September 14 2007: Heavy Reading reports that tremendous growth is expected in packet optical networking, and for once we think they may be even a bit conservative in terms of volume. Packet optical networking is a broad range of stuff that represents non-SONET transport, and one reason we think the forecasts for the sector are low is that the definition of the sector is too narrow. We believe this space has to envelop all of the optical/Ethernet hybrid technologies as well as things like Resilient Packet Ring. When all of these are considered, the total revenue pie is a considerable multiple of the $1 billion that Heavy Reading forecasts for 2012. Packet optical hybrid devices linked with Metro Ethernet are far and away the hottest area in the equipment space, given that nearly 8 of the 10 gigabits of incremental deployed bandwidth in the next five years will occur in metro networks.Relevant Reading Light Reading
September 14 2007: Apple may join the ranks of spectrum bidders in the upcoming FCC auction according to many reports, but we’re doubtful this would happen. First, having its own 3G network might put Apple into competition with other network operators to whom Apple hopes to sell iPhones. Second, the ROI on wireless networking is considerably lower than that which Apple has come to expect. But on the other side is a growing concern at Apple that players like Google might create a private pond or ecosystem using wireless and use it to promote not only search but also equipment–Google you recall is rumored to be looking at a handset.
September 13 2007: The Yankee Group almost got it right in a call with journalists on what service providers need to do. The analyst says that policy management and not bandwidth is the answer, but while it’s true that policy management is important it’s not that simple. What is true is that creating network capacity without a means of linking the improved capacity and associated improved performance to incremental revenue is bad business. Best-effort is simply made better, and there is no incremental ROI gain. But policy management can’t create a favorable experience in the absence of adequate resources. What has to happen is the creation of premium service levels and the enforcement of premium and standard SLAs through policy management. When that can be done, incremental bandwidth can and must be increased.
September 12 2007: Tellabs has been the target of acquisition rumors for a month or more, but Light Reading is now reporting that the suitors may be less interested since their own stocks have declined. Citing a UBS report, the article below suggests that because the share price of potential buyers like Nortel (the most likely, so we hear) has fallen, the acquisition would be harder to swallow. In addition, Tellabs has its own challenges with margins. OK, we don’t disagree with those points, but the stark fact is still that you have to have a metro product ecosystem to be a major player in the service provider equipment market today. Alcatel-Lucent has one and their competitors do not. Tellabs is perhaps the most complete metro story of the independent players, and the situation that UBS describes isn’t going to get better over time. We think Tellabs is still up for grabs, and that the odds still favor Nortel doing the deed.
September 11 2007: A Korean ISP is planning to launch a kind of “Internet HDTV network”, which would use the country’s ultrafast Internet access to delivery HDTV content. The same concept is said to be under consideration by a US ISP, according to the article referenced here, but we’re pretty doubtful about this. The problem is clear; there aren’t any current US services available with the kind of capacity that Korea offers, except perhaps Verizon FiOS. Obviously Verizon isn’t going to launch an Internet video service competing with its own TV offerings. The main takeaway here isn’t that the Internet will take over for broadcast cable (which it will not), but that it’s clear that HDTV in personalized form can be delivered as VoD over IP. That is most likely what a US ISP would consider, and Internet or IP VoD is probably a key issue for the industry because it could defuse the whole broadcast channel debate were it to take off in volume.