Service Providers Get Appy

BALTIMORE, Md. -- The seemingly endless plummet of the stock market and a slowing global economy lurked behind every booth here at the IPSCon tradeshow. But Internet service providers and global telecom carriers alike stood tall when faced with questions about the deterioration of economics in their industry.

In fact, several service providers pointed to the same themes driving their optimism: Growth in new data applications will save their butts -- and make up in volume for the falling prices of both voice and data traffic on their networks.

Leaders at several service providers pointed to the history of data services, in which temporary bandwidth gluts were almost always used up by advancing applications.

"In the 1980s we were told that we've never be able to fill up our first private transatlantic cable," says Alan Coe, a senior regional vice president with Cable & Wireless (NYSE: CWP). "We filled it up. As prices decline, the applications change and people always find an application to fill it up."

In fact, the hope is concentrated on two broadband applications: enterprise data storage services and popular Internet-based consumer applications like Napster. The hope that these emerging broadband applications will continue to drive bandwidth demand was a common theme at the show, which brings together a collection of Internet service providers (ISPs), telecom carriers, and software and hardware vendors."Napster hasn't made them any money but it helps make us money," said Lewis Eatherton, Architect of Regional Design Engineering for Excite@Home, during a panel on Ethernet metro services. "I see residential services sucking up bandwidth more than business applications. Storage networks are the business applications I can think of that will really consume bandwidth."

In fact, one particpant of the same panel noted that his company's business model was largely predicated on the use of IP networks for storage applications. Scott Wipper, services product manager with a GiantLoop Network Inc., said that storage protocol traffic accounts for 60 percent of enterprise traffic -- and GiantLoop believes that such enterprise storage services are moving toward Internet-based networks.

Yet services experts acknowledged that the current cycle of pain will result in botched business models and bankruptcies, insisting that service providers must remain cautious in this environment.

"If your strategy isn't changing, you guessed really well 12 months ago based on information that didn't exist," said John Kane, CEO of Telseon, during the Ethernet discussion. "In this environment, you've got to curtail spending on your plant buildout. Several [service providers] have already disappeared. We see less demand from small service providers and more demand from the larger ones."

Kane noted that he is depending increasingly on larger service providers looking to using his company's services as an outsourced extension into the metro network, and he believes that outsourcing will be a common theme among the larger carriers in 2001.-- R. Scott Raynovich, executive editor, LightReading http://www.lightreading.com