Uncommon Wisdom

Mar 3 2009   2:22PM GMT

Nortel cut back Carrier Ethernet; focuses on optical

Tom Nolle Tom Nolle Profile: Tom Nolle

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.

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