The Nokia Siemens Optical Swiss Army Knife Paradox

Implications: 1.      It is precisely because “[ULH] is a niche application” that an integrated product potentially makes sense. 2.      If ULH were more ubiquitous, then there could be more of a compelling need for a separate box. 3.      Of course, one potential drawback with universality is that it is difficult to do any kind of re-engineering to the system beyond the initial design.  

Analysis:  Both the original MCI and AT&T have used fiber optic electronics from Siemens in the past.  In not just having a purpose-built platform for ULH, Nokia Siemens has a greater chance of penetrating the access, metro, and interoffice portions of the two large RBOCs.  

It would be hard to believe that it has not received feedback from these US customers requesting a single platform. The development of Ciena’s CN 4200, Adtran’s TA 5000, Fujitsu’s FLASHWAVE 9500, and Alcatel-Lucent’s 1850 are all examples of the trend in the industry towards multi-service/multifunction solutions.  The telcos want to deal with as few boxes as possible in their networks.   

It is quite conceivable that Nokia Siemens’ new product is not “going to be the best product on the market for access applications.”  In many cases, service providers are going to be willing to trade best-in-class capabilities in exchange for an all-encompassing device.  The key is getting such gear without paying for too much of a first cost.  There is also the problem of the supplier predicting correctly the space allocation for the different functionalities – because it cannot go back and re-architect the equipment.  But if “adding ultra-long-haul to this mix...[was more] significant," there would be a greater chance that the price/performance of an application-specific constructed product would be more important.  

Nokia Siemens’ actions are somewhat reminiscent of the strategies of some newcomers several years ago that were using PON technology as a backdoor into the overall optical access market.  However, Nokia Siemens is already an incumbent DWDM vendor to large carriers – and its odds for success in grabbing more market share in the access and metro spaces are much greater.