I sat with Avi Domoshevitzki several years ago in a Ramat Hasharon restaurant. We talked about Radnet, the company he founded with Yehuda and Zohar Zisapel, which was sold to Siemens of Germany and Newbridge of Canada, with the company name being changed to Seabridge. The sale agreement committed Domoshevitzki to manage the company for at least two years. “That detail was published in “Globes” after that conversation,” Domoshevitzki says. “Concord general manager Matty Karp noted the date in his calendar. Exactly two years later, in November 1999, he called me and said, ‘Let’s sit down and have a talk,’ and that’s how I came to Concord, mostly because of Matty Karp’s initiative.”
Domoshevitzki managed marketing and sales for two of ECI Telecom (Nasdaq: ECIL)’s three production lines –SDH and DIGILOOP. He worked almost eleven years in ECI. Domoshevitzki, 48, is an electronics engineer by trade and a Haifa Technion graduate with an MBA.
”Globes”: In hard times, like the current situation, is there any point in talking about the future development of communications?
Domoshevitzki: ”The question should be whether the need for communications due to rising share prices on Nasdaq, or vice-versa.”
Please explain.
”I believe that communications is a basic need. Even in the current situation, communications will be a key issue in the coming years. It isn’t a Nasdaq dream; real needs exist. What Nasdaq did in the dream period, and because of the dream, was to gamble on more horses than it should have.”
You are claiming there is a demand.
”The need exists. Broadband, for example. There is no doubt that people will expect to get home broadband. The question is whether it will be provided by existing ILEC or by CLECs. In any case, it is clear that the services will exist. The required core Internet infrastructure for providing it already exists. The name of the game in the coming year will be eliminating access bottlenecks. In my opinion, however, the access will cease being a dumb pipeline. It will become something much more sophisticated, including several communication layers. All those staying with dumb pipelines, such as ADSL, will find themselves competing mostly over price and wind up like poor old Orckit Communications (Nasdaq: ORCT). They’ll have a hard time growing.”
Let’s do something that has never been done, at least in this format. The time is the end of 2005, in exactly five more years. What will be on the 2005 communications technology hit parade?
”In first place I put access and core systems that combine transmission, switching, and application orientation, which is a different method of handling for providing quality service. The early generations of these systems will be called MSPP, while the later generation will be application-oriented switches.”
Are you talking about IP?
”Not just IP. This will be a layer above it. You know what? I take that back. This won’t be in first, but in second place. I have something else for first place.”
Do tell.
”In order to make a great leap forward, it is necessary also to lag behind. The leader finds it difficult to make a significant change. The technology that is currently 20 years behind is optical integration technology.”
How do you achieve progress?
”By bringing planning, miniaturization, and high-quality manufacturing of optical components to the same degree as today’s silicon chips. Today, over half of the cost of manufacturing an optical component, such as a switch, is manual labor. There is a lot of room here for improvement, but it won’t stop there. In my opinion, we will find that while this parade is relevant, technologies will be discovered for constructing modules or optical components that will include their own monitoring systems as a completely integral part, all of the silicon doing the testing. Both will operate at speeds measured in nanoseconds or faster.”
I think you ought to explain yourself.
”Today, an 8 x 8 (eight entrances and eight exits) optical switch is approximately the size of a thin paperback book, while all the electronics is outside. On the other hand, an electronic switch that handles many Gbps is half the size of a button bag, and we haven’t yet begun to take into account technologies that we don’t yet know how to create. The optical components industry will in my opinion top the hit parade for the next five years. It’s no accident that JDS Uniphase (Nasdaq: JDSU) has lost almost none of its value – it is considered the world leader in the optical components field.”
What is in third place?
”In third place are systems that are currently considered very unsexy – NMS management and OSS control and allocation systems.”
What will make them so critical for the Internet?
”The smarter networks become, with the ability to provide services, the harder it will be to manage them, handle malfunctions, and prepare for various future events. It begins with extremely basic things. There is no problem today finding a gigabyte Ethernet technology that will reach the customer, but it takes several months. The delay is not due to a lack of equipment, but the operator’s inability to route the service on his entire network. Today we have both the technology and the cornerstones required for providing practically any service that customers are willing to pay for. The problem is managing it.”
What is in fourth place?
”The new transmission technologies. Most of the world is still in the era of the old TDM switching. Anyone you ask will tell you that the world is changing over to IP. I don’t necessarily believe this will happen, but most prophecies are self-fulfilling, so the world is going towards IP. In the middle, however, over the next 5-10 years, networks must be built that can handle both TDM and IP in optimal fashion.
”The signs are already visible at both extremes. There are companies with pure IP networks. The problem is that they ignore most current network communications. They don’t say they are ignoring it, but in actual fact, they do ignore it, because they don’t handle QoS in general. At the other end, there are SONET systems, which many have dismissed, but whose sales grow from year to year. At the same time, although they are very good systems for telecommunications networks, they are not optimal for IP and data communications. Today all sorts of hybrid systems are springing up, which handle both TDM and IP, with the beginning of a trend towards completely new standards. I put these systems in fourth place.”
What is your last choice?
”In fifth place is a field in which I don’t regard myself as an expert, but which cannot be omitted from the hit parade – the third and maybe also the fourth generation cellular world. These generations are going to change the behavior of the average person. The technology of a rich media, location-based technologies, a changing work culture – all these are derived from construction of the new IP-based networks.”
Let’s get to some sacred cows. Do you have a candidate for the slaughterhouse?
”The first cow for slaughter is the assumption that whoever is able to provide more bandwidth at a lower price will win.”
What systems are you referring to?
”All the DWDM systems (systems enabling many colors to be transmitted over one optical fiber, in contrast to WDM, which allows only one color to be transmitted) in a metropolitan environment and in access. I’m even hinting at some wireless systems. I don’t think what I said now is true for long lines.”
How do you dare to challenge the basic assumption that more and cheaper is better?
”In my opinion, that is a very narrow-minded view of true operating cost. The dumber you make the systems, the higher the surrounding costs will be, and the more it will cost to use them for providing sophisticated services. The test will be the ability to grow. I believe that the attempt to buy bandwidth at a low price falls into the category of ‘saving at all costs’. In the long run, therefore, these systems will disappear from the market.”
Which systems are dumb? DWDM is considered the epitome of technology.
”To make DWDM systems today is hard. When I say dumb, I look at it from a service provider’s viewpoint. He gets a box that he can use to throw a lot of bandwidth at a given customer. To think that this is enough to win is mistaken, because his competitor can also take the same box.”
So what is the trick here?
”To buy simply and quickly service packages tailored to the customer’s requirements, while adapting the network to the level of service that the customer wants.”
Let’s make sure we know what we are talking about: Chromatis’s system, for example, which Lucent bought for billions, Netro’s and Floware Wireless Systems (Nasdaq: FLRE)’s wireless access systems, and ECI Telecom (Nasdaq: ECIL)’s XDM optical system for metropolitan areas. All these systems you classify as dumb, destined to disappear?
”These systems will at some stage disappear or be upgraded to the level of using one architecture, rather than several architectures in the same box. They lack several basic functions that will be necessary in the future.”
Got any other cows?
”Another cow I think is will either be slaughtered or die a natural death is the idea of being ‘always on’, without having to dial. It doesn’t hold water.”
You really surprise me. What could be better than being always on?
”I’ll give you examples from two ends of the web. First, let’s say I’m an Israeli high tech employee living in the US, whose family is in Israel. Ideally, I would want a video camera at in my house and at home in Israel and transmit two Mbps from Israel to the US in real time and have the service all the time. It is clear to any knowledgeable person that if everyone with ADSL at home does this, either every service provider in the world will go bankrupt, because it will cost several times the revenue it produces, or prices will rise accordingly, in which case no one will want ADSL. Another possibility is a concept called service level agreement (SLA). This is an agreement for a minimal bandwidth and QoS. What is being done today is to entice the public into seeing how good bandwidth is, then take it away from them.
”On the other hand, always on presents a great security problem. The computer is always turned on and online; you can always enter your computer. It is out of the question for everyone to buy a system from Check Point (Nasdaq: CHKP). If the service providers don’t come up with an answer for security at the network level, the always on bubble will soon blow up in their faces."
I have a question of great current interest. Last week, a meeting was held at the Government Companies Authority between the Authority heads and the Merrill Lynch investment bank advisors for the privatization of Bezeq. Merrill Lynch examined the global communications market and the situation in Israel and recommended proceeding with the sale of the Bezeq controlling interest, rather than waiting for improvement of the security situation and the global capital market. Do you think that foreign investors will come to acquire the controlling interest in Bezeq in the current situation?
”Yes, but I want to qualify my answer. I think that Bezeq is a company with good technology – really good technology. The problem is that the world has changed from the days of workers committees and the Histadrut and has become competitive. For that reason, I think the investors will regard Bezeq as a good technology asset, provided they overcome the problem of organizational culture and manage to impart the understanding that things must be done globally. There must be strategic cooperation through an exchange of holdings – it can be a wonderful deal for both sides.
Published by Israel's Business Arena on January 25, 2001