ACG Research

ACG Research
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Thursday, April 23, 2015

Nokia-ALU Merger: Can the New European Force Race to the Wireless Top?

Following a trend I predicted in March 2015 (Intense market transformation and consolidation will be among the key 2015 wireless market features) Nokia recently announced it bought the French networking supplier Alcatel-Lucent in a deal valued at $17bn (€15.6bn). The combined company will be called Nokia Corporation, headquartered in Finland, with Rajeev Suri, continuing to serve as CEO.

The company’s goal is to “create the foundation of seamless connectivity for people and things.” Nokia plans to establish a €100m fund to invest in Internet of things startups in France following the closure of the deal, which is expected toward the end of the 2015, that is if there are no serious delays.

Alcatel-Lucent propelled by its successful growth in core networking and routing, was ranked No. 2 in edge routers in 2014 behind Cisco. The new Nokia will definitely take advantage of that position as this core networking unit will add a large percentage to the company’s total revenue. In addition, Alcatel-Lucent has managed to put together a serious wireless partner “ecosystem”, especially for metro and small cell requirements.

Alcatel-Lucent is also poised to capitalize and lead on new technologies such as 5G as the company is exploring a new air interface on the Filtered OFDM, and its strategic small cell partnership  with Qualcomm could be possibly expanded to enhance its future radio access portfolio.
Complementing this ecosystem is Nokia’s Flexizone and Flexi Radio, which covers macro and small cell layer in addition to virtualization, as the company has virtualized most of its core, RAN, as well as delving into NFV alternatives. Nokia also brings strategic partnerships with Dragonwave (mobile backhaul) and Juniper Networks (IP/routing) to the table.
However, the companies do face obstacles common in all mergers. The difficult points in this deal will be staff and product harmonization, especially related to existing customers. The company will have to deal with issues such as orchestration of product overlaps, multiple business partners (internal and external), LTE customers’ relations, and common management across USA, Europe and China. All of which could shake up the global market for quite some time.

Competitors, naturally, are digesting the impact of this gigantic deal but also realize that to stay competitive they will need to adjust their strategies as well as introduce new products as more intensive competition is anticipated across all sectors. Historically, Ericsson is used to that pressure, but this case is definitely unique and more challenging; NokAlu is expected to become a global leader in ultra-broadband, IP networking and cloud applications, has raised this competitive bar.

Investors should closely follow the new company’s milestones and stock as undoubtedly there will be many upturns and downturns before the company stabilizes. The core networking segment is a high-margin, strong performing one that should add and increase the value of NokAlu’s stock. Today, if we benchmark Nokia and Ericsson’s stock, there has not been much volatility during the past year, but there is a respectful gap in the value per share. But this merger could be a game changer.

Once the merger and its accompanying issues have been address and processes, policies staff, etc., are integrated, Nokia will be strongly positioned with a highly efficient and complete end-to end portfolio across all sectors to capture 5G global contracts. With 5G expected to be multidimensional very few vendors with innovative product portfolios will be able to comply and implement providers’ demands but with this merger Nokia will.

    Elias Aranvantino

Tuesday, April 21, 2015

Alcatel-Lucent Raises the Broadband CPE Bar

Announces a new ONT with advanced Wi-Fi and ties in Motive to streamline smart home deployments.

On April 20, 2015, Alcatel-Lucent announced its new broadband residential gateway the 7368 Intelligent Service Access Manager (ISAM) optical network terminal (ONT). The 7368 incorporates dual-band Wi-Fi (802.11ac/n on 5GHz and 802.11b/g/n on 2.4GHz) with enhanced signal strength (Up to 500mW) to deliver better in-home coverage.

Aside from the awkward product name, it addresses a real issue in the broadband and specifically the gigabit industry: namely, delivering gigabit speeds beyond the threshold of the home. In the early days of broadband consumers’ connections from their PC to the CPE devices was greater than the broadband access connection (10 Mbps feeding 1.5 Mbps). With the deployment of gigabit networks (or more accurately “up to a gigabit networks”) the reverse was true, with 802.11n feeding 300 Mbps to the gigabit access link. Alcatel-Lucent has evened out this equation.

The images provided by Alcatel-Lucent showed the new product as a wall-mount device. Aside from looking sleek this has a number of nontechnical barriers to adoption. The big one being home decor aesthetics. Based on a limited sample, my wife, adding anything to precious wall space is a nontrivial exercise. Plus, any device added to a home has to cope with the issues of batteries (power) and backhaul. It would seem that a management interface on a smart-phone, tablet or any existing screen would be more suitable for whole home management.

The second part of the announcement was the incorporation of Motive™ customer experience management solution. ONT Easy Start” streamlines the ONT activation process and performs service orchestration between the Motive care applications and network element managers. This too solves a real business issue of gigabit deployments by reducing the time and cost of activating each subscriber.

The addition of Motive to the total offering is noteworthy. It’s always great to see large companies integrate solutions from separate product lines and business units to offer a greater solution that solves real business issues. 

Alcatel-Lucent has raised the bar in the broadband CPE market. They’ve matched the in-home speeds with the access network, improved in-home Wi-Fi coverage and simplified deployment of gigabit services to the residential market. The company solved real service provider business problems with innovative technologies.

To discuss the implications of this and other issues in the broadband access space on your company and product strategies contact ACG ( to schedule a briefing.

Click from more information about Greg Whelan.

Monday, April 20, 2015

Juniper Networks: Converged Supercore, an ACG HotSeat

Paul Obsitnik, vice president of service provider product marketing at Juniper Networks, and Ray Mota, CEO of ACG Research, discuss Juniper’s Converged Supercore announcement, which includes new custom silicon, updates to the PTX Series router and expanded SDN capabilities. Juniper has positioned itself as a thought leader in the service provider routing space, not only by addressing higher capacity requirements, but by also focusing on automation and SDN programmability to enable networks to be more agile and risk adverse. Listen to how the MX and PTX Series together change the router landscape by addressing service router requirements in the edge and transit router requirements in the core, as well as how customers can maximize cost optimization and service delivery.

Click for more information about ACG’s HotSeat videos.

Tuesday, April 14, 2015

Nokia and Alcatel-Lucent: Which Should Buy Which?

Seeking Alpha reported that Nokia confirmed it is in talks to acquire all or part of Alcatel-Lucent and it is no surprise the companies are quibbling over valuation. Alcatel-Lucent has gone through some tough times and appears to be executing well on its Shift plan. Arguably, they are undervalued but investors are waiting for more tangible results, which will indicate that the plan is working. Current shareholders and employees can sense this positive momentum and are remiss to “sell-out” before the results of their hard work and commitment are fully realized. 

Consolidation in the equipment market is not unexpected. Communication service providers are consolidating too and are getting bigger. When this occurs large equipment providers tend to consolidate as well as they have fewer large customers and need economies of scale to be successful. This is truly a zero-sum game. Either you get 70 percent of the business, 30 percent as a second, keep the first one honest, source or you get zero percent. With the inherent complexities of SDN, NFV and virtualization, particularly in multi-vendor integration, it may be years before the “second’ source is even added.

Driving this buyout could be Huawei. The company is disrupting the entire global telecommunication equipment market. The industry has been aware of the company's “grey area” business practices such as outright appropriating technology and intellectual property to giving eNodeBs away for free, with customers just paying the yearly maintenance fees (with a bonus of dozens of undocumented back doors). Although this is disturbing to the industry what really is of concern is Huawei’s huge product portfolio, their ability to throw “armies” at initiatives and their ability to take a long-term view to market (and global) domination.

The big issue for either Nokia or Alcatel-Lucent is who is going to compete with Huawei? Communication networks are a fundamental asset to nation states. They drive economic development, entertainment, education, national security, etc. Perhaps it’s time all governments treat them as national assets.

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Tuesday, April 7, 2015

De-Risking Your Investment: An ACG HotSeat Video

Now more than ever, carriers are faced with difficult decisions about their architecture. And visibility, into servers and into traffic, is one aspect that is preventing them from successful monitoring, deploying, and de-risking of their services and identifying where their problems are. Andy Huckridge, Director of Service Provider Solutions, Gigamon, and Ray Mota, CEO, ACG Research, discuss Gigamon’s strategy, market impact, and vision and how Gigamon can help carriers de-risk their investments. Andy reviews technologies, IP Voice, Voice over IMS, and Voice over Wi-Fi and Voice for LTE and discusses monitoring infrastructure, such as a visibility fabric, as well as delves into present mode of operation and the existing impact on networks. 

Click for more information about ACG’s HotSeat videos.

Monday, April 6, 2015

Business Case for Open Data Center Architecture in Enterprise Private Cloud

Dr. Michael Kennedy analyzed the transition costs from state-of-the-art switching infrastructure to elastic and agile infrastructure that enables private enterprise cloud for a medium-sized enterprise data center. The Juniper Networks’ open data center infrastructure architecture was compared to a proprietary programmable architecture that requires simultaneous investment in a centralized controller and application-aware switch combination. The proprietary architecture requires parallel operation of the existing switching equipment and the new application-aware switches until all applications are moved to the new switches. This is a multiple-year effort for most enterprises. In contrast, the open architecture does not require any change in the existing infrastructure base. The study found that the open architecture provides full asset protection; the proprietary architecture destroys 88 percent of the value of the original switching investment in the first year of the transition period.

Click to download ACG’s Juniper Business Case for Open DC Architecture.

What is your best route to the cloud?

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Tuesday, March 31, 2015

Forecast of Mobile Broadband Bandwidth Requirements

The consumption of video content is creating a shift from use in the home to mobile devices. This is driving exponential increases in mobile bandwidth demand. ACG Research projects most likely peak period bandwidth requirements to increase at 52 percent compound annual growth rate through 2018.

Dr. Michael Kennedy uses the forecast to model engineered backhaul capacity requirements for a 1,200 square kilometer metro area with a population of 2.5 million. This case study finds that the cell site backhaul bandwidth requirement will range between 0.4 Gbps and 2.5 Gbps in 2018. The odds favor the high end of this range. 10 Gbps Ethernet links in the access network and 10 Gbps rings will be needed to meet the demand requirement, support growth, and maximize load sharing. Agile network architectures will reduce the cost of supporting the expected rapid and volatile increases in mobile bandwidth demand.

Click here to download the business case "Forecast of Mobile Broadband Bandwidth Requirements."

Click for more information about ACG’s business case analysis services or contact

Monday, March 23, 2015

Is Tomorrow’s Cloud Operations Manager a Highly Specialized Real Estate Broker?

As the world gets driven more and more by cloud-based services, what do tomorrow’s operations jobs look like? A decade and more ago ops managers were blue chip contractors, assembling custom-tuned components into environments a well-known set of visitors could use for a prescribed set of tasks. In tomorrow’s cloud-based world the picture that’s emerging is one in which a much larger and more diverse set of visitors needs to be accommodated for purposes that vary widely depending on when and why they show up. Their expectation is that the cloud infrastructure makes a wide range of capabilities available when they need it, and that the underlying platform will be dynamically allocated to simply make it possible at that time. In this sense the new operations manager has to be aware of the capabilities of a variety of ‘venues’ (three-tiered applications, web-scale apps, elastic storage pools, etc.) and ready to let them out for exactly what the renter needs, now. The mix is larger. The versatility of functions is greater. And the client mix is constantly expanding.

In this way the operations manager of the future is partly an expert realtor who maintains a pool of properties ready to be leveraged for what each client needs, ready to be reallocated to the next one when the first one is done. The realtor gets known for the quality of the properties that are offered. And the clients get referred because the promptness of service and the versatility to support their many distinct needs has been shown. The realtor simply has to ensure the range of properties on offer continues to be value to the clients who may want to visit.

For more information about ACG’s SDN services, contact

Click here for more information about Paul Parker-Johnson.

Paul Parker-Johnson 

Tuesday, March 17, 2015

Regulations: Be Careful What You Wish For

Regulations are a critical factor in the access network. Unlike the “rest of the network” the access network is burdened with federal, state and local regulations and this is only getting worse. I’ve written extensively in the past that net neutrality is a bad idea and that Title II is a gigabit killer.

Why is regulation bad for everyone, including Google? The regulated monopoly “phone companies” depreciated equipment over 30 years. With asset-based pricing regulations you want to keep your asset base as high as possible. Thus, the innovation cycle of the regulated voice industry was 30 years. In the unregulated data networking industry the desired depreciation cycle is five to seven years with three to five years being a more common life span of equipment. Thus, the innovation cycle is three to five years.  Today, service providers want to accelerate their innovation cycle to less than one year and ideally three to four months to be more competitive with the “web companies” such as Google and Facebook.

Until recently the net neutrality debate was focused on adverse traffic impacts such a throttling P2P traffic. It’s widely reported that as few as 10 percent of users consume upwards of 80 percent of capacity. The numbers have changed with the proliferation of streaming video but the issue remains. Mobile network operators have solved this problem with data caps. They also have program where web companies can pay so their traffic doesn’t count against subscribers’ data caps. (This may be illegal soon as well.) When an analogous program (for example, paid fast lane) was implemented in the broadband access market there was outrage. 

Traditional content delivery networks (CDNs) can bypass much of the public Internet to improve quality of service. Companies that want to provide a better user experience can use CDNs and cache their content in select Tier 1 locations across the country. This helps; however, from the Tier 1 cache to the user is best-effort delivery.  Once the traffic enters the local exchange carriers’ (LEC) network in a large metropolitan area the “last 50” miles are best effort. 

With this model OTT companies cannot ensure the quality of their service. Why shouldn’t they be able to pay the LEC for better traffic treatment?  The argument is that this benefits the large companies at the detriment of start-up companies. It’s just another challenge innovative start-ups must overcome. This actually benefits consumers as only those companies with a compelling offering will make it over the hurdle. Marginal companies with a marginal offering won’t flood the market and the network with garbage. This is a good thing.  Isn’t the FCC all about protecting the consumer?
Can capitalism and the free market address the issue of a “digital divide”? Yes, a case in point is Comcast in the Boston area. The company offers $10/month broadband service to any family that has children on the free or subsidized school lunch program in the city of Boston.  No laws, no regulations just a solid business driven move by Comcast. 

Service providers have invested billions of dollars deploying and managing broadband networks. Data rates have continuously increased.  Gigabit networks are being deployed around the world by a range of companies and organizations. The free market is driving them. It’s counter intuitive to expect them to spend limited CAPEX if their return on investment is regulated or uncertain.  Today, regulators are faced with conflicting priorities. On one hand they want to spur gigabit investments but on the other hand they want to regulate broadband access. It’s obvious that you can’t get both. To repeat: Title II is a gigabit killer.  

For more information about ACG's services, contact

Monday, March 16, 2015

New Entrants into the DCI Small Form Factor Market

Two equipment titans Coriant and Alcatel-Lucent entered the Data Center Interconnect (DCI) small form factor market with targeted packet optical networking products. Coriant added to its 7100 family of products with the 7100 Pico™ Packet Optical Transport Platform and Alcatel-Lucent added to its 1830 Photonic Service Switch (PSS) family of cloud optimized metro products with its 1830 PSS-4, 8, 16 optical transport platforms. Both of these devices integrate cleanly into their respective portfolios and are Software Defined Network (SDN) enabled for dynamic service instantiation.

These products are significant because they validate the need for higher performance in this growing sector of the packet optical market. Bell Labs forecasts an increase of metro traffic by 560 percent by 2017. By 2019 there will be 60 percent more data centers in the world’s metro areas and DCI volumes will increase 400 percent. Why? With cloud-based services, the industry has recognized the need for data center interconnect (DCI). Initially, service providers offering XaaS solutions were connecting customers’ data centers to service providers’ data centers.  New requirements for DCI have grown out of the operators’ needs to deploy very high-capacity, high-speed, low-latency, efficient transport between their own data center sites. In addition, rich data types such as video, multimedia mobile backhaul, cloud and data center traffic are also forcing the need for more intelligent programmability and automation in management of these traffic patterns. However, because of the size and power constraints of the metro data centers to date, platforms need to fit strategically into smaller Point of Demarcation (POD) locations with low power and high cooling requirements. This is where the DCI small form factor market emerges.

Some key specifications and product comparisons for DCI Small FF at-a-glance:

DCI Small FF Requirements
Coriant 7100 Pico
ALU 1830 PSS –4, 8, 16
4 RU Chassis or less
2 RU
PSS-4=(2 RU), PSS-8(3 RU), 16(8 RU)
DWDM w/ Tb/s fiber capacity
88 DWDM @ 10 & 100G
8 CWDM, 32 DWDM (400G – 1.6 Tb/s)
SAN (FICON, etc.)
SAN interfaces
SAN interfaces
Video (DVB, SDI, etc.)
Video interfaces
Video interfaces
40 - 100G+ ntwk interface
10G, 100G, 200G
10GE – 100GE modular I/O
1, 10 , 100 GE (176 GE max)
10 , 40, 100 GE (w/112SDX11 card)
Pwr (AC or DC)
AC/DC (110/220VAC / -48VDC)
AC/DC (110/220VAC / -48VDC)
Open API/SDN mgt
SDN Enabled

ACG sees a bifurcation of the DCI market between small and multislot form factor devices. The total high-speed DCI market was approximately $400 million in 2013 and is forecasted to grow to $4 billion by 2019. Growth for the DCI small form factor is predicted to be $3 billion by 2019, 97.3 percent CAGR 2014–2019. Growth for the DCI multislot is predicted to be $1 billion by 2019, 27.1 percent CAGR 2014–2019. This market segment is growing because of ADVA, BTI, Ciena, Cisco, Cyan, ECI Telecom, Ekinops, Fujitsu, Huawei, Infinera and ZTE. Who will command the market share? Time will tell but in the meantime ACG is tracking the progress of this exciting market in its new DCI Optical Networking Market Worldwide syndication.

Contact to find out more information or schedule a meeting with Dennis Ward and Paul Parker-Johnson to discuss this research.