The company's stated aim is to become a leading supplier of optical transport systems for the long-haul sector. Altamar's first product, the Titanium Optical Network System, is due to be available for testing around mid-2002.

Ditech

Ditech Communications has been in business since 1985, and has built a reputation for supplying reliable components to the long-haul market sector. Ditech holds a 15-20% share of the addressable market for echo cancellation systems, valued at approximately $250 million. Ditech is a publicly traded company with no debt, and holds cash reserves of $100 million.

Commenting on the reasoning that lead to the formation of Altamar Networks, Ian Wright said that key was the perceived need for an independent, focused, management team, combined with benefits arising from seeding a new brand name in the market for a product outside of Ditech's core business. A further factor was the presence in the U.S. of a financial services company trading under the name Ditech.

ilotron assets

Altamar gained significant capabilities integral to development of Titanium through the acquisition of intellectual property (excluding that relating to optical packet switching) and tangible assets of failed company ilotron. Around 25 of the engineering and management team of that company also joined Altamar in July 2001. Prime expertise brought in through this deal relates to ultra long haul and optical add-drop multiplexing (OADM) capabilities.

However, Ian Wright pointed out that Altamar does not utilise the ilotron system platform and further has not, due to potential cost penalties, incorporated ilotron's transparent switching functionality. "With this deal, Altamar Networks is primarily leveraging ilotron knowledge and expertise relating to transponder design and production", he said.

Discussing ilotron's difficulties, Mr. Wright said that the main cause was felt to be technology issues relating to transparent switching solutions.

"ilotron originally set out to develop an optical packet switch solution, however, this strategy was subsequently assessed to be unsustainable. The company then began to develop an optical wavelength switch."

"From designing networks based upon this switch it was found that transponders were essential in achieving wavelength conversion and selective wavelength regeneration functions. The resulting transponder components were, coincidentally, very effective in ultra long-haul networks - due to the teams background in submarine network systems design."

"By this stage, the company's funding was exhausted. In the mean time, it was becoming clear that photonic - or transparent - switching was uneconomic due to the extra costs incurred in the line systems. It was at this point that Altamar appeared on the scene."

Link ranges of around 1,000 km are achievable with the long-haul system, or between 2,500 and 3,500 km in ultra long-haul form - these distances are dependent upon numerous factors, including amplifier spacing, fibre type and dispersion map. Ian Wright commented that, assuming amplifier spacing of between 80 and 100 km, these link ranges would generally be attainable.

Configurability and flexibility

Another key feature of Titanium is the non-proprietary nature of the system - enabling interoperability with systems from other vendors and thus installation into existing networks.

Titanium is highly flexible and may be deployed to perform a variety of roles and in a variety of configurations. The system can be installed as a switch, incorporating either standard SONET short-reach interfaces or long-reach and ultra long-reach DWDM interfaces. Interfaces may be selected in a 'mix-and-match' fashion, as required to meet the conditions presented with individual installations.

Titanium may also be deployed without the switching capability as a DWDM transmission system, where it performs the role of a traditional DWDM link. Mr. Wright pointed out however, that it would in fact be more cost effective for a carrier to utilise the system in its integrated form due to the cost of short-reach DWDM interfaces, which will exceed that of adding the switching capability. "The switching functionality enables connectivity from one link to the next internally within the system, without resort to short-reach interfaces."

Deployment of Titanium will be on a case-by-case basis according to the particular needs of each customer - there will not be a 'standard' installation. According to Ian Wright, after the requirements of the customer have been assessed, Altamar's suite of automation tools is used to determine the appropriate network components and configuration.

"At this stage, the optimum design for each link is calculated - one link may demand the use of long-haul transponders, another ultra long-haul transponder components, yet another Raman amplification. In the U.S. we are finding that transponders are usually deployed in the proportion two-thirds long-haul to one-third ultra long-haul. Also determined is where best to site equipment such as switches and OADMs, and where to perform traffic grooming. Of prime concern in this process is cost - the resulting system will be the most cost-effective solution able to meet the requirements of the customer."

Mr. Wright further emphasised that when provisioning a network there are a vast array of variables that must be considered in order to produce the optimum (cheapest) network design - many of which are interdependent. The design problem is intractable without design automation tools, and often yields counter-intuitive results. Two examples are that transparent switching raises network costs, and that sometimes it is cheaper to regenerate than to use ULR links.

Titanium is due for commercial release 'imminently', with availability for testing purposes by the end of the second quarter of 2002. Ian Wright said several carriers have shown an interest in trialling the product but at this time no details can be announced publicly.

A majority of the intellectual property developed by Altamar Networks is held by the company in the form of trade secrets rather than as patents, due to the necessity of revealing sensitive information in patent applications. Switching chips are sourced from Velio Communications with whom Altamar Networks maintains a close relationship.

Differentiators

Altamar cites the key differentiator with Titanium as cost - the system is believed, from work conducted so far, to offer the lowest cost network solution available currently. This cost advantage derives primarily from the integrated nature of the system, combined with a lack of reliance on Raman amplification. Ian Wright stated that Altamar is able to attain link distances of 2,500 km without the need for Raman amplification, although, where necessary, this range is extended using Raman technology. An additional feature that significantly reduces cost for carriers includes the ability to scale switching and grooming of traffic as demand grows.

Altamar has taken the decision with the present Titanium system to stay with electrical switching, rather than move to photonic switching. Mr. Wright explained that cost was again the prime reason.

"Presently, there are inherent factors that make a transparent network more expensive to install than an opaque network. Fundamentally, it is not possible to design point-to-point links in a transparent, all-optical, network - from the transponder-transmitter to the receiver at the far end of the network will be a dynamically variable distance, dependent upon topology and switching activity. Effectively, all links in a transparent network will be ultra long-reach. In addition, it is no longer possible to groom traffic."

Further adding to the costs of a transparent network is the need to install numerous transponders to handle such functions as wavelength conversion and selective regeneration. The latter function is an 'unknown', thus making precise planning of location and number of transponder components in such a network an impossibility, and thus leading to over-provisioning of transponders As mentioned earlier, this is a lesson that ilotron learned.

Added together, these factors mean that transparent networks will be substantially more expensive than the new generation of opaque networks.

Although there is a lack of directly comparable systems on the market presently, there are nonetheless alternative next generation systems against which Altamar will be competing. Whilst these systems do not offer the same degree of capital and operational expenditure reductions as the Titanium solution, they do offer significant savings over conventional systems.

Countering Altamar's emphatic value statement is the disruptive nature of Titanium in terms of network architecture when applied to long-haul networks. But as outlined previously, the system may be deployed in a variety of configurations; for example, purely as a switch, to light a single fibre, or as a replacement for end terminals in a DWDM network, thereby leaving intact the existing amplifier chain. Alternative systems, Altamar believes, will not generally be so flexible or so versatile.

The Altamar solution similarly displays major cost advantages over transparent network solutions, which cannot be installed into existing networks. Mr. Wright explained that a transparent system will require installation of, at a minimum, a switch and the surrounding links, plus switches connected to those links and the links from those switches, and total investment entailed in deploying this equipment will run to hundreds of millions of dollars.

Altamar also holds an unusual position in the optical systems market through parent company Ditech. This link brings the company a certain level of recognition, plus a 'ready-made' history and track record, and additionally removes the need to rely on venture capital companies for funding. Ditech's successful echo-canceller and sub-system products serve to confer on Altamar credibility with the carriers that would otherwise be lacking at this stage in the company's development.

Amongst vendors offering conventional, non-integrated systems, Ciena is viewed as the main competitor. In addition, Corvis is now beginning to promote its own hybrid O-E-O solution similar to that of Altamar, having originally set out to develop an all-optical system.

"Corvis is now heading for the same place in the market as Altamar Networks, having started out from a point far removed with their concept for a radical all-optical system."

Altamar believes that Titanium will bring to carriers substantial cost savings over the conventional systems supplied by vendors such as Ciena and Nortel Networks. The company estimates that the new, aggressive, long distance carriers in the U.S. could realise as much as a ten-fold reduction in capital and operational expenditure through deployment of Titanium in preference to a conventional solution.

Altamar has devoted resources to achieving this goal through development of better performing transponders, which are seen as a highly cost effective route to increasing system range. The company has resisted the use of Raman amplification in its systems per se - described as the 'brute force' approach - wherever practical, due to the high costs associated with this technology. According to Ian Wright, Altamar extends reach in so far as it gives lower cost/bit/sec/km not for the sake of proving that it can be done.

Metro applications

Despite a focus on the long-haul sector, Altamar has been involved in a limited number of projects concerned with metro network design, though engagements to date have not related to 'typical' metro network topologies.

Titanium is suited to certain metro network situations where high capacity, short-range links are needed, without adaptation and aggregation functions. Such situations represent, in terms of system performance, the bottom-end of the range that Titanium is designed to meet, whilst, conversely, representing the top-end for metro systems - neither solution is a perfect fit. Comparing the respective design requirements for long-haul and metro systems, Mr. Wright said that products for the latter market must support any and all possible protocol stacks, making the systems extremely software intensive.

North American focus

Discussing the focus on North American long distance carriers, Mr. Wright said the company aims to first establish a significant presence in this market sector before turning attention to other market sectors and geographic regions. For example, despite expertise in submarine network systems, gained via ex-ilotron staff, Altamar does not plan to enter this market. While engineering expertise was brought in from ilotron, sales and marketing personnel and existing customer relationships were not acquired.

With regard to the European market, Ian Wright proffered the view that, although presently healthier overall than that of the U.S., it may be the case that the downturn has simply not yet hit, and might trail the U.S. by one year. Nevertheless, the global market is important to Altamar.

"Altamar Networks believes that sales of optical sub-systems outside North America are relatively strong. The majority of this business is conducted through OEM agreements. For Altamar, it is anticipated that Europe, China and South America will represent significant opportunities. However, right now with Titanium, North America is the only market that we are addressing."

Summing up the state of the North American market now and over the near term, Mr. Wright commented that all indications are that it will be a very 'interesting' environment during 2002 - with continued volatility generally, and consolidation amongst long distance carriers in particular. The one strength still offered by the North American market is felt to be the high volume of traffic and demand, although currently severely constricted by lack of capital. This last factor does not yet translate to many other geographic markets, for example China - where traffic growth is strong but absolute traffic volume remains comparatively small.

Market size

The addressable market for Altamar's product can be defined as including the long haul and ultra long-haul markets in their entirety. For the U.S. alone, this equates to in the order of $20 billion, according to estimates from market research companies such as RHK. The actual addressable market for Titanium is extremely difficult to quantify presently, as, apart from any other factors, the company has yet to launch and sell its system.

The main issues that must be reconciled with Altamar's plans relate to how capital will be invested, where and on what will it be invested, and by whom. Currently, the major risk derives from the volatile carrier landscape which promises further consolidation and failures over the next one to two years. For the system vendors, success or failure could be simply a matter of selecting and, crucially, winning business with the survivors. This scenario is viewed as presenting both a risk and an opportunity for Altamar.

"Overall, for new players in the market such as Altamar Networks, and especially for companies at our stage of development, change is a positive force now."

Altamar is, overall, confident that it has the product, strategy and financial backing to carry it through the present market downturn. In the longer term, there are no doubts that the company can be successful. As Ian Wright noted, factors such as the advent of the 'information age' will ensure huge growth in traffic and thus demand for products such as Titanium.

"Even today, total investment in communications network equipment, including that for long-haul networks, is massive, irrespective of the downturn in the market. For small companies such as Altamar Networks this represents a huge potential opportunity."