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BT- DT Partnership based on promise of All-IP, New IP & Cloud Services

The changeover from the legacy PSTN to All-IP networks may be at the heart of Deutsche Telekom's (DT's) decision to own 12% of the entity formed by BT's merger with mobile operator EE rather than accept additional cash. A DT executive said the transition would help pave the way for the introduction of new IP-based technologies. 

It might not be immediately obvious why DT would prefer 12% of BT to additional cash. Outside the UK, there is little overlap between the two operators' footprints. While BT is expanding into the TV, mobile and ultra-fast broadband markets in the UK, DT is heavily focused on building a "pan-European" network in central and eastern Europe.

According to Axel Clauberg, Deutsche Telekom's vice president of aggregation, transport, IP and fixed access, all-IP investments are also laying the foundations for the rollout of New IP technologies like SDN and NFV. 

All-IP and New IP could provide a financial rationale for cross-border takeover activity, according to financial analysts. The scenario is that an operator buys a network in a neighboring country, dispenses with that player's service platforms (along with some facilities and employees needed to support them) and bolsters its sales and margins accordingly. This could justify a takeover of BT. (See All-IP DT Could Drive Euro M&A, Say Analysts.)

Besides their all-IP ambitions, though, BT and Deutsche Telekom share an interest in expanding their enterprise-sector businesses through the rollout of cloud services, as do many large telcos (e.g. Verizon and AT&T in the U.S.). It remains to be seen if that effort will be at all sucessful.

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CenturyLink CFO: Sell Data Centers; Still Offer Colocation Capabilities & Managed Services

Century Link's Data Center & Colo Plans:

In yet another sign that there'll be fewer cloud providers with their own mega-data centers, Century Link has proposed to divest more than 18 data centers it acquired in 2011 when it purchased Qwest and then Savvis.   With the Savvis aquisition, Century Link also picked up managed services and cloud services. CenturyLink became a colocation provider through the acquisitions. That move to divest its data centers won't necessarily disrupt the company's colocation business, according to  Chief Financial Officer Stewart Ewing.  

In a recent speech to investors during this week’s Citi 2016 Global Internet, Media & Telecommunications Conference, Ewing described the company's evolving managed services business, saying that data center ownership is not necessary for monetization.

“When we bought Savvis, we indicated that we really would not invest in the data-center business such that we would be able to grow revenues at the same rates that the colocation companies would get … because we just simply didn’t want to make the investment there," Ewing said. “And we bought Savvis more so for the managed services and cloud."

After operating the facilities for a few years, CenturyLink has decided that “we don’t really have to own the data centers so we’re going to run through a process to see what level of interest is out there and our ability to monetize that asset, and if we can’t we’ll keep it," he said.

“But we think that if we can monetize it, we can still sell colocation services from a wholesale perspective with whomever we sell the data centers to, or potentially other colocation providers, as well as … continue to be a customer of that business from the standpoint of managed services cages for customers being in those data centers, as well as the cloud pods that are in some of those data centers," Ewing said.

CenturyLink wants to keep the managed services and cloud services pieces because, when coupled with its network and IT services, it gives the company a differentiator between it and others that aren’t able to “put the whole package together for customers," he said.

“So as more midsize and enterprise customers, and smaller customers start moving their infrastructure from their data center and closets to the cloud, we think that we can facilitate that process for customers, and it will give us, again, a differentiator," Ewing said.

Other telcos are making major decisions regarding their data-center assets. This week, Reuters reported that Verizon Communications has started a process to sell its data-center assets as it focuses on its core business. It reportedly hopes to sell the assets for more than $2.5 billion. In October, Windstream announced the sale of its hosted unit to TierPoint for $575 million.

Kelly Morgan, research director at 451 Research, said there’s been no apparent downside for telcos selling their data-center assets.  “I think that so far there haven’t been a lot of drawbacks," she told Channel Partners. “It all depends on the pricing," she added.

Colocation Market:

The market leader is Equinix, with close to 8.5 percent of global market revenue. Digital Realty is the the second-largest supplier in terms of revenue (5.6 percent) but the largest in terms of operational square feet, with or 9.6 percent of global capacity. 

The market leader is Equinix, with close to 8.5 percent of global market revenue. Digital Realty is the the second-largest supplier in terms of revenue (5.6 percent) but the largest in terms of operational square feet, with or 9.6 percent of global capacity.

“This remains an extremely fragmented industry,” said Kelly Morgan, research director, North American Datacenters. “The majority of colocation facilities are provided by local operators with only one to three facilities each. However, it is becoming harder for them to compete with the more geographically diverse providers that are now entering many local markets. We will see continued consolidation in this sector.”

Consolidation in the data center market has been ongoing. The biggest recent deal was the merger between Interxion and TelecityGroup in Europe. A recent example in the U.S. was the Fortune Data Centers and Dallas Infomart merger last October.

Other consolidation is occurring in the form of telecoms and cable companies buying service providers. Zayo acquired Latisys, and Canada’s Shaw Communications acquired ViaWest. Large communications companies have been acquiring into the data center and cloud market for years. One big past example was Verizon acquiring Terremark.

The market seems split between those focusing on core markets and those focusing on emerging markets. Equinix and Coresite focus specifically on their core markets, while other players like 365 Data Centers and EdgeConneX focus on underserved metros.

“This remains an extremely fragmented industry,” said Kelly Morgan, research director, North American Data centers. “The majority of colocation facilities are provided by local operators with only one to three facilities each. However, it is becoming harder for them to compete with the more geographically diverse providers that are now entering many local markets. We will see continued consolidation in this sector.”

Consolidation in the data center market has been ongoing. The biggest recent deal was the merger between Interxion and TelecityGroup in Europe. A recent example in the U.S. was the Fortune Data Centers and Dallas Infomart merger last October.

Other consolidation is occurring in the form of telecoms and cable companies buying service providers. Zayo acquired Latisys, and Canada’s Shaw Communications acquired ViaWest. Large communications companies have been acquiring into the data center and cloud market for years. One big past example was Verizon acquiring Terremark.

The market seems split between those focusing on core markets and those focusing on emerging markets. Equinix and Coresite focus specifically on their core markets, while other players like 365 Data Centers and EdgeConneX focus on underserved metros.  Other colocation providers include Telx, and SV Colo.

451 Research estimates that less than half of the world’s current. total operational space for colocation (space supporting IT equipment) is in North America: about 43 percent. EMEA and Asia-Pacific compose a large portion of the other half, each accounting for one quarter of the market. However, this is the first quarter that APAC has edged out EMEA as the second-largest market. Latin America is around 4.5 percent of the market.





Verizon CEO on Yahoo, aol, FiOS, 5G, competition from MSOs/CableCos & more!


Famous and then discredited DOTCOM analyst Henry Blodget interviewed Verizon Communications CEO Lowell McAdam on December 24th for Business Insider.  

McAdam explains the company's three-tiered strategy, including how a potential purchase of Yahoo would fit into those plans. He also discusses Verizon's Go90 mobile video service, the future of FiOS and the company's upcoming 5G network.  Excerpts of the interview follow:


Pic of Verizon CEO Lowell McAdam.

Will Verizon buy Yahoo's Internet Assets?

McAdam: Our view is their board hasn't decided what they're going to do. As far as we know, it's not for sale. And I'm pretty sure if it turned out that parts of it or all of it were for sale, we'd look at it just like we look at anything in the digital-media area at this point because it's so hot.

Why did Verizon buy AOL and what would Yahoo do?

McAdam: If we look at our strategy, it is three tiers. Have the best connectivity you can have out there. Own certain platforms that drive a lot of traffic to your network. So our Go90 platform, and AOL's ad platform, fits into that perfectly. And then the third tier is a few areas where you want to get to content, or solution, or application, so that you can show that broad area of the ecosystem.

Healthcare Internet of Things (IoT) is one of those because we think that will drive a lot of traffic to the network. So AOL fit in perfectly with that strategy. And if there were pieces of Yahoo that augmented AOL, perhaps, but again that's way premature. Their board hasn't made any decisions and there've been no discussions and we're not getting ahead of our headlights here. We've got plenty to do.

 Inline image

Blodget: You just launched it, Go90. What is it? Where is it going?

McAdam: It's not just a video platform — it's a social-networking platform based on video. We have the NFL deal. We just cut a deal with the NBA, so we'll have ... many more games than you've seen before. But the interesting thing is we can get many things like Comedy Central that are distributed in certain places, but we've also got some premium content now — AwesomenessTV, which is owned by DreamWorks.

Driving at a very low cost, driving a huge number of views. Some of the episodes will come out at 6 o'clock on Saturday night. By 10 o'clock, they have more views than some of the cable-news stations do in an entire month. The 300-channel bundle is going to continue to break down. And as we do, we'll be able to provide some long form but more geared toward millennials, more short-form content like "Guidance" and other series like that as we go forward.

On FiOS (Verizon's Triple Play Fiber to the Home distribution system:

McAdam: Our biggest challenge with FiOS is building it out. And you know we look for opportunities to learn, and I think Google has done us a favor by showing that the standard licensing agreement with the cities is probably not sustainable because, again, people do not want 300-channel bundles and the economics won't work for that.

I'll give you a factoid on our Custom TV, which is averaging 40 to 60 channels. It became 40% of our volume the minute we launched it. And it doesn't have all the heavy weight of these sports channels that you have to pay for, whether you watch or not, and some of the 13 channels that come along with those. So we've seen that grow.

So skinnying down the bundle helps the profitability, driving more broadband helps the profitability, and, frankly, I think a big breakthrough is going to be when we start doing 5G because that allows you to cover many more homes without having to actually go into the home to provide the services.

What is 5G to Verizon?  

5G is much more designed for video. We call it more use-case defined.

When you think of the thousands of devices in the Internet of Things, when you think that today 70% of our traffic is video and year-over-year our volume has grown 75%, no one sees that slowing down. So bigger capacity, faster response times. Latency is very important when you think about autonomous cars and things like that — 5G will really change the game, and I think will be another spike of growth in the wireless industry.

 When Will Verizon Wireless Customers Get It?

McAdam: I showed my board the service in November, and you don't ever go to a board with something that's not real. We'll be piloting it more broadly. San Francisco, we'll be there. We'll have it in New York. We'll have it in Boston.

I expect to have our Basking Ridge campus up in January, and then rolling it out more commercially later in the year, and then commercially more in 2017 and beyond.

Comment:  Amazing that McAdam says he showed his board a "5G service" in November, when it hasn't even been defined yet by ITU-R or consortiums working on 5G (see previous 5G related blog posts on this site)

Competition from MSOs/CableCos for Verizon?

Blodget:  Brian Roberts of Comcast points out that only a relatively small percentage — maybe 10% — of mobile data is actually consumed outside of home and work. And Brian talked about cable maybe moving into offering mobile phones and connectivity. Do you see much more head-to-head competition over time?

McAdam: I guess it depends on the model. I think the key is the technology will be there to offer an integrated, seamless product. So far, the bundle has been a bottom of the bill discount. I believe mobile-first video will take off inside and outside the home. The question is how long does it take for this to sort of come down? Is the 300-channel bundle going to be around for a decade? I tend to think not. I think it's more three to five years.

Blodget: And how much going forward will owning content matter to that?

McAdam: It's a little bit. It's the same philosophy we would have whether it's distribution or networks or stores. You need to own enough of that to understand what drives the usage, but the key for us is the best network carrying traffic. Platforms that enable those applications to seamlessly go on the network and have just a few of those applications and content is all we're really interested in.


Interview Transcript:

Video: Verizon CEO Lowell McAdam explains why he bought AOL





Google Fiber Proposed for Santa Clara; AT&T bids to build CityLinkLA

1. A representative of Google presented plans for Google Fiber at a City of Santa Clara meeting that Ken Pyle (Viodi View) and I attended on December 16, 2015.  

Ken wrote: "Google appears to be considering the city of Santa Clara (population 120,000) as one big fiber hood. This is significant, as Google’s initial builds were done by popularity (e.g. they would go to those areas where they got enough sign-ups). Their fiber hood strategy was controversial in some circles, as it harkened back to the early cable days of so-called redlining where operators would avoid building in parts of cities that were not economically viable."

 Google is working closely with the Santa Clara’s municipal electric provider, Silicon Valley Power, which is owned by the City of Santa Clara, for equipment space and rights-of-way. That Silicon Valley Power is especially supportive to this project indicates that they see the fiber project being a service to their customers and a complement to their municipal fiber and WiFi network.

Google indicates it will be a 36 month buildout cycle after they start the project. Google would not commit to a start date to either Santa Clara or San Jose, CA. The decision on when to start seems like a business decision, as from a permitting and local regulatory approval standpoint, it appears that Google should be able to start construction as early as Q1 2016.


Read more at:

Pic of Santa Clara Study Session on Google Fiber:



2.  AT&T is one of multiple Internet service providers (ISPs) that have responded to Los Angeles' request for proposal to build CityLinkLA. The five-year plan is aimed at providing access to residents who lack broadband service. A city spokesman says other municipalities have inquired about the project, which will connect residents to educational and other local resources. 

Both wired and satellite telecommunication carriers were eligible to offer bids, according to the request for participants, which closed last month. The solicitation said the city will provide the selected vendor low-cost land and office space, expedite the application process for major project components, and offer access to existing networks, like the city’s SmartPoles, under a long-term lease. 

AT&T submitted a proposal for CityLinkLA, which, if selected, it hopes to tie into its existing collaboration with the city, Kathryn Ijams, a spokeswoman for AT&T in California, wrote in an email.

“AT&T understands the City’s vision for a more connected Los Angeles and is excited about the opportunity to make the CityLinkLA project a success,” Ijams wrote. “We look forward to discussions with the City to determine how AT&T’s investments can help support the City’s goal of delivering advanced communications to where Angelenos live, work, and play indoors and outdoors.”

The city did not give details about how Google Fiber or AT&T’s Gigabit project may fit into the initiative. But in a release, Blumenfield said private sector efforts would complement CityLinkLA.

“Access to high-speed Internet is essential to the City’s future economic competitiveness, and will drive Los Angeles’ entertainment, tech, and entrepreneurial activity,” he said. “We welcome AT&T GigaPower and Google Fiber to Los Angeles, and look forward to continuing to push Los Angeles to become the world’s premier gigabit city.”

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Challenges & Opportunities for the "New Nokia"; Focus on SD-WAN


On December 2nd, Nokia shareholders overwhelmingly approved the acquisition of Alcatel-Lucent . The only remaining full service telecom equipment company in either North America or Europe is being sold to Nokia in a 15.6 billion Euro (€) deal which could make the “new Nokia” a market leader in network equipment and cloud services for telecom wireless AND wire-line networks. The only other full service telecom suppliers left are Huawei and ZTE from China.

In October, Nokia said it would pay € 4 billion to shareholders as the company raised its outlook for the year. Nokia will hold 66.5 percent stake in the new company, Alcatel-Lucent will hold the remaining 33.5 percent stake.

Nokia’s Position & Executive Quotes:

Currently, Nokia is ranked the third largest network equipment manufacturer after Ericsson of Sweden and China's Huawei. Dell 'Oro group says that Huawei has now surpassed Ericsson as the #1 provider of wireless network equipment, according to a recent WSJ article. That desite Huawei being shut out of the U.S. market after a congressional report deemed it a risk to national security. The company has strong sales in Asia and Latin America and is the #1 smart phone vendor in China.

Following the sale of its mobile phone business to Microsoft, Nokia focus on wireless telecommunications infrastructure and mapping services. Last August, the company sold its digital mapping business to German carmakers BMW, Audi and Mercedes for approximately € 2.5 billion.

Rajeev Suri, Nokia’s CEO, said he was delighted by shareholders recognizing the “long-term value creation opportunity” of the deal, which is expected to close during the first quarter of 2016. "I feel quite confident because as we have seen we have broad shareholder support, support from costumers, regulators, government and so on. There's broad support overall for the deal," Suri said.

"Nokia's shareholders have today shown the full extent of their support for our proposed combination with Alcatel-Lucent. By ratifying the transaction in such great numbers, they have endorsed our strongly-held belief that the combined company will be better positioned to compete as a world leader in network technologies over the long-term," said Risto Siilasmaa, Chairman of the Nokia Board of Directors.

Competition for the New Nokia:

In addition to Huawei (which is also a global leader in smart phones), there will surely be competition from the recently announced partnership between Cisco and Ericsson, in which the companies will jointly develop new products for telecom and cloud service providers.

According to Cisco’s press release, “In a world driven by mobility, cloud, and digitization, the networks of the future will require new design principles to ensure they are agile, autonomous, and highly secure. Ericsson and Cisco will meet this challenge together by offering end-to-end leadership across network architectures including 5G, cloud, IP, and the Internet of Things – from devices and sensors to access and core networks to the enterprise IT cloud.”

The press release notes that the partnership would bring in incremental revenue of $1 billion for both companies in 2018. Under the terms of the partnership, Ericsson will also receive patent licensing fees from Cisco.

According to Dell’Oro Group, Huawei, Ericsson, and the combination of Nokia and Alcatel-Lucent are the top three players in the worldwide market for wireless infrastructure equipment. These three are closely ranked, with each having 25% to 30% market share.

Note that Ericsson is a pure play wireless equipment and managed services vendor while both Huawei and Alcatel-Lucent design, develop and sell BOTH wireless and wireline gear. Alcatel-Lucent subsidiary Nuage Networks develops software for cloud resident data centers and specializes in network virtualization/overlay model of software defined networking.

Opportunities Knocking:

We think there are three huge growth areas that telecom companies really haven’t yet penetrated in a big way: cloud computing networks (from customer premises to cloud service providers point of presence), software defined WAN (multiple reference models for SDN, NFV, others known as SD-WAN), and Internet of Things (IoT).  


Gartner indentifies several companies (many are start-ups) as building products for SD-WANs:  

1. Representative Vendors: Cisco, Citrix, CloudGenix, FatPipe Networks, Nuage Networks (a subsidiary of Alcatel-Lucent), Ocedo, Silver Peak, Talari, VeloCloud, Versa Networks, Viptela

2. Other Vendors: InfoVista (Ipanema Technologies), Riverbed, Sonus


In an evocative blog post,  Mushroom Networks CEO wrote:

"SD-WAN gives enterprises additional options when it comes to the configuration of not only their networking devices, but their network itself. With SD-WAN, companies can utilize different types of networks that weren’t available in the past. For example – in traditional networks, it’s possible to send different traffic over different kinds of networks, i.e. to send critical traffic over a dedicated MPLS network, and less important traffic over a less expensive network, like a broadband network or even a wireless LTEnetwork. Some SD-WAN technologies can take this to a new level whereby various algorithmic nodes (configured by software) can be implemented as a function of application type. Think in terms of special treatment of, say VOIP packets, such as optimizing the WAN connectivity for latency, jitter etc, to ensure VOIP quality and reliability. If these types of specialized flow based complex algorithms can be pushed down to the hardware via a software defined environment with ease, the benefits are limitless.

This is not only useful for enterprise branch office setups but also useful for small and medium-sized businesses, who are often challenged to justify the expenditures of an MPLS circuit at all of their locations, and often lack the in-house IT networking talent to manage their network complexity.

SD-WAN gives you the ability to mix and match your WAN network types, and synch your different classes of network traffic with those different classes of network.  It will allow a company’s network to become much more efficient and dynamic, and allow for much more efficient utilization of network resources. And over time, when companies compare the savings on a monthly basis on the network spend versus the one-time (or close to it) spend on new hardware, many companies will find that it’s a no-brainer.

If you have an enterprise which has several locations or more and/or significant network traffic, SDWAN offers enormous potential. And if you’re a medium to large enterprise, the potential savings of SD-WAN are truly impressive, especially over time. But even if you have a very small company, with one or two locations and relatively little traffic, SDN can provide the SLA and QoS targets your applications need, such as VOIP/SIP, over very cost effective broadband connections.

The full scope of applications and impact to be felt from SDN is yet to be determined. But one thing is definite – the next few years are going to be very interesting."


Here's Google's Open Network Summit presentation on their SD-WAN


We think SD-WAN represents a great opportunity for the new Nokia and other telecom/ network equipment vendors like Ciena.


Internet of Things (IoT) Opportunity for Telecom Service Providers & Network Equipment Companies

Telecom Equipment Market & Growth Areas:

Service Provider Telecom Equipment market comprising the Access, Carrier IP Telephony, Microwave, Mobile RAN, Optical, SP Routers, SP WiFi, and Wireless Packet Core markets, are set to improve between 2014 and 2019, according to Dell 'Oro Group. The Service Provider Telecom Equipment market is expected to be $26 B higher than the comparative five-year period (2008-2013). 

We think there are three huge growth areas that telecom companies really haven’t yet penetrated in a big way: cloud computing networks (from customer premises to cloud service providers point of presence), software defined WAN (multiple reference models), and Internet of Things (IoT). While analyzing these are beyond the scope of this article (contact the author if you’re interested in a consulting arrangement to do so), we believe gaining market share in these markets will be critical for the big telecom equipment companies.

This article focuses on IoT opportunities for both wireless and wireline network equipment makers.  Note that IEEE recently held an IoT World Forum on Dec 14-16, 2015 in Milano, Italy.

IoT Market:

According to IDC, the worldwide Internet of Things (IoT) market will grow from $655.8 billion in 2014 to $1.7 trillion in 2020 with a compound annual growth rate (CAGR) of 16.9%.

Devices, connectivity, and IT services will make up the majority of the IoT market in 2020, according to IDC. Together, they are estimated to account for over two-thirds of the worldwide IoT market in 2020, with devices (modules/sensors) alone representing 31.8% of the total. By 2020, IDC expects that IoT purpose-built platforms, application software, and "as a service" offerings will capture a larger percentage of revenue. What role the big telecom gear makers play in IoT is anyone’s guess at this point in time.

Research and Markets forecasts the IoT in manufacturing market size to grow from USD 4.11 Billion in 2015 to USD 13.49 Billion by 2020, at a compound annual growth rate (CAGR) of 26.9%. Manufacturer's need for operational efficiency has increased the utilization of sensors through enhanced automation and integrated connected technology solutions across the manufacturing process, which, in-turn, has increased the demand for IoT solutions for various manufacturing applications. Other driving forces include decreasing hardware and connectivity cost and increasing penetration of connected devices.  The target audiences of the IoT in manufacturing market report are solution vendors, manufacturing equipment suppliers, system integrators, advisory firms, national regulatory authorities, venture capitalists, private equity groups, investment houses, equity research firms, and other stakeholders.

IoT Opportunities:

In addition to connectivity, which is expected to be mostly wireless, there are many IoT opportunities for telecom service providers (SPs) and equipment vendors.  Those include control and management, service provisioning platforms, big data/analytics (making sense of the huge volumes of data collected from things), and privacy/security sub-systems.  

France based service provider SigFox has built their own 2G-like network that's just for the IoT- no smart phones or tablets are end points!  They have already started initial IoT network deployments.  Fierce Wireless reports that San Francisco is the first U.S. city to receive Sigfox's connectivity; the other cities Sigfox plans to launch in by early 2016 are New York, Boston, Los Angeles, Chicago, Austin, Houston, Atlanta, Dallas and San Jose.

"The Internet of Things can bring new opportunities to San Francisco -- the Innovation Capital of the World," said San Francisco Mayor Ed Lee in a press release. "Creating a network of this kind, the city will be able to attract new startup companies, strengthen existing businesses and provide more jobs, economic growth and continuing prosperity for our residents. I'm excited that the Internet of Things network will help the city deliver more efficient services for residents and opportunities for innovation for entrepreneurs."

Network Requirements for IoT Traffic:

Security and privacy will likely receive a lot of attention. As IoT devices become more and more prevalent in our lives, their usefulness for applications like healthcare, energy and home monitoring will demand their awareness of increasingly personal information, or at least information that easily be profiled back to you once it’s analyzed as “big data’ in the cloud. Service providers will need to implement sophisticated network security systems that meet the expectations of both consumer and enterprise customers.

Network availability will be critical for many IoT applications. If critical infrastructure systems like industrial control, emergency, healthcare and security are going to be sending time-critical traffic over a service provider network, they need to have a very high degree of confidence that the network will be up and all the networking services will be working. Enterprise-class availability (three-nines or 99.9% up uptime) won’t be adequate: these services will demand the six-nines reliability (99.9999% uptime) that today is only achieved by telco-grade networks. Again, there will be a wide diversity of requirements for network availability, reliability and resiliency: some IoT applications will tolerate packet loss while others will demand maximum fault tolerance.

The latency (and jitter) of service provider networks will have a strong impact on the usefulness of many projected IoT applications. If you’re driving a connected car with the expectation that traffic lights or sensors are going to react to your presence, a one second delay at 70 miles an hour means that you’ve travelled 100 feet. A lot can go wrong over that time and distance. Quality-of-service (QoS) segmentation will allow service providers to position (and price) different service levels for different use cases.

All these issues point to the need for highly-reliable, low-latency, secure infrastructure platforms in service provider networks optimized for IoT traffic.  It remains to be seen if the SPs and vendors capitalize on this mega-trend


Huge Challenge of Disaggregated Network Equipment for Large Telecom Gear Makers

Disaggregation of IT equipment started with Facebook driving the Open Compute Project (OCP) to open up the design of compute servers.  It then extended to bare metal switches and white boxes (such as those from Pica8), especially for Software Defined Networks.  That represents a huge competitive threat to traditional switch/router vendors.

The latest disaggregation effort is to decompose the functional elements of two types of equipment: GPON Line Terminating Equipment (LTE) and G.FAST (vectored DSL) modems.  It's known as the CORD project, which is an acronym for Central Office Re-architected as a Data center.  Last June, ONOS (a consortium developing an Open Source SDN operating system for service providers) combined with AT&T to demonstrate a CORD Proof of Concept (POC) at the Open Networking Summit which we described in this article.

"One of the ONOS applications that has really taken hold is CORD," said Bill Snow, vice president of engineering at ON.Lab . "From day one we have targeted ONOS to serve the service provider marketplace... and we found that there was a big hole there."

At the Light Reading White Boxes for Communications Service Providers event in November,  CORD for GPON was described by Ken Duell as "FTTH as a Service" consisting of hardware blueprints (schematics?) and open source software modules.”  Duell said a CORD-GPON field trial will be held in the 1st Quarter of 2016.

In addition to AT&T, ONOS CORD project contributors include Ciena Corp., Ericsson AB, ON.Lab, SK Telecom and Huawei Technologies Co. Ltd. 

The New IP recently reported that SK Telecom is working to enhance CORD for the delivery of mobile network use cases.  The South Korean telco is leading a project called Simplified Overlay Networking Architecture (SONA), which will ease deployment of software defined data centers, where they have provided OpenStack Switching and OpenStack interfaces for CORD.

Guru Parulkar, executive director of ON.Lab, said the goal of ONOS CORD is to bring the economics of data centers and the agility of cloud to service providers.    Guru opined: “Service providers should be able to build their infrastructure with a few building blocks hopefully built using merchant silicon, white boxes and open source platforms.  Telco central offices have to be reinvented because they are where service providers have maximum CAPEX and OPEX spending, but they are also gateways  to enable or offer new services to residential and business customers.” 

Juniper Disaggregates Junos:

In November, Juniper Networks announced the disaggregation of Junos – it’s network operating system for advanced routing, switching, and security.  This move will allow Juniper’s users to run the software on third-party (bare metal/white box) switches supporting the Open Network Install Environment (ONIE). It also allows customers to install third-party applications such as automation and programming tools or services like deep packet inspection directly on Juniper switches via a VM or container.

Juniper is committed to separating software from hardware as the networking industry shifts to a software focus, Jonathan Davidson, Juniper executive VP and general manager of development and innovation, told attendees at the company’s inaugural NXTWORK customer summit in Santa Clara, CA.


Severe price pressures from Chinese network/ telecom equipment vendors (e.g. Huawei and ZTE), carrier consolidation (resulting in fewer large equipment customers),  new competition from the Ericsson-Cisco partnership (TBD?), results in an intensely competitive telecom equipment market with razor thin profit margins.  Add “SD-WAN/disaggregation/open source software” to the mix and there is even more of a threat from bare metal switches, white boxes, and commodity transport platforms.  

Meanwhile, consortium efforts like CORD/ONOS will surely lead to further minimization of  the hardware aspects of large telecom equipment vendors.  Software becomes the key factor with most of it going open source (e.g. ONOS and ON.Lab, Open Daylight, Open NFV, ONF, etc). 

With that megatrend intact, what role will the big telecom vendors play? And how will they compete with one another?How many will be left standing in the next five years?


Operations is Key R&D Focus for Alcatel-Lucent IP Platforms

"[R&D work] is in the operations," Bhaskar Gorti, Alcatel-Lucent's president of IP platforms, told Light Reading without hesitation at a recent on-site visit. "Getting a network function to run in a virtualized network is fine, but the reality is that there will be a hybrid world of virtual and physical networks. How do you operate it?"

This is where Alcatel-Lucent is spending its time and money in the final months leading up to its acquisition by Nokia Corp.  In fact, its Naperville, Ill., offices are full of Lean Ops demos that show evidence of this R&D work. Here, the vendor demonstrates agile, New IP networks that can spin up -- or down -- services on the fly, taking network management down to a matter of minutes. 

Gorti says that amongst Alcatel-Lucent's customer base of network operators of all sizes, he sees the larger ones seeking a horizontal virtual approach to building NFV infrastructure and orchestration that is independent of VNFs, and smaller players running out of physical capacity and looking to add virtual network elements rather than completely overhaul their networks. Either way, he said, every request for proposal (RFP) now has virtualization on it, whether they deploy it or not. (See Major Change Afoot in Managing Virtualization.)

"It is there today; there is a roadmap, and they want to see future versions and how they will live in a hybrid world," Gorti says. "Operations is key."

"There won't be that big of a business case in moving from physical to virtual," Gorti said. "There is not a dramatic capex change right away. It's how do you scale it and run it? We come back to operations."

Comment:  This author has previously stated that operations and OPEX are key for all the new age networking technologies, e.g. NFV,  Network Virtualization, OpenFlow based Software Defined Networking, and use of white boxes for any or all of the above!

For more information, see:

Related Story:

Alcatel Lucent successfully deployed a monitoring, information, management and control system based on Internet Protocol/Multi-Protocol Label Switching (‘IP/MPLS’) technology. This technology would help Poland’s maritime authorities enhance operational efficacy as well as safety at ports located near the Baltic Sea. Alcatel-Lucent completed the project as a consortium leader, along with the famous technology and consulting multinational firm, Indra.  For more information, see:


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IHS and ACG Research on Optical Network Market Status & Outlook


Following a 21-percent surge in the second quarter, global spending on optical network equipment declined 10 percent in the third quarter, to $2.95 billion, reports IHS (NYSE: IHS). The market is down 1.7 percent from a year ago, with the biggest declines coming from EMEA and CALA.  

“The previous three quarters’ results for EMEA (Europe, Middle East, Africa) indicated the first reversal of poor optical spending since 2009. However, third quarter results are less favorable, with a 5 percent year-over-year decline. We assume this is a short-term setback and the recovery will continue. However, we will monitor this closely,” said Alex Green, senior research director for IT and networking at IHS.   


·    Asia Pacific, the largest optical network hardware market in the world, saw flat spending (-0.2 percent) in 3Q15 from a year ago, as Japan has yet to ignite the 100G engine

·    North America was the only major world region to post positive year-over-year results (+3 percent)

·    WDM equipment spending grew 4 percent worldwide in 3Q15 from a year ago

·    Global spending on SDH/SONET optical hardware dropped 27 percent in 3Q15 from the year prior, and is forecast by IHS to decline from $2.17 billion in 2014 to just over $500 million by 2019

·    All annual growth in optical network hardware market going forward will come from the WDM segment, which IHS predicts will top $6.8 billion in 2019


The quarterly IHS Infonetics Optical Network Hardware market size, share and forecasts report tracks the global market for metro and long haul WDM and SONET/SDH equipment, Ethernet optical ports, SONET/SDH/POS ports and WDM ports. Vendors tracked include Adtran, Adva, Alcatel-Lucent, Ciena, Cisco, Coriant, Cyan (acquired by Ciena), ECI, Fujitsu, Huawei, Infinera, NEC, Padtec, Transmode, TE Connectivity, Tyco Telecom, ZTE, and others. This report is part of the IHS Optical Intelligence Service.

To inquire about research subscriptions, please visit



ACG Research:  Optical data center interconnect market nearly $5 billion in 2019


ACG Research expects the global market for optical data center interconnect (DCI) technology will increase from just over $1.1 billion in 2014 to $4.7 billion in 2019, a compound annual growth rate (CAGR) of 44.9%.

"Uptake of optical DCI is being driven by the migration of services to data centers and the cloud as service providers simplify deployment models and accelerate delivery of new and differentiated services," says Tim Doiron, practice lead for Intelligent Transport Networking at the market research firm. "New and expanded data center deployments are being driven by a variety of service providers including Internet content providers, network service providers, and interexchange providers as well as enterprises themselves. As more functions become automated and virtualized, the need to interconnect data centers for capacity, resiliency, and versatility will continue to grow and increase the need for reliable, cost-effective, high-speed data center interconnections."


OTN Equipment Market Trends:

The OTN hardware market can be bifurcated on the basis of OTN equipment, which comprises OTN transport, OTN switching, and optical packet platform systems (P-OTS). OTN switching equipment delivers economical and low latency switching layer, and helps to deal with the challenge of traffic congestion in a network. OTN transport equipment monitors the performance of the entire network. The optical packet platform system helps in efficient transfer of data in packets over the network. P-OTS equipment offers high reliability and efficiency.

Get more information on Global OTN hardware Market or request for TOC of this research report at:



Highlights of Light Reading's White Box Strategies for Communications Service Providers (CSPs)


Network operators (like AT&T, Orange, SK Telecom, etc) and mega-web companies (like Linked In) are moving away from proprietary purpose-built hardware to "white box" solutions that are a mix of purpose-built software, or open source software running on generic compute server and/or Ethernet switch/IP router hardware.  A "white box" is to be distinguished from a "bare metal switch" which does not come with any software.

It's been said that white box networking offers greater flexibility and the potential for faster service delivery, but that's yet to be proven.  The transition from dedicated network equipment to generic white boxes is one part of the transformation process being undertaken by communications service providers and large enterprises as they seek greater efficiencies and new business opportunities.

The path to a white box world is complicated. In the past, the white box approach was only considered viable for enterprise networks, data centers and, in rare instances, the very edge of service provider networks. The latest iterations reach across vast swaths of wide area networks (WANs), right up to the carrier core, and the closer service providers get to an end-to-end, white box "white wash," the higher the stakes become.

Inline image

On November 17, 2015, Light Reading sponsored an excellent conference on "White Box Strategies for Communications Service Providers (CSPs)."  We report the highlights in this post.


Key Points Made by CSPs:

Ken Duell, Assistant VP of New Technology Product Development & Engineering, AT&T said there were many potential benefits of white boxes, including cost per bit, flexibility, speed to market and operations costs savings.  
"When we open up our network (to white box vendors) that leads to innovation.  Some of our customers come up with things we never even thought of," he said.
However, there are huge challenges which include integration of white box hardware and open source/ purpose built software as well as network operations. Currently, AT&T is doing the integration themselves, rather than outsource it to a systems integration 3rd party.  "Right now, because of the state of the ecosystem, we're doing it ourselves," Duell said. AT&T  would like to involve a whole ecosystem, but for now it looks to best-of-breed components.  The telco giant (which is really SBC which acquired the old AT&T) is retraining its employees to handle the shift to white boxes/ virtualized network functions.
[LinkedIn is also doing the systems integration themselves.  They say they can save on OPEX by disabling network functions that are not needed at configuration time.]

AT&T's first step in white boxes was what they call "universal CPE," which the company describes as follows:
"Universal Customer Premises Equipment (uCPE) is a virtual appliance. Utilizing network function virtualization (NFV) technology, uCPE network appliances can be run as software on a virtual machine. Instead of installing a physical router, a customer could turn up a software-based virtual router in near real-time.   Not only does the Universal CPE afford increased speed but, for the first time, the ability to run multiple functions simultaneously. The unique open design enables multiple virtual network functions (VNFs) to run concurrently. For example, if a customer wants a router and a WAN accelerator, they can activate both of those functions on the same physical box."


Next up is the CORD Project for GPON network equipment disaggregation.  CORD uses ONOS-- an Open Source SDN operating system for service providers.  Announced this past June, a CORD field trial will take place in Q1-2016. Mr. Duell described the project as "an open, virtualized service platform that provides cloud economics and agility. Think of it as "FTTH as a Service" consisting of hardware blueprints (schematics?) and open source software modules, Mr. Duell said.

From AT&T's website: "CORD enables service providers to build an underlying common infrastructure with white boxes using ONOS (carrier-grade open source SDN Control Plane), OpenStack (virtual infrastructure management), and XOS (an open source service orchestration/management platform built on OpenStack) with a diversity of organizations building the services and solutions that ride above. In effect, this common infrastructure replaces the fragmented, non-commodity one in today's Central Offices where each site hosts more than 300 unique deployed appliances, each requiring a physical install and specialized management."
Guru Parulker, PhD and ‎Executive Director of the Open Networking Research Center (ONRC) at Stanford University, said CORD was just one of several solutions enabled by ONOS, which is gaining a lot of momentum on a path to real deployments.  He didn't disclose any other solutions.  Both ILECs and CLECs could take advantage of ONOS, Guru added.
Christos Kolias, PhD and a senior research scientist at Orange Networking Labs in S.F. is a frequent speaker at Silicon Valley networking conferences related to virtualization technologies.  This new world has a 3 layer reference model vs the 1980's OSI 7 layer model, according to Christos.  The 3 layers are:
 Applications: encompassing L3-L7
 Control layer -network software: SDN, NFV, network virtualization, network OS, etc 
 Data layer- infrastructure: physical & virtual (L1-L2)
Note: We would put L3 = Internet Protocol (IP) in the Control layer for route/path computation AND also in the Data layer for packet forwarding.  That's independent of a centralized SDN controller is used for all route/path computations in a given network domain.
Kolias sees integration as the key challenge for communications service providers (CSPs) that want to adopt the same kinds of hyperscale technologies that are fueling their biggest competitors, namely the web giants like Amazon, Microsoft, and Google.  He also said that white boxes pose a huge challenge for traditional network equipment vendors, such as Cisco, Juniper, Alcatel-Lucent, Huawei, and Ericsson.  "The user (network operator) now has a choice.  Reusability will be important; software will be the differentiator." 

Christos identified the opportunity to "create a marketplace for services and applications" including emerging Internet of Things (IoT) and marketing apps such as trading advertisements for free bandwidth to support video streams, as well as the ability to build customized products to the specifications of the service provider, as Google and others do today.   All of that is enabled by separating hardware and software, and moving to more commodity-type, commercial-grade hardware built on merchant silicon that can rapidly scale and support innovation at the software layer. Not that getting to that stage will be easy, Kolias said.

Noting that the CSPs need "disaggregation, not disintegration," he said there are significant integration challenges to achieving the same level of consistent performance using white boxes that exist today with purpose-built telecom gear.

 Breaking down the network gear

 Systems Integration/packaging options: ODM (h/w or s/w), 3rd party, end-user, or a combination thereof

 Accelerates product development to match evolving requirements

 DevOps ‒ continuous testing & integration

 The rise of the ISVs (Independent Software Vendors)

 White box switches and software switches

 Suitable for Data Centers, Enterprise, Cloud, potentially CSPs

As noted above, there are different approaches that network operators can take to address the systems integration (hardware, open source software, purpose built software, etc) challenge, the Orange executive said: CSPs can rely on hardware or software vendors for help, bring in third-party integrators, do their own integration, or combine those three approaches.

APIs are more critical than ever, Christos said.  They are important for plug-n-play, especially for open platforms (Google, FB, Microsoft, eg, WebRTC).  APIs provide: the “glue” in an open system, the integration points with existing systems (eg, OSS), the support points for the apps.  APIs are essential for building developer communities.

 Standard & open APIs can enable and ensure interoperability and thereby lessen dependency risk 

 They can enable plethora of innovative (eg, ad-hoc/customized) services and lead to new business models for the telcos 

  Provide monetization opportunities (eg, consumers, enterprise, VNOs, etc)


Ashish Singh, SK Telecom's GM/VP of products said the South Korean telco is transitioning from an ARPU business model to an Average Revenue Per Service model.  SK Telecom is planning to use white box servers as part of a strategy to build "mini-modular data centers" for services at the edge to serve mobile computing needs, rather than sending data to a centralized data center.

The goal is to move intelligence closer to the edge of the network, to enable improved reliability, data protection and end-to-end encryption, Singh said.  He added that IoT services via NFV (Network Function Virtualization) must provide: low latency, high reliability, processing that's close to the user.  He cited telemedicine as an example IoT application.  At the mobile edge, SK Telecom is using Apache Spark for real time streaming video.  Again, the objective is to push decision making to the network edge.


OPEX Savings or Problems?

I continue to believe that OPEX will be a key issue for white box networking because the white boxes won't be as reliable as typical carrier class network equipmen.  Furthermore, the hardware/software are from different vendors leading to a systems integration/fault isolation/finger pointing problem which will increase OPEX.

Key OPEX issues include: hardware/software integration, fault isolation and repair (fail-over and problem resolution), restoration/re-routing around failures or congested network nodes, integration with OSS/BSS, upgrades/updates to software which cause problems with other functions, etc.



1.  The AT&T and SK Telecom panelists said they are using the same infrastructure (network equipment) for both wireline and mobile subscribers via a new wireless access rack (not defined and no details provided).  

2.  While CAPEX for white boxes will be lower than purpose built networking gear, we think OPEX may be considerably more expensive (see section above).  This point can only be proven or disproved several years after white box networks have been deployed in large volumes.

3..  A huge transition is underway for telcos - from a network operator offering a fixed set of services to a "platform service provider," which permits new companies to build applications and business models that run on top of the network.  Such new age CSP's Comms will open their network and resources and build their own services on the platform, while also letting partners build services as well.

Comment: Haven't we heard that line before? Like every other day for the last 15 years?

 ODMs that make White Boxes (Compute Servers and Bare Metal Switches):
Quanta, Accton, Delta Networks Inc, Edge Core, Foxconn, Super Micro, ABMX, Servers Direct, AMAX, etc
Software Vendors & Systems Integrators that use White Box Servers and/or Switches:
Cumulus Networks, Big Switch Networks, Pica8, Centec, NoviFlow