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Hooking up the world is a tough business

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Moving vast amounts of data in the blink of an eye has become a big, highly complicated business. It is also an industry where the competition is fierce, the options are complex, and the actual technology is truly understood by a limited group of highly motivated experts who deal with more acronyms than a government agency. Like making sausage and laws, the process of transporting data globally is not a pretty sight.

Many of the communications service providers gathered this week in San Francisco for the annual Optical Fiber Communication Conference (OFC) and the mood was decidedly upbeat. As Jimmy Yu of the Dell’Oro Group put it during one panel session, “What we’re seeing now is the realization of things that everyone has been talking about for the last three years.”

The race is on to keep pipelines for the high speed conversion and transmission of data from clogging up like cars on a one lane road during rush hour as the pressure to exchange information grows at a dizzying pace. So this was a gathering with a great sense of urgency and calls for mutual collaboration. “No one company is going to be able to deliver all of this,” warned Gary Smith of Ciena, one of the major players in optical and network automation, during his keynote address on Tuesday. “And everyone is going to have to play nicely.”

In order to play nicely, it first helps to know what the technology truly means. Many of the OFC conference sessions are technically dense to the point of incoherence. There are only a privileged few who would eagerly welcome two hours of “Fiber Nonlinearity Compensation of an 8-channel WDM PDM-OPSK Signal using Multiple Phase Conjugations.”

But out of the connectivity weeds it is possible to glean a few key insights that show where all of this is headed. First, the rise of long-form video is overshadowing nearly everything else when it comes to traffic on the Internet today. And the company currently driving the bus is Netflix.

The video entertainment giant is now responsible for more than a third of all the U.S. download traffic in the evenings. We have moved from 30 second clips of dancing cats to a full season of “House of Cards.”

Thus the recent “interconnection” agreement between Comcast and Netflix to provide a faster, smoother streaming experience is a significant milestone in the evolution of web-only television, but it also raises the stakes to push even larger amounts of video content into American homes.

Second, the rise of Google Fiber could have a big impact on how all of this plays out. Last month, the company announced that it had invited 33 U.S. cities to negotiate for the installation of its one gigabit ultrafast Internet residential service. This is basically 100 times faster than average broadband speed today. Kansas City, Austin, and Provo are already online.

Keep in mind that Google is not a regulated telco such as Verizon or AT&T which could give them a significant competitive advantage if their project takes off. But the physical installation of this kind of fiber network still takes time. Estimates for the metropolitan areas under consideration call for at least two years before such a network is up and running.

This leads to the final and most important take-away from OFC this week. Service providers such as Comcast, Verizon, etc. do not have a business model that can keep pace with the skyrocketing demand. The companies giving us access to the Internet get a monthly fee whether they chose to upgrade their technology or not, so the return on investment is zero. As David Clark, a senior research scientist at MIT, told conference attendees on Tuesday, “We were doing demos of the Internet in 1985 and then we waited for the capacity to get there.”

In this regard, not a lot has really changed in nearly 30 years. Capacity has always been and will continue to be a big problem, one that even the brightest minds gathered this week in San Francisco are struggling to solve. The good news is that the technology on display this week at OFC may soon bring much needed support to a faster, more efficient Internet.

Clark’s parting words were “The consumer is your friend and it’s your only friend.” In the tough business of hooking up the world, communications service providers right now need all the friends they can get.

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