Networking

Report on IP traffic growth greatly exaggerated?

UBS has released a sector report on telecom that suggests that the slowing IP traffic growth will threaten router vendors. While the firm has long taken a rather bearish stance on the industry, this seems more alarming and less justified than most positions.

We know of no credible reports of slowing IP traffic growth; in fact, the increased deployment of high-speed broadband seems to promise the opposite. However, beneath its questionable main thesis is an essential truth, which is that while IP traffic growth may not be slowing, the IP revenue ramp is definitely slowing. Service providers, like everyone else, invest for profits, and revenue per bit has been declining.

We have seen pitch after pitch from the service providers talking about their strategies for transformation, but we have also heard these same providers tell us that their barrier today is equipment vendors that have not followed up on operators’ published strategies. The trend toward usage pricing and caps, and traffic metering, are all related to the need to curtail costs to match revenue potential. If equipment vendors want to continue to sell gear, they need to step up in the NGN revenue game, not just push boxes.

WiMAX consortium getting serious

WiMAX companies are proposing a patent pool to create a stable and reasonable royalty picture for the technology, hopefully stemming any loss of interest due to perceived risk in patent payments to third parties. Intel, Cisco, Sprint, Clearwire and Alcatel-Lucent are all involved. WiMAX, a new service framework likely dependent on wide acceptance by portable device vendors, poses greater risk than something like 3G, whose market is already established. The move is seen as a way to encourage participation by equipment vendors. This shows that the Clearwire WiMAX consortium formed here earlier is likely serious about trying to make WiMAX work.

Router sales up…an IP economic indicator

Infonetics reports that router sales in the first quarter rose sharply, further validating the notion that the IP infrastructure market is more immune to economic problems than the enterprise. Both Juniper and Cisco gained market share, apparently in part at the expense of Alcatel-Lucent, whose IPTV position had previously been gaining it traction. We have long believed that IPTV would not be the silver bullet for ALU; too few regions meet the very special economic demographic requirements to make the strategy optimal.

Telecom consolidation continues in U.S. and Europe

Verizon is in advanced talks with Alltel, aimed at acquiring the mobile player. The move would make Verizon the largest mobile operator in the U.S. and a more effective competitor to AT&T. It also signals yet again the shift in the mobile market.  Consolidation is not a move that is undertaken in a dynamic and growing market, but rather in one that is already facing commoditization. France Telecom has also announced negotiations to acquire Swedish phone company TeliaSonera, a move that would create the EU’s largest operator. All consolidation moves are aimed at creating economies of scale, and in FT’s case, these are targeted initially at operations costs and core network costs, since access networks are not generally overlapping and don’t generate any real consolidation economies. In the case of Alltel, we believe there will be a net reduction in mobile spending.

Juniper announces IPsphere implementation

Juniper Networks and Net One Systems have announced the CONTENTsphere Field Trial Cookbook, a collaboration between the two companies to generate an implementation of IPsphere’s content distribution field trial, authorized by the body in the plenary meeting last September. A contribution on the Cookbook is being presented this week at the Stockholm IPSF plenary. The move is important because up to now no vendor has announced an implementation of IPsphere, even Juniper, which was the force behind starting the body about three years ago. This may also signal increased interest in the software space by Juniper, which could be positive for the company’s strategic directions. The question now will be what other vendors in the IPSF do, and what the providers do to encourage other implementations. We expect some insight out of the meetings this week in Stockholm.

HP nears EDS acquisition deal

HP is nearing an agreement to acquire EDS, which would make it the second-largest integrator in the world after IBM and a truly formidable challenger to IBM for perhaps the first time. The deal comes as the role of IT is shifting in the market in general, due to the emergence of the SOA-driven IT cycle, and also to a shifting relationship between IT and networking. While the deal highlights competition in the IT space, it also has implications for Cisco, whose software/service initiative is the company’s primary growth strategy. EDS has also had relationships with network vendors and a not-too-successful strategy to integrate networks and services it launched with Level 3.

IBM cloud computing focused on networking control?

Cloud computing may be heading for a major role in the marketing plans of major vendors like Sun, HP, IBM, and Microsoft. Since the Internet is really an information network, it is really as much or more about storage and software as about network routers and other bit-moving gear, and IBM’s recent announcement of cloud computing support shows that the big IT players want to formalize their participation in and control of the server side. We believe that cloud computing activity will also push out into enterprise computing, and that it is a major part of IBM’s strategy to wrestle control of networking away from Cisco and its competitors.

New open source initiative from CIMI Corporation

We have launched an open source project to develop service logic execution environments (SLEEs) and service management execution environments (SMEEs) for NGN services. The initiative is called “ExperiaSphere,” and we are now actively seeking contributors and partners in the process. We’ve established a website wiki (www.experiasphere.wikispaces.com) for this new venture, and we invite our clients and those who read this blog to review the material there from time to time as the concept develops. Some coding is already started for this activity, and we expect to be making media announcements in May.

Comcast to test faster cable speed in Qwest territory

Comcast will be rolling out a DOCSIS 3.0 trial in Minnesota, with the top download speed 50 Mbps (5 Mbps upload). The service will be the first deployment of the faster cable modem standard, and the interest level will be high since DOCSIS 3.0 is the only architecture that can rival FTTH in performance. However, it’s interesting that Comcast is deploying in Qwest’s territory; the operator has only DSL in contrast to its eastern rival Verizon, whose FiOS can also offer 50 Mbps in some areas. We note that DOCSIS 3.0 is still a shared-media technology with less capacity available per user than FTTH can support, and the upload speed for cable is much lower than for FiOS (which now offers 20/20 symmetrical and 30/20 asymmetrical in some areas).

RF over Glass: Cable’s answer to telco FTTH

The cable companies are taking the threat of FiOS seriously and promoting technologies that are more suitable for deep fiber and FTTH in their own plants. The activity is concentrated in what is called “RFoG” or RF over Glass, meaning mechanisms to perform the opto-electrical transformation from optical delivery of multicast RF to the CATV plant that already wires the homes. We are hearing that the idea is not to go with fiber to the home despite reports to the contrary, but rather to take more of a fiber-to-the-curb approach, wiring perhaps a dozen homes at the maximum into a CATV span off an RFoG fiber plant. Verizon has been looking at a similar notion of using a remote and MoCA to run cable into the home to reduce fiber provisioning costs in areas where the ARPU won’t justify true FTTH. We believe that there will be more and more outside plant “wiring” using a combination of fiber and coax, even among the carriers.