Summary

Entrepreneurs, spurred by perceived opportunities for new networks, developed many of the optical and switching innovations previously discussed. They envisioned that competition would provide opportunities to sell equipment to new carriers. However, in most of Europe and in the United States, competitive network providers underestimated the difficulty of competing with incumbents and the expense of building new infrastructure. Moreover, competitors have been hurt by regulators' failure to uniformly enforce low-priced, timely interconnections to incumbent networks. In addition, new carriers have incurred huge loses and large amounts of debt as a result of the high costs of building out their networks. In the short run, capital investment has dried up for the purchase of new equipment. It's unclear what that impact will be on the continued development of new technologies.

In the short run, incumbent local exchange carriers (ILECs) that have the largest networks are changing their voice switching architecture very slowly. They are conservative and won't adopt a new technology until they see a payback. In particular, they want to make sure their billing, customer care and inventory tracking operation support systems (OSS) built over 25 to 30 years can interoperate with any new switching technologies they install.

Countries in which companies are building new infrastructure are more likely to take advantage of new metropolitan optical technologies—particularly if these technologies, such as passive optical networking, are lower in cost to deploy and maintain. Cellular providers that upgrade to higher speed 2.5G, next generation service, are likely to deploy IP service in their backbone networks. Carriers such as Level 3, Williams, Qwest and Broadwing Inc. that have built new networks since the late 1990s are the ones that, if they have the capital, will continue to deploy packet networks.