Tuesday, April 8, 2014

High IQ Networks: An ACG HotSeat Video with Juniper Networks

Ray Mota, ACG Research, and Rami Rahim, EVP/GM of the Juniper Networks Development and Innovation team, discuss the definition of a high IQ network architecture and the significance to service providers and their customers.  They recap Juniper’s recent announcement of new solutions that will help service providers automate networks, enable them to scale and dynamically create new services. The new NorthStar Network Controller is featured with use cases, as well as Juniper’s position and market differentiation on open standards.  Click here to listen.

For more information about ACG's HotSeat Videos, contact sales@acgresearch.net.

Thursday, April 3, 2014

Home Broadband, Video Usage Patterns Will Force Changes in Access, Aggregation Networks

Residential networking services and the devices we use to access them are constantly changing, usually in unanticipated ways. Video streaming, social networking, smart phones and tablets are creating new demand, displacing traditional media and threatening the foundations of the multichannel video subscription (cable, DBS and telco) industry. The new services and devices also are causing a shift in video usage from multichannel service to broadband Internet service. The shift already has made video the dominant Internet traffic source and is driving network operators to rethink their network architectures. Read more at FierceTelecom.

For more information about Michael Kennedy, click here.


Thursday, March 20, 2014

Business Case for BTI Intelligent Cloud Connect for Content, Co-lo and Network Providers

BTI Intelligent Cloud Connect provides converged optical and LSR based architecture that responds to the challenges of today’s metro data center networks.

Cloud computing, video streaming, and social media are contributing to a dramatic rise in metro and regional inter data center traffic that includes data center to data center, data center to access networks and local traffic, and data center to peering and partner traffic.

Inter data center network architectures are being reconfigured to respond to the increased traffic volumes and changing traffic patterns. The architectural challenges include cost effectively accommodating rapidly expanding traffic volumes, providing network flexibility, and supporting service innovation.

BTI Intelligent Cloud Connect (ICC) is a converged optical, LSR and application-aware architecture that responds to these challenges. The converged platform provides 10 Gbps and 100 Gbps DWDM wavelengths, MPLS Label Switch Router (LSR), and a Network Function Virtualization-based (NFV) applications module. The LSR approach is optimized for cloud connectivity applications.

ACG Research conducted a case study of a typical metro data center network to compare the five-year total cost of ownership of the BTI Intelligent Cloud Connect architecture with two alternative solutions: 1) LSR Composite: separate LSR, transparent optical transport, and network analytics platforms; 2) L3 Composite: separate L3 router, transparent optical transport, and network analytics platforms.

The case study shows that BTI’s TCO for five years is 58 percent lower than the LSR Composite alternative and 71 percent lower than the L3 Composite alternative. BTI’s CapEx is 59 percent lower than the LSR Composite alternative and 72 percent lower than the Layer 3 router alternative. BTI’s OpEx is 56 percent lower and 69 percent lower for the LSR Composite and L3 Composite alternatives, respectively. Click here to download the TCO.


Wednesday, March 19, 2014

Telecom Performance in 2014 Indicates Growth

The Worldwide Router and Switch markets are expected to grow moderately and steadily from 2014–2018 with growth being driven by the increase in fixed broadband traffic and mobile broadband traffic on 3G and LTE networks. 

The total Worldwide Service Provider Carrier Router-Switch market is projected to increase from $11.4 B to $13.8. B by 2018 (CAGR 5.1 percent). From a regional perspective, APAC will lead the growth as carriers respond to increases in data traffic, big data, virtualization, software-defined networking and machine to machine as well as the unrelenting demand for innovative and intelligent applications and services. The projected five-year growth will be strongest in APAC (CAGR +6.3 percent), North America (CAGR +5.1 percent), and EMEA (CAGR +4.5 percent).

Wall Street firms report that the 2013 year-to-date telecom performance was 6.2 percent; IT was 10 percent. These numbers are indicators of future economic growth within these sectors. Worldwide, there is a correlation between different types of technology and the impact on GDP or economic growth. For example, for every 5 percent broadband penetration related to consumer business or mobility there is a 1.6 percent increase in GDP. In the communications, technology or IT in the enterprise spaces, we see a similar type of correlation; for every 5 percent increase in the use of IT within the enterprise space there is approximately 0.5 percent increase in productivity. This insight is important for companies as they need to change their mindset on how they create solutions for a customer.

  • The outlook for routers: the edge segment, which is projected to reach $12.2 B in 2018, is 3X the size of the core router market, which will increase $3.3 B in 2018.
  • Live SDN deployments in WAN IP and transport solutions will gain significant traction, and the edge, metro and core domains will each become larger as a percentage of total SP SDN sales than the data centers are by 2018 (including both hardware and software SDN products). This is driven by the diversity of platforms participating in SDN solutions in those domains (IP/MPLS, Ethernet/MPLS, Optical and Packet Optical Transport Systems, for example), the broad extent of their deployment in SP infrastructures globally, and the range of optimizations in each domain being ushered in as part of the SDN transformation.
  • Total potential for SDN enabled equipment in the core will reach $7.5 billion in 2018, but not all of those platforms will be used for live SDN deployments.

The demand for new applications, increases in Internet data and video traffic will continue to drive markets during the forecast years. These drivers will require flexible and scalable networks. This year, the network that connects the data centers will be the industry’s focus. Inter-data center networks need to change to support new services and network requirements for bandwidth scalability, low latency, security, virtualization and automation. 

Thursday, February 27, 2014

4Q 2013 Optical Networking Market Update

Once again the optical infrastructure market grew; 4Q quarter budget flush delivered 19.5% quarter-over-quarter gain and increased the Worldwide Total Optical Networking market revenue to $4.01 billion, the highest run rate level since 4Q 2008. 

The fourth quarter year-over-year growth for the optical infrastructure market was 16%, growing 9% for the year. Of the six product segments tracked within the optical market five of the six reported positive quarterly gains. The Long Haul DWDM segment returned to the number one position based on revenue with 45.6% quarter-over-quarter growth. The Metro WDM segment was the second highest segment, delivering 15.9% quarter-over-quarter growth.

Only the POTS segment experienced negative quarterly growth, -4.1% but was up in 42.1% year-over-year. It also remains the fastest growing segment on a yearly basis. All the other product segments of MSPP, Optical Cross Connect and SONET/SDH saw demand increase and reported positive quarter-over-quarter growth.

In 4Q not all vendors benefited equally from the increased spending with some significantly missing their revenue targets. The vendors’ performance varied widely with several reporting banner quarters with the highest revenue levels seen for years or new highs. For the top 10 positions for the total worldwide optical networking market this caused a reshuffle of positions 2–8 within the Optical Networking market for 4Q.

4Q, 2013 Worldwide Total Optical Networking Market
4Q Revenue ($M)
$ 1381.9
$ 432.8
$ 403.5
$ 364.5
$ 225.9
$ 210.0
$ 152.0
$ 146.0
$ 121.5
$ 115.1

Huawei maintained its lock on the first position and reported its highest optical revenue quarter ever. The advancers included: Alcatel-Lucent, Ciena, Ericsson, and Coriant, which all advanced one position. The decliners included ZTE and Fujitsu; both lost multiple ranks within the market for 4Q. Cisco managed to maintain its position although its quarterly performance was also below target.

APAC, the largest region from an optical revenue standpoint, reported 25.6% quarter-over-quarter growth and positive 27.0% year-over year gain. This was largely driven by Huawei and the company’s wins with both China Mobile and China Telecom. The economy in EMEA is beginning to show signs of picking up and vendors reported 48% quarter-over-quarter growth and 11.9% year-over-year. LATAM was the largest increase on a percentage basis, delivering +58.9% quarter-over-quarter but only +3.3% year-over-year increases. On a regional basis North America was the worst performing region, -15.0% quarter-over-quarter but still managing a gain of 10.0% year-to-year. This was largely driven by AT&T, Verizon and Sprint, North American Tier 1 providers, curtailing their CapEx spending toward the end of 2013. 

4Q Trends
  • The MSPP market segment continues to experience declining revenue and for 4Q was able to post a small positive gain of 3.9% quarter-over-quarter but dropped 15.4% year-over-year. On a yearly basis in 2013 the MSPP segment dropped 17% and is 52% down from its all-time high achieved in 2007. The general transition away from legacy technologies is driving the decline in this market segment. As enterprises move to the IP/Ethernet environment it is driving a shift of product type from MSPPs to POTS platforms.

  • Though the POTS segment saw a decline in demand during 4Q and decreased 4.1% quarter-over-quarter it was still up 24.1% year-over-year. This segment grew 25.9% on a yearly basis, making it one of the fastest growing segments in the optical equipment market. These platforms are widely deployed in data center solutions and are generally all SDN ready. There are a large number of both incumbents and newcomers to this market segment, making the competition extremely fierce and partnering and technology decisions more complex.
  • Marlin Equity Partners completed its acquisition and privatization of Tellabs and has set its strategic direction. A portion will fold into Coriant and the other will be spun out as a separate entity called Tellabs. With Coriant in seventh position and Tellabs in eleventh, the combined revenue will bring them on par with Fujitsu and Cisco. Marlin Equity Partners has become a major stakeholder in the optical market, and it must now focus on execution.
  • Demand for 100 Gig interfaces remains strong and ACG estimates more than 10,000 100G ports were shipped in 4Q. The overall port count for 100G deployment was up by approximately 26% in 4Q and accounts for as much as 30% of some vendors’ revenue. We anticipate a flattening of growth but project that demand will remain strong during the first half of 2014.
  • The Metro WDM market segment was strong, particularly in North America, and has surpassed sales of the MSPP market segment. The Metro WDM growth is driven by increased user traffic as well as a traffic pattern shifts where more of the traffic originates and terminates within the Metro itself. This trend, which predicts as much as 75% of the traffic, will stay within the Metro and will drive equipment sales.

The optical networking equipment market continues to be driven by its traditional application of wireline services (dry and wet), wireless back haul, data centers applications and emerging M2M applications. Demand for services that will rely and effectively run over optical infrastructure will remain strong. With the global economy showing strength and government outages behind us consumers should help drive demand. In the optical market, however, 1Q of every year tends to be down as vendors generally attempt to pull in all possible revenue to finish their year strong.

For more information about ACG'spacket optical transport services, contact sales@acgresearch.net

         Jeff Ogle

Monday, February 24, 2014

Even if Aereo Wins Supreme Court Case, Can the Company Compete?

The Supreme Court recently decided to hear the Aereo case, which centers on whether Aereo is essentially another cable company that will be regulated as one (and pay retransmission fees) or whether it is an individualized service such as a home VCR that is exempt from transmission fees and cable regulation. 

Aereo took a risk with this all or nothing strategy. The company wanted to consolidate its court challenges to save on litigation cost and accelerate its expansion, but if Aero loses it will be quite calamitous for them. The outcome will likely hinge on whether the Court defines the services on a strict technological basis or more on a functional basis. 

Technologically, the company offers each subscriber an antenna, which is like having a virtual pair of rabbit ears for receiving over the air broadcasts.  Many lower courts have taken this view and have ruled in favor of Aereo. Most likely, the Supreme Court will look at the technology more broadly, and will consider the role of shared equipment: transcoders, servers, software, storage, routing and switching, network access.  Since not all of these can be neatly or efficiently cordoned off and dedicated to each customer, does that make Aereo a type of common carrier? What happens if the location of the antenna is positioned so that the stations available to the customers are different from what they can receive in their home, even if slightly? Does this change the classification of the service as an over the air antenna rental? What about renting an antenna in a different metro area, does that change the nature of the service? Does it change the regulations that are applied?

If the Court takes a more functional view, will it consider Aereo’s service functionally equivalent to cable service and, therefore, subject to the same regulations? While there are differences, it seems to me that Aereo’s service is indistinguishable from basic cable service. It is interesting to note that cable originated as community antenna TV, which is functionally quite similar to Aereo. 

Given these issues, the outcome of the court case is far from certain for Aereo, and even if the company wins, can it scale the technology? I suspect that adding a new antenna (actually two according to the web site) for each new customer eliminates the possibility of economies of scale and the costs for space, power and storage could become burdensome as subscriber numbers get into the millions. 

Regardless of how the Supreme Court rules, the decision will be momentous in how it shapes the industry. If Aereo prevails, consumer choice will increase, and the industry economics will be changed dramatically. Content owners will lose substantial leverage and probably significant revenue from retransmission fees. MSOs will face new, stiff competition that when combined with OTT streaming will be a formidable low-cost alternative to cable. On the plus side for MSOs, they might gain additional leverage in negotiating retransmission fees. If Aereo loses, expect to see further consolidation as incumbents seek to strengthen and protect their positions.

For more information about ACG Research's services, contact sales@acgresearch.net.

David Dines

Friday, February 21, 2014

4Q Vendor Financial Index Announcement

ACG Research has released its 4Q Vendor Financial Index report, which delivers independent information about the sustainability of a vendor or company to help providers assess the risk of selecting the right vendor to meet their business requirements and to ascertain a risk level on the stability of the vendor regardless of technology innovations.

Low-risk vendors for the quarter are Adtran, Brocade, Cisco, and Juniper. Characteristics of low-risk vendors include strong revenue outlook, high operating margins because of sales, solid gross margin and expense discipline, low debt dependency, and high receivable efficiency ratio. Adtran’s growth with the Deutsche Telekom and AT&T opportunities and improved spending by carriers is projected to accelerate the company’s revenue 10% in 2014. Brocade, which was in the medium-risk category in 3Q, is now in the low-risk category because of solid operating margin, high receivable efficiency ratio, good inventory management practices and healthy equity to debt ratio. Although Cisco’s revenue is projected to decline in the fiscal calendar year, the company is aggressively pursuing major technology developments, including Internet of Everything and SDN. The question is how long will the transition take? Juniper has posted its sixth consecutive quarter of YoY growth and is focusing on improving operational execution and managing costs. 

Of note in 4Q:
  • Adtran claims the highest Altman Z-Score in the industry: 7.3
  • Brocade had the highest receivable efficiency ratio: 2.59
  • Cisco posted the highest R&D potential: 28.7%
  • Juniper has a high receivable efficiency ratio: 2.20, compared to industry average

Cyan, Ciena and ZTE are high risk, which is characterized by low inventory turnover ratio, revenue decreases and low value of equity to debt ratio. Cyan, with one of the lowest operating margin in the industry, is dependent on a few customers (Windstream contributed 39% revenue). A substantial segment of Ciena’s revenue continues to come from sales to a small number of service providers. ZTE has the lowest receivable efficiency ratio in the industry, indicating significant risks associated with the credit policy and finances. 

For more information about ACG Research's Vendor Financial Index service or other syndicated and consulting services, contact sales@acgresearch.net.

Tuesday, February 18, 2014

F5: Business Cases

F5 Networks' solution delivers data center consolidation, DDos and S-Gi mobile network simplification.

Business Case for S/Gi Network Simplification: F5 provides a unified solution for delivery of S/Gi services. An S/Gi network simplification use case compared an alternative point products solution to the F5 unified solution. It shows that the F5 solution has 36% lower TCO.

Business Case for F5 DDoS Consolidated Solution: F5 provides a comprehensive DDoS mitigation solution using a two-tier (L3-4 and L7) architecture. As compared to a solution using multiple point products over five years it has 81% lower TCO, 80% lower CapEx and 82% lower OpEx.

Business Case for Data Center Network Consolidation: F5 provides a unified data center networking solution that delivers multiple services over a common hardware and software framework.  It uses a common hardware and software framework to deliver multiple services. This simplifies the configuration and management of network resources without any hardware restrictions. 

For more information about ACG's business case analysis services, contact sales@acgresearch.net.


Business Case for Cisco Evolved Services Platform and NFV

New services are driving strong traffic growth as well as creating demand for service personalization and novel consumption pricing models. Network operators usually have built their infrastructures separately by service with purpose-built solutions, creating large, complex networks that can slow service innovation and add cost. This can hinder operators in capturing market opportunities as life cycles for technologies, applications, and services decrease and as OTT and cloud service providers rapidly introduce new services and business models.

Network Function Virtualization, a network operator driven initiative, aims to control costs and accelerate revenue growth by leveraging standard IT virtualization and orchestration technologies to consolidate network equipment functions onto industry-standard high-volume servers, switches and storage.

Cisco Evolved Services Platform provides a comprehensive multivendor NFV solution that is based upon open standards and APIs. It is extensible by offering comprehensive modular capabilities that span the entire network operator architecture: cloud, video, mobile and fixed. It is elastic; it seamlessly and dynamically scales services and resources whenever and wherever they are needed. Cisco’s NFV portfolio has the most extensive set of virtual network functions available on the market. The Cisco solution is offered through four alternative purchasing models that allow operators to fit the NFV solutions to their tolerance for implementation, operational and financial risk.

Two use cases illustrate the breadth of the Cisco Evolved Services Platform and NFV solution: 1) Virtual premium mobile broadband virtualizes all elements of a secure, reliable, and private mobile Internet system; 2) multiscreen cloud DVR provides a multiscreen cloud DVR alternative to physical DVRs located in the home. 

For more information, down load the business case.

For more information about ACG's business case analysis services, contact sales@acgresearch.net.


Monday, February 17, 2014

2013 Service Provider Router and Switching Market Ends Year Flat to Slightly Up

GDP instability in emerging countries, NSA, product transitions and a major shift from purpose-built to virtualized routers is having an impact on the market.

The Worldwide Carrier Routing & Switching markets decreased revenue 0.5% in Q4 but increased slightly 0.7% for the entire year. In spite of positive growth and doubling of profitability reported by Tier 1 providers. Q4 Total Worldwide Carrier Routing & Switching market posted revenue of $2.9 B. Core Routing revenues were down 0.8% q/q but up 16.3% y/y. Edge Routing and Switching revenues were down 0.4% q/q and down 2.8% y/y.

Although Alcatel-Lucent is benefiting from the growth in IP core, which continues to see increases in 100GE adoption, providers refreshing core routers, increases in IP-Optical convergence and SDN, the company decreased 1.6% q/q and 5.7% y/y. The company benefited from CapEx spending in the first three quarters of 2013 but which dried up in Q4. Cisco, as the company projected, posted a total worldwide decline of 7.4% q/q and a decrease of 2.4% y/y. In spite of the decreases Cisco is currently undergoing product transition and shifting to a virtualizing product portfolio. The company was impacted by slowdown in emerging countries. Juniper posted increases of 3.2%, q/q and 15.3% y/y. Juniper reported that its MX line of edge routers drove growth (22%) in routing revenues.

Software-defined networking has been one of the top trends in 2013 with vendors introducing products geared at addressing traffic and revenue problems associated with the network. Live SDN deployments in WAN IP and transport solutions will gain significant traction, and the edge, metro and core domains will each become larger as a percentage of total SP SDN sales than the data centers are by 2018 (including both hardware and software SDN products). This is driven by the diversity of platforms participating in SDN solutions in those domains, the broad extent of deployments in SP infrastructures globally, and the range of optimizations in each domain being ushered in as part of the SDN transformation.

2014 will be the year of SDN trials in the service provider space with actual deployments occurring in 2015 and larger scale trials deploying in 2016. CPE and Edge are the areas that SDN will impact. We caution vendors to be mindful that they are not in a race to the bottom. Vendors must add value by including better management and orchestration. Having a platform that allows more agility and increases service deployment will be more important than the initial CapEx saving. 

For more information about ACG Research's Router and Switching service or other syndicated and consulting services, contact sales@acgresearch.net.