Ciena’s World Wide Packets and CenturyTel

Implications: 1.      The acquisition of World Wide Packets is making a difference in unexpected ways. 2.      It gives Ciena another means to gain greater leverage in general at carriers. 3.      Operational cost assumptions in connection with WWP tend to be overblown.

Analysis:  CenturyTel as a whole uses a lot of WWP for Layer 2 switching.  The large independent telco has found it to be cheap and that it works.  CenturyTel engineers have also discovered that as long as they follow a few rules, they will not stub their toes too hard with the WWP equipment.  

Ciena had been aware for a long while that Century Tel’s long distance division, LightCore, is in the middle of a 2-year program of upgrading and replacing all of its core DWDM gear to a next-generation platform.  The supplier also apparently knows that LightCore is forklifting all of the Ciena DWDM out of its network and will sell it on the grey market.  

As a result, the vendor was initially informed that there was no intention to renew the maintenance contract for next year with LightCore. However, a little while later, after Ciena bought WWP, it was able to say to the long-haul group that it will still be doing business with it.  

Ciena has tried to sell the 4200 to LightCore, but despite feedback that it is a nice, little product, it was not what it wanted to deploy.  The manufacturer also could not make the case where the CoreDirector will pay for itself at LightCore.  

The “sugges[tion]…that operating expenses have increased” and that it is “likely from World Wide Packets…” is an exaggeration.  Ciena is in the enviable position that it needs to spend money on development because of impressive customer demand.  The idea that the supplier should be criticized because of great success is shortsighted.  One often needs to spend money to make money.