Philippe Morin

Nortel Networks today announced its 36^th and 37^th customer wins for the 40-gigabit-per-second optical gear it released in April: US cable TV provider Mediacom Communications and Canadian carrier Telus. The news comes just weeks after analysis firm Ovum declared that the 40G market is finally beginning to enter a “generalized deployment phase,” with 40G revenue growing 48% annually from a base of $178 million last year. Philippe Morin, president of Nortel’s Metro Ethernet Networks group (which includes optical gear) spoke with Telephony’s Ed Gubbins today about the market.

On 40G applications: The biggest part of our 40G business right now is not router-to-router connectivity; it’s 4 by 10. What you’ve seen from Ovum is that in the past -- until Nortel came out with a solution – 40G deployments were predominantly routers to routers. Because our solution is more cost-effective than 4 by 10, we’re now replacing – it’s a bit what we did with 2.5G and 10G in ‘99 and 2000 – we’re now going after the 4 by 10 market. That’s why we’ve got so many wins in such a short time frame. We’ve gone from April to sitting here in December with 37 wins -- that’s a pretty steep ramp. And in a third of these wins, we were not the incumbent. [Note: Nortel was the incumbent at Telus, however, and at another recent 40G win, Alaska Communications Systems.]

On 40G drivers: It’s all about bandwidth growth around the world, driven by our appetite for video. Cable TV providers, for example, are looking at video on demand and high-definition VOD. Every minute, 10 hours of video are uploaded onto YouTube. The long-haul 40G solution we provided Telus with is to help them manage bandwidth growth, predominantly driven by data-center connectivity -- especially in Canada, being a pretty big geography, helping them reach those data centers [is important].

On 40G and carrier spending: [Carriers] need to go to 40G because it’s more cost-effective than continuing with 10G. In a recession, they’re still going to be looking for ways to cost-reduce their solutions, and that’s why they’re jumping up to the 40G. When you can show them there’s a very simple path to 100G by just replacing a circuit pack, in our case, it makes it more compelling to upgrade the network.

On 100G: We’re targeting the end of next year for productizing [100G]. From a market demand point of view, the real trigger initially on 100G will be driven by router-to-router connectivity, once they have that 100G interface.

On the proposed sale of the Metro Ethernet Networks group: The exploration of the divestiture is absolutely continuing. We’re continuing the same level of investment [in the group] in terms of product and sales support.