Vision of an optical internet

The internet is disruptive technology, so as we go from one world into a new world, there is a period of chaos in between. The telecommunications industry is, therefore, experiencing difficulty as it tries to establish a new business model based on the new rules of the internet economy.

This is how Pascal Debon, president for Europe, Middle East and Africa at Nortel Networks, views the current state of the industry. "People apply the present business model to this new world - which doesn't work," he says. "This is because it has been built around a single application - voice."

He points out that voice has declined to only 35 per cent of traffic, yet it still generates 82 per cent of revenue. Even though the majority of the traffic is data, carriers' businesses are still built on voice services.

"In a few years everything will be 'packet', but carriers are still struggling to see how they make money on data," he says. "As a result, investment money has left the industry, causing an economic slowdown."

Now that voice is declining, carriers have to invent a new model to make money. However, it isn't possible to invoice just data transmission. The value proposition lies with applications, which people will pay to use. "If you cannot enable applications, then it is just a pipe," he says. "This huge industry has to establish a new foundation for profitability by providing and invoicing use of applications."

Nortel believes that an internet economy with applications at its heart requires several new components. The first is a huge electronic highway to the computer servers on which the applications are running. The company believes the only technology available for the next 15 years that can provide enough capacity is optical fibre.

It is building the "optical internet" and its equipment already carries more than 50 per cent of optical internet traffic in Europe, covering 14 of the 19 pan-European optical networks. The company's vision is to eventually provide optical transmission from end-to-end, including optical switching.

Both businesses and consumers will need to access these optical networks. Businesses will connect directly to an optical metropolitan area network, giving them huge capacity to use on the internet. Bringing the light of the fibre to the enterprise will fulfil Nortel's vision to "light up" Europe.

This will bring radical change within corporations, whose systems have been built around the personal computer. The additional capacity provided by optical fibre will allow users to have a simple screen, acting as a "dumb terminal". This will be permanently connected to an external data centre, which runs massive applications. "This model is a lot less expensive and provides much more application performance," says Mr Debon. "The last ten years were all about the personal computer, but the next ten years will be about the network and its storage."

Consumers will access the internet through third-generation networks. Optical fibre, in Nortel's view, will go all the way to the base station, with the last step being wireless. Young people have grown up with mobile telephones and will never come back to a wireline concept. Third-generation networks will, therefore, be key for access to the internet.

Home links

For the rest of us, Mr Debon believes that optical fibre to the home will be available in three to four years, more quickly than projected. "With all the scepticism, it may not be the right time to say that," he admits. "However, when carriers see value propositions from applications, it will encourage them to quickly provide optical fibre to the home."

These new optical networks will need the ability to switch different applications from different users through various routes to provide differing levels of service. The network must be able to recognise the user and the content in order to establish the correct rules for delivering it. This ability to switch content will drive the "intelligent internet".

"Carriers can't invoice data today because they don't have tools to invoice applications to a customer," says Mr Debon. "One of the main functions of the intelligent internet is to be able to establish value propositions per customer that can be invoiced in order to make money."

He believes that the change the industry is experiencing is so radical that it will not be easy, because we are entering a new world that is completely different. It will take time for people to admit that the rules have changed, to understand the new business model, to learn the new rules and to act on them. That is a fundamental problem, not just for the telecommunications industry, but also for bankers, investors, businesses and consumers.

"We are in a difficult time between the two models," he says. "It will take a few years for people to change their behaviour. It is difficult to realise that everything you have learned is gone and you have to go with a new set of rules. It isn't about doing the same thing as last year or improving it. It is fundamentally new, different, revolutionary and disruptive. You have to get millions and millions of people to relate the new concept. Yet change is not fundamentally exciting and people naturally resist, so it will take time."

The internet is new in the same way that steam and electricity were new. "When steam was invented people said that travelling with horses was safer and better and that railways were dangerous and noisy," he says. "Nobody could ever imagine that in a few years the world would be networked with railways. That is where we are now."

The industry slowdown has caused people to forget that the fundamentals of the growth of the internet model is still with us. Mr Debon believes that with a little bit of vision and passion it will come back.

He does not see embracing the internet as like driving a car which is quicker, more powerful and better looking than the previous one. It is actually a new way to travel, involving changing the entire infrastructure and the way we drive.

Mr Debon will be speaking on "Getting in shape for the drought" at a Canada-UK Chamber of Commerce event in London on Monday October 2. It will be held at: London House, Goodenough College, Mecklenburgh Square, London WC1N 2AB. This event, which runs from 18.15-20.00, with reception to follow, is free to members of the Chamber. Guests and non-members are welcome at a charge of £25 per person, subject to availability. RSVP Rita Newing at rsnewing@canada-uk.org or fax on 020 7258 6594