Carrier Ethernet

Nortel Carrier Ethernet assets still up for grabs

Nortel’s CEO resigned as the company reported another steep loss and the auction of the key business proceeds. At this point, only the Carrier Ethernet business remains on the table, and the losses there matched those of the company overall.

We’ve noted that most of the operators we’ve talked to have been skeptical of the prospects for the sale of Nortel’s Ethernet business, given the fact that its prior successes were linked in part to PBT, which has lost momentum in part because of poor strategy on the part of Nortel.

The hope that Ericsson might buy the unit seems at least partially justified, but the question is whether a buyer as conservative as Ericsson could really gain much traction in the space at this point.

Nortel cut back Carrier Ethernet; focuses on optical

Nortel will be cutting back on its Carrier Ethernet investment and focusing more on optical, according to a leaked memo later largely confirmed by the company. The move is an acknowledgement of the company’s Ethernet woes, which buried its early hopes for the success of its PBT technology.

The problem we found with Nortel’s positioning was that the company was unable to make a strong case for PBT in a unified national network like BT’s, and in many metro networks, there’s not enough traffic engineering need yet to justify it.

But the big problem according to both our research with providers and our TCO modeling was the lack of effective operations tools for PBT networks, which by inference means Carrier Ethernet in general. It appears that TCO would be lower for a hybrid MPLS/Ethernet network or an MPLS-TP network because of better operations tools, but there is not yet sufficient information available to model this conclusion.

Nortel also had a major problem explaining its own approach, according to a number of operators we spoke with. The decision to move away from higher-layer protocols to lower-layer ones will be a difficult one to reconcile with long-term profit goals, though, because optical margins are often thinner.

Nortel’s Ethernet sale: Who will buy?

We may be coming to the point of a Nortel Ethernet sale soon after the first of the year, according to some of our sources. Four companies have been named possible buyers (Cisco, Ericsson, Huawei, and Nokia-Siemens), but we are hearing that the front runner is Huawei and that Cisco is not a serious contender. There are potential issues in a Huawei sale but company executives from both sides have been working to make them less likely to derail a deal. Whoever does the deal, it is likely that it will spur additional activity in the Ethernet space, and a Huawei buy could well set the stage for an eventual takeover of all of Nortel by Huawei

Ericsson develops packet-optical gear for metro surge

Ericsson is fielding a line of packet optical gear designed to address the expected surge in metro networking. The new products will support a T-MPLS control plane, but Ericsson plans to upgrade to the more modern MPLS-TP and is also considering PBT (PBB-TE).

Metro capacity may be driven by a host of factors in 2009 and 2010 and the operators may be more interested than usual in the optical layer. This has implications on the Carrier Ethernet and IP MPLS wars since optical spending tends to encourage operators to deploy some control plane architecture, and that could then pull through either switches or routers.

New Cisco edge router to focus on metro apps in 2009

Cisco has announced a new edge router, the 9000, which is widely expected to be the replacement for its aging but important 7600 series. The new box features a card design that gives it a very high per-card capacity, making it capable of supporting the new 100 Mbps Ethernet standard when it is finalized. The box is most likely to be deployed in an edge-of-core or metro-core application, with the latter application focusing on replacing PBT with MPLS inside a metro network. We believe that Cisco will be going full out in 2009 on the metro applications, as well as on “glamour” plays like its deal with the Yankees for an immersive multimedia experience in the stadium.

ECI takes Carrier Ethernet OSS high road

October 23 2008 regarding carrier Ethernet and management trends.
ECI is reportedly moving into Carrier Ethernet more strongly and taking the OSS high road that we predicted would be needed in our recent TCO study on Ethernet versus MPLS.

The company has special focus on synchronization, essential in wireless backhaul applications for anything other than 4G services because of the use of T-carrier trunking for voice, and also software tools to improve Ethernet management integration with OSS/BSS.

In a separate story, Light Reading reports that Soapstone founder Larry Dennison is starting a company that will focus on virtualization and support for service componentization and assembly, for both Carrier Ethernet and other technologies. We believe this space, which has been critical for years now, is finally getting some attention.

Nokia strategy reflects capex shift

Nokia is launching “Tube,” its newest smartphone today, and is expected to articulate its mobile strategy in greater detail. The company, like others, is addressing what appears to be a capex shift to wireless for 2009, a shift that would increase sales of RF and handsets and reduce that of traditional data equipment, including routers, switches, and optics.

Mobile broadband has less capacity demand than fixed, and while mobile backhaul will be an important application, our research shows it to be shifting more decisively to Carrier Ethernet and also that the total capacity requirements for mobile backhaul are lower than those of enterprise Ethernet services or consumer wireline broadband and video.

Juniper exec changes could indicate software emphasis

Microsoft executive Kevin Johnson, president of the Platforms and Services division that was working for the Yahoo acquisition, is leaving Microsoft to run Juniper Networks. Juniper issued a press release indicating that Johnson will become CEO and Scott Kriens will become the chairman and will still be involved in strategic matters.

We believe this is a good thing. Johnson represents a vision of where Juniper must go, which is beyond being a box vendor or its products will commoditize and its stock stagnate or fall. Kriens understands where Juniper is now, and how near-term modifications can be made to lead to the ultimate direction Johnson represents. Both the goal and the route are equally critical for Juniper, and we hope that the two can be harmonized by Johnson and Kriens cooperation and effective collaboration.

 We have heard that this change has been in the works for some time and was at least in part responsible for the other recent executive changes at Juniper. For Microsoft, which will be reorganizing its Platforms and Services area, the departure of Johnson seems to signal a bitter aftermath of the failed Yahoo deal and an internal conviction that the deal cannot now be done, though some inside Microsoft tell us that’s not necessarily the case.

At Juniper, the move is not completely a surprise. Kriens was one of the few executives to start a tech company and remain CEO through its IPO and operation as a major public corporation. Last year, according to rumors, there was board pressure to make some changes in Juniper and Stephen Elop was brought in (from Adobe). Elop left after a year (ironically, joining Microsoft). It would be significant in our view that Johnson, like the other executives recently joining Juniper have a software background.

We have long said that Juniper and other network equipment vendors needed to be more focused on the software layer of the network to insure they could sustain feature differentiation. The changes at Juniper suggest that there may be a shift to a more software-centric position, and perhaps a more aggressive positioning in the Carrier Ethernet space, but it is clearly too early to say for sure.

Carrier Ethernet/MPLS TCO comparison brings surprises

CIMI Corporation has completed an extensive survey-and-model process on the economics of carrier infrastructure, focusing on the TCO differences between Carrier Ethernet and IP/MPLS. The results of this study will be published in the July issue of our newsletter Netwatcher, and we will also release a separate report in the fall.

The results of the study, which surprised us considerably, were that while Ethernet always generated lower capex costs, it was also unusually vulnerable to issues in service management efficiency, especially in the WAN versus metro. Those issues could swing the TCO in IP’s favor, providing that IP service management was strong. In fact, the effectiveness of service management tools on controlling operations costs and support incidents had more effect on TCO than a swing in capital cost of over 40%.

Vendors showing up for Carrier Ethernet

NXTcomm 08 was an interesting show, something a lot better than some of the disasters that followed the breakup of the SuperComm partnership, but far less than SuperComm in its prime.

<p>We believe this is due not as much to the show as to the industry; infrastructure doesn’t have buzz any more. In the heyday of the older show, the bubble was in bloom and there was a lot of trade press action around it. Today, publication coverage of infrastructure issues is down because the buyers are all big telcos who don’t do things interesting enough to make the press happy. The big news in the show was the substantial vendor presence in Carrier Ethernet.

 <p>While most of the companies that showed products were objectively doing less than half of what the market would require in terms of features, there was enough support to make it clear that despite the PBT announcement by BT, this technology isn’t going away. We believe, in fact, that the major deployments will begin to roll in 2H09 and that most of the opponents of PBT will end up quietly supporting it by then.

<p>We had 10 interviews with vendors and carriers on our ExperiaSphere initiative and we were thus able to exceed our own objectives for the show. Service management issues and their relationship to standards and to network resources are a key part of the Ethernet picture, and also key for IP/MPLS in any form. In fact, a report we are publishing in the July issue of Newatcher, our newsletter, shows that service and operations management issues with both Ethernet and IP/MPLS result in more swing in total cost of ownership than technology issues do.