Metro Area Networks

ECI enters Carrier Ethernet fray

ECI is entering the Carrier Ethernet market, leveraging in part the MPLS tools that the company obtained from Laurel Networks when it acquired that company. This space is a critical one because it is the focus of some fundamental debates—is Ethernet a service framework or a metro architecture, and can it displace some or all of MPLS. We believe that Carrier Ethernet can be a service and metro architecture and can displace an important chunk of the MPLS opportunity, but only if providers understand how to build metro infrastructure from Ethernet and not just offer Ethernet services. ECI seems to be moving in the correct direction, but the details of its products are still too sparse to be sure.

Alcatel-Lucent losses indicate management change?

Alcatel-Lucent posted another loss, warned on the current quarter, and suspended dividend payments, all of which will almost certainly lead to a management shakeup. The company is suffering under a mobile spending slump that has also hurt some of its competitors, and is unlikely to lift for the balance of 2008. Despite the publicized success of its IPTV strategies, it has also been unable to make the revenue shortage up with broadband success, and there is now indication that it’s shifting strategies to a more generalized access and metro strategy that would offer lower-cost deployment. Recent emphasis on DSL and PON are examples of this trend. We believe the company has little chance of pulling out of the current slump in 2008 even with a management change, and that some major restructuring and cost-cutting will be forthcoming

Net neutrality at heart of Internet capacity issue

The study commissioned by the Internet Innovation Alliance that showed the Internet running out of capacity by the next decade is coming under criticism as favoring the telco perspective. We believe that the study’s conclusions on Internet capacity shortfall are likely inaccurate since they do not take into account the metro nature of most content traffic and the impact of CDNs. However, we do believe that the Internet is threatened by an imbalance of demand and supply created by the over-the-top players and the all-you-can-eat pricing model. The issue is at the heart of the net neutrality debate, but public policy to prevent access and Internet providers from earning a fair ROI would simply stifle broadband deployment. It is clear that work is needed to develop a useful balance of interest here.

Tellabs still up for grabs

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.

Light Reading