VoIP

Emerging economies create emerging vendors

Emerging economies’ telecom deals may be creating a new wave of key players, absent some of the usual names. The recent action in China and India show that where an emerging economy invests in telecom infrastructure, the deals are weighted toward access, metro and fiber, and less to the high-flying switching/routing. Package bids that involve a range of products are also more common. This favors players like Alcatel-Lucent, whose broad portfolio of access products and metro solutions got it attention in India, but also price-leader players like Huawei and ZTE. We believe it is likely that there will be pressure put on Cisco, Juniper, Tellabs, Ciena and other more narrowly focused players to partner or even merge to counter the trend.

Carrier Ethernet Wins TCO Comparison

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%.

NEC buys NetCracker for OSS and SDP presence

NEC is buying OSS firm NetCracker, a move we think sends the clearest signal so far on the importance of operations software in the telecom space. NetCracker is known for a strong service delivery platform (SDP) software position, a class of operations and service feature strategies that focus on hosting features and operations elements on specialized platforms.

We believe that telco equipment vendors will generally beef up their OSS positions, but in particular will be beefing up their SDP positions, as consumer services and partnerships with higher-layer players change the nature of service provider revenue targets and infrastructure priorities.

NEC sees this as an entrée into the telco space, and they’re right. The price of playing in major deals in the future is going to include the ability to supply integrated operations solutions. If they’re your own, you have differentiation. If they’re someone else’s, you’re heading down the road to plumbing.

AT&T U-verse to Trial 2 High-Def Streams

AT&T is about to begin a trial roll-out of a U-verse service that could deliver two HD streams at once, something that hasn’t worked up to now. There are several ways in which AT&T is looking at this, one through increasingly aggressive compression and the other through upspeeding the loop. It is possible both will be tried. There is no indication of when the capability will be fully rolled out, but AT&T appears committed to it. They have to be; this would be a crippling problem for U-verse if it continued much into 2009. We believe AT&T has major problems with its TV strategy, this change notwithstanding, and that they will eventually be forced to move to another approach.

Telcos look at open source

Telcos are apparently working harder to make their APIs suitable for a broader range of web developers, providing more Web 2.0-like or “RESTfull” interfaces (an acronym for the normal interaction between web clients and servers). We believe that the move is positive in that it shows the operators are aware they can’t make their developer programs work with complex event-based APIs. But we also believe that simple web interfaces are only suitable for the limited set of services that can be projected from a telco API direct to an end user. While we’re clearly biased, we believe this is a validation our open source ExperiaSphere (www.experiasphere.wikispaces.com) approach.

Microblogging: Trouble for network bandwidth?

Twitter, the “What are you doing” less-than-texting concept, is gaining a lot of buzz, users and funding. Monetizing any social network has proved difficult, and Twitter’s simple approach makes it harder than usual to see how ads might work there, but it still raises a troubling question for networks. Is the real service of the future more signaling than bandwidth? Clearly you can’t be twittering video stuff to each other; and few people have the time for an activity that must occur regularly and also consumes a lot of capacity.

If casual social microblogging is the prototype of future services, then network bandwidth and bandwidth production could be in deep trouble. We believe that the telco side of the market needs to be thinking about how to make casual bit-intensive activities as attractive as short text messages and blogs, or face some unpleasant consequences.

Fixed mobile convergence makes global progress

T-Mobile is launching its broadband voice @Home service throughout the US, which prepares them for an agressive FMC position. French telecom carriers are also expected to push harder on FMC and wireline broadband expansion as the consolidation in the market finally draws to a close, but that we believe is mirroring a worldwide trend.

Consolidation hasn’t been holding other projects back, it’s simply been a safer early response to declining revenue per bit. We believe that operators worldwide are preparing for a “transformation test” around FMC, broadband services, partnerships with Internet companies and developers, and other new areas. They’ll fund what works and cease funding what does not, and this could result in some pockets of spending and reductions as everyone takes the measure of their market. We think the situation will be more predictable in 2009 than in 2010 through 2012, when only some successful revenue initiatives will drive spending growth in service provider infrastructure.

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.

Nortel’s Verizon PBT contract sheds light on Ethernet market

Nortel has announced a PBB win at Verizon, the same provider who reportedly said it would not be using PBT. SInce PBT is officially PBB-TE and is a simple upgrade from PBB, we believe the sequence of events here shows the overall lack of media sanity on key technology issues.

First, Verizon’s selection of VPLS over PBT, as reported, was a core network decision not metro, where most of Verizon’s dollars are spent. Second, the “decision” had never been in doubt, as we reported when it was first announced, since Verizon’s core network isn’t even a candidate for Ethernet deployment.

In any event, there is no problem in the Carrier Ethernet market, and IP players may be looking wistfully at the opportunity there before long. Metro buildout is clearly on a faster pace worldwide than core build-out for revenue reasons.

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.