors with investment analysts has been somewhat based on a mirage. Yet, for anyone who had been following FNC’s messaging in not putting a heavy emphasis on metro 100G and/or had read our blog article this past January, the whole matter may have been kept in better perspective.

We will still be somewhat shocked if FNC, which has been a loyal and reliable supplier for a good number of years, does not ultimately get a piece of Verizon’s metro 100G purchases. It is probably a safe bet that the company can afford to wait to see how everything shakes out, and strive to deliver a superior product set to be used in the public network than what is being offered by either Ciena or Cisco.

[written by Mark Lutkowitz]