By Ronald Rosenberg, Globe Staff, 1/19/2000

It's no secret the explosive growth of the Internet has helped create an information highway that carries ever-increasing amounts of traffic.

Now come the cloverleafs, ramps, and automated toll booths that link and modernize the system.

A new generation of technology, based on fiber-optic communications, is being developed to speed and increase the flow of traffic on the Net and to soup up services to users of the information highway.

Known as ''optical networking,'' the hardware and software are being developed by dozens of upstart telecommunications companies. Many of them are in Massachusetts, which has become the epicenter for optical networking.

''These young companies are saying, `How do we not stall the growth of the Internet?' So they are on the bleeding edge of the technology, thinking several years ahead to get a leg up over competitors,'' said Andrew Cray, senior analyst at Aberdeen Group in Boston.

Fiber-optic technology isn't entirely new: Cables containing hair-thin glass strands that use pulses of light, instead of electrical pulses, have increasingly replaced copper wires to form the backbone of the nation's communications network.

But there's a new wave of fiber-optic equipment that transmits huge amounts of data at phenomenal speeds - comparable to sophisticated toll booths and on-off ramps - along with new software services. This new infrastructure promises to make Internet communications faster, cheaper, and better.

Lately, optical networking has taken on a buzz. Take the example of Sycamore Networks Inc. of Chelmsford, best known for its dizzying stock market valuation - $20.5 billion as of yesterday. Sycamore developed a powerful optical switch that allows phone carriers to offer the latest fiber-optic technology to corporate customers quickly and less expensively. The company went public in October at $38 a share and saw its stock surge to 328 in late December. It closed yesterday at 259 15/16, down 8 11/16.

With Sycamore serving as a model, a bevy of other start-ups has sprung up locally. Topping Silicon Valley, home to some of the telecommunications giants, Greater Boston and parts of southern New Hampshire are considered the leading centers for optical networking, followed by Northern California and Texas.

Huddled along Interstate 495 are nearly a dozen optical networking start-ups backed by venture capital, mostly formed in the last 22 months. Many of the leaders of these companies and their employees have come from Bell Laboratories, Lincoln Laboratories, and Cascade Communications Inc. of

Westford, the high-speed switching company that enjoyed a meteoric rise in the 1990s.

Most of the optical start-ups, which have yet to sell products and services commercially, are targeting phone carriers and service providers that in turn sell to businesses.

''When you look at the management and talent running these optical start-ups in Massachusetts, you see their infrastructure expertise in building systems and reliable networks for telephone carriers,'' said David E. Schantz, general partner at Matrix Partners, a local venture firm that has funded several optical companies.

''You don't have this level of experience in Silicon Valley, which is why the pendulum in the next generation of optical networking has swung eastward to New England.''

The new companies are developing products and services that complement Sycamore's.

''Today's infrastructure is built on voice telephone calls, and while it has changed to handle data, optical networking is starting differently - with no choke points. You can have a mind- boggling 10,000 lanes with automated tolls,'' said Desh Deshpande, Sycamore chairman and founder.

To speed adoption of the new technology, Sycamore announced last week that 50 optical networking equipment makers and long-distance carriers will promote universal technical standards, creating a sort of ''optical dial tone.''

Plugging into Sycamore switches are a host of complementary companies including Coriolis Networks, Appian Communications, and Quantum Bridge Communications.

''There is a little bit of the land-rush scramble going on, where entrepreneurs see opportunities [in selling to] long-distance carriers who want to offer corporate customers more capacity for their Internet traffic and new telephone services - all at a lower cost,'' said Robert Castle, founder and president of Coriolis, a 35-person Boxborough company developing optical access equipment.

The thirst for more Net capacity, or ''bandwidth,'' is expected to fuel sales of optical networking equipment and services, from $8.9 billion last year to more than $41 billion by 2003, according to RHK, a market research firm in San Francisco. At the same time, phone carriers that buy the optical equipment and install it in corporations will also provide related services - such as Web hosting, desktop videoconferencing, customized private networks, and a panoply of e-mail possibilities.

''The challenge is to develop the services side that the carriers will depend on for their future, while also keeping up with the speed requirements that optical networking requires,'' said David Tolwinski, president of Tenor Networks Inc. of Acton.

Tenor Networks was formed to provide hardware and customized services. Robert P. Ryan, now vice president of research and development, and Leon K. Woo, the company's chief technology officer, formed the company in October 1998. Tolwinski joined them in January 1999. All three worked at 3Com Corp.'s switching division in Boxborough.

''After the kids went to school, Leon and I put our ideas together on the dining room table of my home,'' recalled Ryan. ''We are technologists and saw a fundamental change in the way networks will be built in the future.''

It wasn't just technology that gave rise to optical networking. The Telecommunications Act of 1996, which effectively ended the Baby Bells' phone monopolies, sparked a flurry of telecommunications start-ups.

''We would not be in business today were it not for the Telecom Act,'' said Mick Scully, founder and president of Appian Communications of Boxborough, which has quickly grown to 43 employees since March.

As with anything that involves Internet communications, the optical networking upstarts say that speed is essential.

''You have to run like hell, set expectations, meet them, and know that you really have less than a year's lead time over your rivals,'' said Anthony Zona, president and chief executive of Quantum Bridge of North Andover.

This story ran on page C01 of the Boston Globe on 1/19/2000.
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