Did Ciena win Nortel’s optical unit?

Carrier network specialist Ciena emerged as the winner of Nortel’s optical networking and carrier Ethernet assets, following an extended auction that took place over the weekend.

Monday afternoon Ciena said it paid $530m in cash and $239m in Senior Convertible notes due 2017 for a total consideration of $769m for the assets.

Ciena is also expected to make employment offers to at least 2,000 Nortel employees to become part of Ciena’s global team of network specialists.

In a statement on Monday morning, rival bidder Nokia Siemens Networks (NSN) confirmed that did not submit the highest bid for Nortel’s optical networking and carrier Ethernet assets in the auction that began Friday morning and extended through the weekend.

“Nokia Siemens Networks believes that its final offer represented fair value for the assets, and further bidding could not be financially justified,” the company said.

The assets in question were owned by Nortel’s Metro Ethernet Networks (MEN) business and include the Canadian firm’s long-haul optical transport portfolio, metro optical Ethernet switching and transport solutions, Ethernet transport, aggregation and switching technology, multiservice SONET/SDH product families, and network management software products.

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Nortel delays optical network and Carrier Ethernet auction

Canadian vendor Nortel has delayed the next stage of its fire sale until later this week, giving potential bidders for its Optical Networking and Carrier Ethernet businesses and extra few days to get bids together.

The auction was previously scheduled to take place last week, but will now take place on Tuesday of this week.

This development suggests that carrier network specialist Ciena, which forged an agreement with Nortel to acquire the exiting firm’s optical networking and carrier Ethernet assets in October, has some competition.

The assets are owned by Nortel’s Metro Ethernet Networks (MEN) business and include the firm’s long-haul optical transport portfolio, metro optical Ethernet switching and transport solutions, Ethernet transport, aggregation and switching technology, multiservice SONET/SDH product families, and network management software products.

Ciena set to pick up Nortel’s optical and carrier Ethernet business

Carrier network specialist Ciena has forged an agreement with Nortel to acquire the exiting Canadian firm’s optical networking and carrier Ethernet assets for $390m in cash and ten million shares of Ciena common stock estimated to be worth a further $131m.

The assets are owned by Nortel’s Metro Ethernet Networks (MEN) business and include the firm’s long-haul optical transport portfolio, metro optical Ethernet switching and transport solutions, Ethernet transport, aggregation and switching technology, multiservice SONET/SDH product families, and network management software products.

Gary Smith, Ciena’s CEO and president, said he believes the transaction will position the firm for faster growth through greater geographic reach and a deeper portfolio of solutions.

The company intends to make employment offers to at least 2,000 Nortel employees under the deal, with Ciena expecting to incur integration-related costs of approximately $180m.

As we have seen with Nortel’s other asset sales, this proposed transaction is also subject to a competitive bidding process and requires the approval of the United States Bankruptcy Court for the District of Delaware and the Ontario Superior Court of Justice. Ciena expects hearings before these courts to be held within the next several weeks.

Earlier this month Nortel said it is planning to sell off its GSM and GSM-R (GSM for railways) assets via an open auction process. The business transaction will also include GSM related patents and non-exclusive licenses to other relevant patents.

Subject to approval of the bidding procedures filed with the US and Canadian courts, qualified bidders will be required to submit offers for the assets by November 5, 2009. The auction itself is scheduled for November 9.

The evolution of Carrier Ethernet

Carrier Ethernet is no longer the new kid on the block. Its many virtues, from flexibility and scalability to lower operational costs and greater simplicity and interoperability, are now well understood and widely attractive to carriers and, more importantly, their customers.

A number of business trends have emerged that are changing the traditional nature of telecom products and services and driving new demand curves. For example, the maturation of virtualisation and cloud-based applications is driving significant changes in user behaviour and network resource utilisation.  Since virtualisation is a demand trend that is shifting IT resources from the Local Area Network (LAN) into an operator or application service provider’s network, it stresses the network to adapt and scale quickly while ensuring quality and performance, particularly for those mission critical applications for which the enterprise user is now trusting someone else to support.  Service providers are left with no choice but to evolve their business model to one that more effectively manages the demand for new services and network traffic distribution as well as bandwidth growth requirements, all of which can be addressed with Carrier Ethernet technology.

The MEF groundwork

While initially attractive due to its cost, Carrier Ethernet’s adoption is now primarily driven by the shift in emphasis to top-line revenue growth through the creation and deployment of new Ethernet services with greater velocity, automation and customisation.

For this to happen effectively, operators should build on the foundations laid out by the Metro Ethernet Forum (MEF) and work with the industry to focus on a comprehensive and sophisticated form of Carrier Ethernet that addresses operational complexity.  If done successfully, operators will have open to them new levels of speed, differentiation, operational scalability and reliability in delivering revenue generating Ethernet business services.

The MEF laid the foundations for Carrier Ethernet by establishing five areas which distinguished it from LAN Ethernet. These are: Standardised Services, Scalability, Reliability, Quality of Service (QoS) and Service Management.  These attributes provide carrier-class capabilities to transform traditional LAN Ethernet into a technology suitable for deployment in service provider Metro and Wide Area Networks (MANs and WANs). Providers can use Carrier Ethernet-based business services to deliver these capabilities while minimising the cost of delivery, compared with other technologies.

The MEF also defined three key service types associated with Carrier Ethernet:  E-Line services to provide a secure, point-to-point connection between two customer locations, E-LAN services to enable an extension of a business LAN to multiple locations and the emerging E-Tree service type supports multicast services, such as business IP television (IPTV).

With the breadth and flexibility of the key Ethernet business service types, service providers have the means to customise a wide range of value-added Ethernet applications and services that can drive top-line growth and profitability.

Building on the standards

The Carrier Ethernet story is today moving on.  New capabilities and features are being deployed that go further than the minimum requirements established by MEF, ushering in the age of what we at Ciena define as True Carrier Ethernet.

In a nutshell, True Carrier Ethernet goes beyond standardised service definitions into technology and operational advancement that improves an operator’s ability to deploy, provision and manage cost effective Ethernet based solutions.  True Carrier Ethernet brings about additional benefits in each of the core five Carrier Ethernet qualifiers set out by the MEF.

For Standardised Services, True Carrier Ethernet enables operators to optimise bandwidth, network paths, and reliability alternatives without sacrificing service quality or selection.  This is enabled by supporting all MEF services across any topology and different tunnel encapsulation formats. True Carrier Ethernet supports 802.1ad Provider Bridging and can deliver and transport MEF services using MPLS/ H-VPLS and PBB-TE technologies, along with SDH-like 50ms restoration capabilities.  By supporting these important technologies, True Carrier Ethernet enables carriers to leverage existing network investments and select, mix, and match the wide-area services that best meet their needs today and in the future.

Network and topology limits are easily overcome through True Carrier Ethernet, addressing the scalability requirements of the MEF standards and building on them and including features such as ‘discovery’ and ‘automated service activation’. Bandwidth can scale to very large capacity, but in very granular steps. It is still in its early days, but virtual switching technology will play a big part in this and will enable flexibility and interoperability with existing and emerging technologies.

True Carrier Ethernet improves reliability for the service. By using a multi-tiered tunnel approach, operators can add, service, and upgrade sites without having to touch all layers of network elements. Only the lowest tier of PBB-TE tunnels must be reconfigured. This capability simplifies the provisioning and ongoing maintenance effort, reducing operations costs while still easing the transition for those trained in SDH management environments.

The fourth MEF standard, QoS, can be built upon further by delivering unprecedented levels of service classification, enabling rich service stratification for broader customer appeal and higher revenues. This can be achieved through service aggregation switches that allow for up to 64 service class levels.  Additionally, QoS can be improved by segmenting bandwidth using hierarchical QoS enforcement at each level: service category, customer, department or user, and application.

Finally, there is service management. True Carrier Ethernet dramatically improves the time to discover network elements and resources, and to provision services and tunnels. This ability enables rapid and accurate provisioning of flexible services. Service provisioning has been simplified through the use of provisioning wizards. For instance, an operator can select two endpoints for a point-to-point service and run the provisioning wizard to set service-specific fields, automatically creating the service and configuring any intermediate elements. Service attributes, such as QoS parameters-committed information rate, excess information rate and burst parameters-can be configured and later changed automatically through the use of service templates defining those parameters.

With True Carrier Ethernet advances delivering a wide range of capabilities and features that enhance the key Ethernet business service attributes, service providers can realise new levels of speed, agility, and performance in the deployment of revenue-generating services.  Ethernet has already proven itself as one of the most successful networking technologies ever in the LAN space and it has now proved that it can mature into a true carrier proposition.

Vinay Rathore is senior marketing director at network specialist Ciena

NSN, Juniper team up to tackle Carrier Ethernet

Infrastructure vendor Nokia Siemens Networks has teamed up with security and network infrastructure firm Juniper Networks to bolster their offerings in the Carrier Ethernet space.

Under the agreement, the two companies will form a joint venture to address the Carrier Ethernet market. Headquartered in the Netherlands, the venture extends the previously announced partnership designed to deliver a fully interoperable Carrier Ethernet platform for mobile backhaul, business services and residential broadband networks.

The deal includes Juniper’s MX Series Ethernet Services Routers, NSN’s A-series Carrier Ethernet Switches as well as the Finnish firm’s network management system, which NSN claims can reduce OPEX on network administration by as much as 80 per cent.

The new offering should be available to carriers by the fourth quarter of 2009, the companies said.

Mobile backhaul is seen by some as a safe growth market due to the explosion of mobile data usage, which has shifted bottlenecks from the radio interface upstream to the backhaul network. Industry analyst Informa Telecoms & Media recently put the total number of mobile broadband subscriptions at 178.2 million at the end of 2008. This represents extraordinary growth given that Verizon, the largest operator in terms of mobile broadband subscriber numbers (24.245 million), only registered its first such subscribers at the end of 2004.

Statistics released by Informa found that revenues generated by non-voice services reached $188.7bn in 2008, increasing 24 per cent year on year in 2008 and delivering around 15 per cent of all revenues generated by mobile operators worldwide.

And while the majority of the non-voice revenues are still SMS-based, at the end of 2008, $75.1bn, or 40 per cent of this revenue stream came from non-SMS services, bolstered by the deployment of technologies such as HSPA and the growing demand for data-optimised devices such the Apple iPhone.