Summary
We have never hesitated in the past to point out Ciena’s mistakes and weaknesses. The introduction of these systems by the supplier is definitely remarkable. Some industry analysts, who had an insufficient appreciation of what it takes to play in this game, may now see there was truly a need to be spending all of that R&D money.
Analysis
Much of what Ciena is offering new appears to be as a result of Verizon demands. If perhaps even 80% had been there of what was announced, it probably would have met the RBOC’s expectations. The flexibility of the modules within the products is definitely notable. For example, despite having SONET functionality already in the box, the ease with which the Ethernet can be added, while maintaining the full SONET capabilities, is a plus. Other suppliers, such as Alcatel-Lucent, have had the problem of the minute a new application is added, the one that is already in can get diminished. It is not out of the question with some of these vendors’ systems that in devoting 20% of the capacity on an existing box to Ethernet that 40% of the overall matrix capacity could be lost.
Interestingly, Ciena found something to do with the World Wide Packets technology. The vendor was almost forced to do so with all of that investment in the purchase of the company. It could not afford to just let it die. At least they get a blade out of it – albeit a very expensive one.
The extent to which Ciena’s new solutions are supposedly compatible with other vendors’ equipment raises some skepticism. One will just have to wait and see as to the extent of the proprietary nature of this new gear. It is possible there will be lab situations in which everything can be tested over and over again. However, Ciena is not doing anything different than any others in the past in selling as much of their entire package as possible. Nortel’s actions in this way were extreme and very detrimental. Nortel’s products tended to only work with its own boxes. It was certainly a bone of contention at Verizon. Conversely, Ciena’s products from the beginning offered capability of being used with other equipment. Ciena realizes that the chance of a large service provider buying everything from one manufacturer is nil.
Another refreshing change with this announcement is that the word, Ethernet, is not used every other sentence. There certainly is no intention to hide the fact that it is offering optical. In fact, there may be a realization now across the company that the world is not all about Ethernet. The big carriers are simply not adopting Ethernet as quickly as some in the industry had predicted. There is no doubt that AT&T is increasingly moving to that technology – and that Verizon will do likewise. Still, it is not the answer that Ciena’s rhetoric two years ago would have indicated. The public telecom world is not simple in that just in showing that something is lower cost that the customer is going to switch. These providers are working with networks that are paid for and are operating at least adequately – and income is being generated.
Samuel Greenholtz consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
