More Virtual Vertical Integration Needed for 100G

The amount of communication from the service providers down to the chip providers needs to go up substantially in the 100G space.  Whether the various “departments” are flying under the same corporate flag in terms of production, is irrelevant.  Any companies practicing any kind of work in total isolation will need to be persuaded otherwise as much as possible.

The service providers need to take a more proactive role in helping to drive the components side of the optical business in terms of both technology development and cost reduction. The old MCI side of the Verizon company has plenty of experience with systems integration, and while the telco should avoid this activity, it ought to have regular meetings with key, lower-end manufacturers.  The carriers should also strongly consider funding certain important, financially-strapped chip and components firms, to ensure timely delivery of features and functionality.  It may be a necessity for those carriers that want 100G yesterday.  

 

One may anticipate that AT&T gets more into licensing of technology, especially with any developments from its old Bell Labs division. The RBOC would continue to avoid getting into the manufacturing business, developments could be driven in a direction most favorable to itself, and an attractive cash cow can result from the licenses themselves.   With 100G, system vendors cannot totally be obsessed with driving prices down to commodity-like levels with their component suppliers. Hopefully, with increased specialization expected by the lower-end products, their ability to do so will be more limited.  

For more information on this topic, please see the latest issue in our 40/100 Gigabit Network Strategies Monthly, “100G Chip/Component Price Pressures to Force Virtual Vertical Integration by System Vendors.”  The report can be purchased directly from GLG.

Samuel Greenholtz consults with leading institutions through GLG