Lumen hit a milestone with its ongoing 400G network upgrade, completing enough routes to launch inter-city wavelength services covering 70 markets. While that means a large portion of its buildout is complete, Lumen SVP of of Core Network Solutions Miriana Martinova told Fierce it will continue expanding the network in 2023 to meet growing demand.
According to Martinova, the initial tranche of 400G wavelength upgrades that has been completed over the last 18 months was designed to provide comprehensive coverage across the U.S., with redundant route options on its own network. But she noted Lumen exceeded its budget goals for 400G in 2022 and thinks it will have an even stronger year in 2023 given it is in active negotiations with a number of enterprise customers. So, she said the operator will grow its inter-city network and push into metro markets where there is growing demand for its services.
The SVP said 400G wavelength services are still in the early phases of adoption, with cloud service providers, wireless carriers, large financial institutions, software-as-a-service companies and wholesale players leading the charge. However, she noted they're now starting to gain traction down market as well in the regional enterprise space, particularly with retail and financial institutions. That’s “not necessarily a trend that we saw a couple of years ago,” she explained.
Among the factors driving uptake of 400G wavelengths is the desire to more easily scale and upgrade capacity versus what is possible with 100G wavelengths and interest in opex savings. On the latter front, Martinova noted four 100G waves would require eight cross-connects, while a single 400G wave would require two. That means a 75% reduction in cross connects which translates to “huge cost benefits for the customers.”
Lumen is playing in an optical transport market for which Dell’Oro recently tipped equipment sales to reach $17 billion in annual revenue by 2027. In its report, Dell’Oro noted deployments of 400 Gbps wavelengths are expected to dominate the majority of the forecast period.
Of course, Lumen isn’t the only one wise to the opportunity. It is squaring off in the market against the likes of Zayo, AT&T, Verizon, Windstream, Crown Castle and Aurelion. Lumen’s internal analysis of multiple third-party wavelength market forecasts shows it currently has around 22% market share in North America. While competitors are likely looking to take a chunk out of that, Martinova said Lumen thinks it can hold its own.
“What really differentiates Lumen…is the fact that we can couple that with managed optical network solutions” which deliver cost savings, she stated. “Customers come to us to buy waves. They come repeatedly to buy more from us and actually they’re coming to us from other competitors because we represent the value both in the quality of the network and in the support capabilities that we continue to provide.”
Beyond allowing Lumen to defend its market share in the wavelength arena, Martinova said the upgrades provide a modern foundation on which the operator can build enhanced security and edge solutions. New CEO Kate Johnson recently pointed to security and edge services as areas where the operator plans to lean in.
Martinova explained the revamped network incorporates software-defined networking and automation capabilities which can be carried up the stack into new products. The upgrades have also enabled Lumen to trot out a new digital ordering experience – its Topology Viewer – which allows customers to quote, design and order the services they need.
The network upgrades aren’t just bolstering Lumen’s wavelength services – the operator has also been building up its ethernet offerings as well with a pivot from 10G to 100G. Early last year, Lumen was only offering 100G ethernet in fewer than 10 markets. Now, that number stands at 42 markets, Martinova said.
While it was already seeing demand from financial, education, healthcare and hyperscale companies, she noted Lumen only accelerated its deployment in the back half of 2022. That means the full impact of the upgrade and the deals it has on the table has yet to flow through to its financial results, she said.