Lower prices on cable modem termination system ports are likely in 2008, and this often means that the cable companies are putting pressure on the vendors with advance notice of procurements. The changes in pricing will come with some capability to re-architect the downstream bandwidth to the home, allowing either standard DOCSIS 2.0 rates up to about 15 Mbps or DOCSIS 3.0 rates as high as 100 Mbps. The former is more likely to deploy here in the US. A big push by cable players in 2008 would benefit Cisco significantly and would likely drive cable capex higher, to win the MSOs more Wall Street ire.
AT&T is rumored to be considering a revamp of the BellSouth FTTC strategy, based on Tellabs, in favor of an FTTC/FTTP strategy based on Ericsson. Ericsson had, via its Marconi unit, a history with BellSouth’s fiber plans and there is some sign that the carrier is now breaking its original plan to have a uniform infrastructure in favor of a more regionalized approach. We have noted in the past that BellSouth’s internal review of fiber options prior to the merger had favored a Verizon-like plan, and this may be an indication that AT&T will now consider that for at least that region. We also believe AT&T may consider broader FTTH deployment and also the Verizon linear RF approach to broadcast.
RIM reported doubling of profit and revenue as its Blackberry sales exploded, magnifying the gulf between the handset vendors and the network equipment vendors in the mobile space. The challenge of course is that handsets are a consumer fad and mobile networks are long-lived infrastructure that can’t churn very often. The performance of RIM also suggests, when compared with that of Motorola, that higher-end handsets will likely be gaining strength. That again argues for a disconnect of handsets from mobile service provider offers, something we’ve predicted for some time. The pressure from the handset vendors will increase with the advent of OHA, and it may be that the network operators will yield and open the handset market to avoid having a truly “open” handset based on open-source take over. OHA’s fate may depend on the early discussions on a more open relationship between traditional handsets and the mobile operators.
Charlie Giancarlo, former CDO of Cisco, resigned today. Charlie was the expected successor to John Chambers, but recent political moves within Cisco suggested that succession, if it happened at all, would be long delayed. Giancarlo was a strategist, a thinker, and not a salesman or a showman, and Chambers is clearly both of the latter. Cisco’s reorganization seems to show that there will not be a designated heir to Chambers in the near term
The Federal government agency mandate to run IPv6 by the summer of 2008 is now approaching, and Sprint at least is planning to be ready in case the government actually goes through with what it has mandates, far from a sure thing. IPv6 is a new version of IP that has considerably more address space, enough to address all the devices on the Internet and PSTN with room to spare. The problem is that it requires changes in the network and user equipment to use. It is expected that it will roll out commercially in a gradual way, and that IPv6 may not be really used universally on the Internet for a decade.
There is speculation that a Clearwire/Sprint relationship may still be in the cards. The two companies had forged a WiMAX alliance but it came apart in the fall due, we have heard, to a strategy difference between the two. Sprint and Clearwire are now reportedly more in sync with regards to the goals of WiMAX, which we believe means a more premium offering targeted at portable devices and not (as Sprint reportedly wanted) an alternative to fixed wireless at a price sure to be under pressure. It’s too early to say for sure whether the deal will rekindle, but there is a lot of WiMAX buzz at both Sprint and Clearwire that’s starting to sound more like harmony than competition.
Cisco made an exploratory foray into the new media space at its C-scape conference, with a short discussion of its architecture for social and entertainment portals, EOS. This open-source framework is expected to be available to developers in 2008. There were no real details of Cisco’s plans here, and it is widely believed that the step is so far more exploratory than a commitment to significant resources or efforts.
AT&T has semi-affirmed an open wireless strategy, not going as far as Verizon but clearly going far enough to show that it feels the pressure. The company notes that GSM phones are compatible across networks through a SIM card, which offers some handset portability, but falls short of the complete open-if-certified model Verizon plans. We believe the AT&T comments reflect the reality that the mobile walled garden was breaking down under pressure from regulators, Google saw that and launched Android and OHA, and the operators are now responding, but more to the regulators than to Google. This is important because it likely means the regulatory pace of opening wireless will accelerate in 2008 given relative lack of operator pressure. The comments came as AT&T issued an upbeat forecast for the coming year.
Rumors continue to spin around a new Juniper enterprise Ethernet switch and a competing Cisco product launched, not surprisingly, at about the same time. As we reported last week, financial analysts were predicting that Juniper would launch its Ethernet switch on January 29th in New York at a meeting scheduled for the financial and media communities, and Cisco has traditionally worked to trump competitive announcements by making one of their own just before that date. All of this is aimed at the larger “data center” or enterprise headquarters market, a market that in 2008 may be more challenging than it was in 2007 according to our research.
Motorola’s president, Ed Zander, stepped down and will be succeeded by Greg Brown. The company has been under pressure because of poor stock performance, and it is this that makes the departure of Mr. Zander interesting. There are many companies that Wall Street believes have not met shareholder appreciation goals, including Cisco, and the pressure for the change came as private equity companies were working with some board members and investors to break Motorola up to create several units whose combined performance would better suit shareholder goals. We believe that this kind of pressure will spawn aggressive product moves among other network companies in 2008 to prevent being fragmented.