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Friday, May 22, 2015

1Q Worldwide Optical Markets Affected by Capex Decreases

The growth rate of 100G optical interfaces remains steady and the trend to support 4G and mobile Internet services is driving expansion in all regions

The Worldwide Optical Networking market decreased in 1Q15 to $2.9 billion in revenue, dropping 13.3 percent q-q but increasing 4.1 percent y-y. With the exception of the Packet Optical Transport segment, which was up 3.9 percent q-q and Sonet/SDH segment, which increased 0.5 percent, all segments of the optical market posted quarterly declines.
The POTS segment, after slow growth for several years, is beginning to see an acceleration driven by the transition from legacy services and operators that need to transition their installed base. In the SONET/SDH segment most Tier 1 service providers have stopped building out or capped spending on SONET/SDH as they transition to newer technologies; however, in other global markets and low-tier carriers, E1 interfaces are still fundamental to operators’ businesses. Legacy players tend to dominate these businesses with development support limited to maintenance.
U.S. Capex in the first quarter was down 14 percent and the second quarter is projected to be down 10 percent. The smaller capex spending in Q1 had a direct impact in the overall optical market. Capex allocation for optical equipment has decreased from 9 percent to 4.3 percent during the last 5 years.
The top five worldwide players in 1Q were Huawei with 15 percent market share; ZTE, 15 percent market share; Alcatel-Lucent, 12 percent market share; Ciena 12 percent market share and Cisco, 8.5 percent market share respectively.
Web 2.0/Webscaller/Co-location capex is expected to grow in 2015 in the $36 billion range and will be a new growth area for selling virtual routers, DCI optical and packet solutions. We expect to see growth with web scale companies growing their capex.
Data center interconnect positively impacts both the optical and packet domain. Currently, ACG sees six to eight percent of edge routers being dedicated to DCI. ACG sees three main areas that will be the foundation for DCI: Optical, Layer 2 and Layer 3.
MSPP solutions continue to decline as subscribers transition from legacy protocols such as ATM and TDM based technologies to the IP/Ethernet environment continues.
100G in metro applications in high demand, which will help drive growth in overall optical market.
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Wednesday, May 20, 2015

Carrier SDN: Networks as Agile as the Cloud

Operators need more agile ways to deliver network services if they’re to fully realize the benefits of cloud computing. And many see Carrier Software-Defined Networking as the way forward.

Enabling Carrier SDN
Most of us know that remarkable gains in creating and deploying new services efficiently and at scale have been made in the cloud computing community. But in the network operator community we also know that a significant impediment to delivering new services with the agility of the cloud is the rigidity of the networks we deploy and the processes we use to define and instantiate the services.

Vendors have expended a great deal of effort in recent years to enhance network flexibility. Solutions have begun to appear that address parts of the problem, but they have typically been constrained to a particular function or domain and have not actually solved the overall agile service delivery problem for networks.

I’ve just had the opportunity to study the new Alcatel-Lucent Network Services Platform (NSP) and believe it has attributes that will interest operators who aspire to deliver services in a new way by enabling Carrier SDN.

What it is
The NSP is a unified solution that creates agility in network service delivery. It brings efficiency and flexibility to the front-end problems of new service creation and the immediate downstream problems of operating those services efficiently and intelligently in a multilayer, multidomain, multivendor network. It does so in a unified and holistically designed solution.

What I liked about it
NSP breaks the OSS/BSS logjam in network service creation. It uses open RESTful APIs northbound for OSS and BSS integration and important data modeling standards and templates for network and service representation. Services and networks are represented once to multiple OSS and BSS applications, eliminating the need to define the same service multiple times to different modules so they can talk to a range of vendors’ platforms.

1. NSP associates service policies and tenant contexts with newly defined services, and applies them broadly across the target network infrastructure. We analyzed development of a new bandwidth calendaring service by a representative operator and discovered that NSP brings improvements over 50 percent in both time and resources definition compared to present modes of operation.

2. As service templates travel southbound they’re converted by a versatile mediation engine into the semantics and formats needed to work with each IP/MPLS and optical network platform being managed. This auto-conversion dramatically simplifies and streamlines the provisioning process for service offerings across network layers, vendors, and domains.

3. Communication southbound with NSP is supported by multiple important multivendor standard protocols:
• OpenFlow, future, where used

Special cases for vendor CLI support are also included for simplification.

4. NSP bridges the gap between service automation and network optimization. On-demand service provisioning becomes network-aware and makes best use of available network assets during service placement. Dynamic network optimization uses network and service health to drive changes that ensure ongoing service quality and network efficiency.

5. Alcatel-Lucent has integrated functionality derived from 1,000s of operator deployments in both optical and IP/MPLS layers to enhance NSP’s value. For example, three distinct path computation engines are available to meet operator requirements:
• Packet-oriented PCE (PCE-P) for use with IP/MPLS paths
• Optically-oriented PCE (PCE-T) for use with optical paths
• Multilayer PCE (PCE-X) for use in multilayer path optimization

PCEs define paths in line with service policies at provisioning time, and KPIs are monitored in real time to determine if adjustments of any sort are called for as operations progress.

6. Alcatel-Lucent has incorporated unique and innovative algorithms for resource optimization. For instance, self-tuned adaptive routing for LSPs helps the network adapt allocations in real time according to policies and service delivery needs, producing further efficiencies and revenue-generating capacity.

The NSP seems to supply a missing link in solving the wide area network agility problem by leveraging the benefits of Carrier SDN. service providers will be interested in how its combination of functions has the right attributes for turning WANs into agile service delivery platforms. And it’s likely to be a major contributor to many operators looking to make their networks as agile as the cloud.

Paul Parker-Johnson

Tuesday, May 19, 2015

1Q Worldwide Router and Switch Markets Affected by Lower Global Capex Spend

Global capital expenditure is expected to increase only two to three percent in 2015.
The Worldwide Carrier Routing & Switching markets decreased revenue in Q1 but was up slightly year over year. The Q1 Total Worldwide Carrier Routing and Switching market posted revenue of $2.8 billion. The core routing segment had revenues of $570 million, increasing 1.2 percent q-q and up 3.6 percent y-y. The edge/switching segment posted revenue of $2.2 billion, down 8.0 percent q-q but up marginally 0.2 percent y-y.

Worldwide Carrier Routing & Switching Markets 1Q15
U.S. capex was down 14 percent in 1Q and is projected to be down 10 percent in 2Q. The second half of 2015 is expected to be positive, with capex ranging from 2 to 6 percent, but overall for 2015, U.S. capex is projected to decline 4 percent. Europe is projected to increase approximately 5.8 percent, APAC will be up 6 percent and CALA, which was down 4 percent last year, will grow 2.2 percent.
Disruption continues to affect the router and switching market; social, mobile, analytics, and SDN/virtualization adoption has resulted in more data being transmitted and stored through mobile and computing devices. “Currently, carriers have infrastructure that is complex and is somewhat inflexible,” states Ray Mota, CEO of ACG. “This means they have to be very risk adverse. Carriers must start transitioning their architectures to so they just program the services, not rearchitect the network every time they have a new service. Service providers are looking for low-risk deployments while doing their network transformations and are looking at hybrid networks, a network that utilizes both the purpose-built Physical Network Function and Virtual Network Function, which are targeting almost all segments and functions of the network.”
Network innovations will facilitate bandwidth increases by expanding the capacity of the access network, reducing service providers’ costs, and creating new incentives for subscribers to stay on-net. For example, the benefits of LTE-Advanced include optimized heterogeneous networks with a mix of macro cells and small cells to improve coverage and reduce costs and use of multicarrier to support higher data rates.
LTE initiatives are also driving demand for mobile backhaul, evolved packet core, and edge routing solutions; however, there will be a decrease in the mobile backhaul business as LTE roll-outs end. In 1Q some vendors benefited from a second round of investments in LTE backhaul infrastructure to raise capacity for demand.
Wireline carriers remain focused on enhancing the fiber footprint, expanding its reach (FTTX) and capacity (100 gig) to facilitate improved broadband offerings, carrier Ethernet services, and cloud capabilities. Increasing traffic volumes at the network edge should drive demand for core upgrades, which may benefit sales of coherent transport products, OTN switches and core routers.
Data center interconnect positively impacts both the optical and packet domain. Currently, ACG sees six to eight percent of edge routers being dedicated to DCI. ACG sees three main areas that will be the foundation for DCI: Optical, Layer 2 and Layer 3.
For more information about ACG's router and switch services, contact

Friday, May 15, 2015

SDN Requires a Standard Version as "a Prerequisite"

The networks programming process is quite challenging, as operators face several issues within Software Defined Networking (SDN) planning such as maintaining the five-nines reliability of telecom networks striving for reliability and high tolerance. Ultimately, a standard version of SDN is "a prerequisite" and operators are looking to deploy whatever can really interoperate not only with other pieces of the network but also with future networks. The SDN products, today, need to ensure full compliance with mobile-specific requirements in an identified and globally accepted proof of concept.

Recently, Nokia Networks has laid the foundations for deploying SDN in mobile backhaul through a proof of concept developed in conjunction with Finland-based Aalto University and other industry partners. The proof of concept has centralized SDN controllers operating standard transport and packet core switches in a virtualized LTE network with all control software running on generic data centers to enable a global view of the network but also running mobile backhaul, transport and core entirely in the telco cloud.

Huawei is engaged in a joint innovation project with the China Telecom Guangzhou Institute. It has released new products under its SDN based mobile backhaul solution LTEHaul, supporting SDN capabilities through the release of its CX600 series aggregation router, its ATN910 series cell site router and U2000 network management system.

There are several ongoing projects and forums where vendors have been proactively participating in standardization efforts in collaboration with stakeholders, operators, equipment manufacturers and research institutions, to promote the application of SDN in end-to-end networks.

Some examples are the Open Networking Foundation and the OpenDaylight project where Intracom Telecom serves as Silver Sponsor, aiming to transform the most mature SDN controller to carrier-grade status by evaluating and enhancing its performance and stability for massive scale deployments comprising several thousands switches. Ultimately, the goal is to extend this project to wireless backhaul networks. Intracom Telecom’s popular MW nodes (OmniBASTM and StreetNodeTM) have been designed to be OpenFlow ready; new networking functions are being developed on the OpenDaylight Controller to facilitate a smooth shift to the SDN architecture

The use of SDN in backhaul networks allows MNOs to work more easily with a number of suppliers, but also allows them to consider flexible network-sharing arrangements to drive down deployment, capital expense and operational costs. SDN is expected to redefine the backhaul network’s ecosystem and value chain, but there are still questions of when and how to migrate the critical network elements.


Tuesday, May 5, 2015

Small Cells: Ideal for Smart City Applications

“Digital urbanism” is rapidly becoming a central pillar for urban planners, technology architects, developers, and transportation providers, as well as in public service provision. For the last two years the UK has been pushing its smart cities concept and testing applications in collaboration with vendors and is, consequently, becoming an innovative test bed for smart applications. City councils throughout the countries are considering new high-capacity wireless and optical networks to efficiently support a wider range of end-user’ needs. The smart cities of the future could offer ultra-low latency connectivity for driverless cars, kilobits per second connectivity for machine to machine sensors to monitor the health of citizens with long-term chronic conditions, hundred megabits per second for ultra high-definition TV broadcasts, video surveillance and terabits per second data transfers for collaborative research and development programs between global universities.

Universities, which are a good place to look for future trends, are pushing hard to become “mini cities” and are frequently early adopters of smart city technology. One such example of “mini cities” is the University of Bristol, Cambridge, where staff is adding the new public platforms with the assistance of several vendors, such as NEC and Cisco. With small cells these “mini cities” could be easily rescaled to larger ones as they can effectively satisfy the requirement of a carrier-grade, high- capacity transport network in the urban environment.

The smart city technology architecture when boosted by the small cells should be able to deliver the following benefits:
  • Simplicity and availability. End-to-end IP, high bandwidth guarantees high service quality and relatively low maintenance.
  • Security. IP security mechanisms ensure a highly robust and resilient system.
  • Multiservice. Solutions should place equal importance on data, voice, video, and sensors.
  • Technological scalability. The new architecture should be designed to handle the large number of connected “things.”
  • Business scalability. Solution should offer “pay-per-use” opportunities to enhance granularity so that it can be scaled as budgets allow.
  • Manageability. The end-to-end nature of the solution makes maintenance easier by enabling greater visibility into the infrastructure.
  • Flexibility. The architecture allows city managers and citizens to utilize the same services and information for their specific needs.

    Elias Aranvantino

Wednesday, April 29, 2015

Is API Regulation the Future of Information Security?

Recently, I listened in on an IEEE-SA sponsored roundtable at the RSA Conference in San Francisco on April 22, 2015. Karen McCabe, IEEE-SA senior director, Technology Policy and International Affairs, lead a discussion on whether Application Programming Interface (API) regulation is necessary for the future of information security. Participants were Bret Hartman, VP and CTO, Security Business Group, Cisco Systems, Inc.; Cooper Quintin, staff technologist, Electronic Frontier Foundation; Monique Morrow, CTO, evangelist, New Frontiers Development and Engineering, Cisco Systems, Inc.; Hadi Narhari, chief security architect, NVIDIA; Rob Zazueta, Director Platform Strategy, Mashery (Intel); Matt McLarty, VP, The API Academy, CA Technologies; and moderator Kimball Brown, Independent Technology Consultant.

What is an Application Programmable Interface (API)? In its native form, APIs are building blocks for developers to construct programs. APIs often come in the form of a library that includes specifications for routines, data structures, object classes and variables. In other cases an API is simply a specification of remote calls exposed to the API consumers (for example, JSON and REST). These APIs are used primarily for many of the virtualized functions/service programs we are seeing on the market today. Think of a remote controlled robot on a manufacturing floor, a virtual network function in a switch or your favorite application on your cell phone that accesses the sensor on your wrist that monitors your heart or on a macroscopic scale, the billions of devices that are forecasted to exist via the Internet Of Things (IoT) and the programs to control them. All of these programs will rely on APIs in their development. Imagine if a rogue hacker tried to manipulate these programs via accessible APIs to cause harm? There lies the issue. How can this be avoided? What is the state of protection now? And where does this responsibility lie?

The panel agreed that there needs to be more education given to developers on building security into their initial designs, possibly implementing an attack tree or use case security framework from which to build. This framework should be transparent to the consumer because this structure should not impede on the go-to-market strategies that affect the bottom line. Although the panel agreed that this would be a good idea, because there are so many types of APIs, there is no standard way to implement this. As for IoT, the development environment is not like a static information technology environment where the attack points are relatively predictable. IoT environments, in many cases, will be mobile, personal and limited in memory space for which traditional security measures cannot be used. The threat model will have to be redefined, which has yet to happen. Once one is established this model should be communicated to developers as well as consumers.

Panel member also discussed a universal consortium establishing standards and if this would help the problem? The answer was a little but it would not fully address the problem, because the market pace and demand will be too fast for standardization groups to react. One thought was to develop an emerging new API platform with proper hooks and external partners buying into the model. This thought spurred an interesting conversation dealing with the integrity of the partners in the joint venture. How credible are they? This led quickly into the examples of Target, Snapchat and J.P Morgan/Chase where the weak link was the integrity of the partner and not necessarily the flaw of an API, underscoring that business partners having a stake in the level of security that is needed. This led to an interesting discussion concerning Person Area Networks (PAN) where the person becomes the API. Would a developer, consumer or human PAN bill of rights help? Again a “one-size-fits-all” constitution would be tough because every person has his or her own view of what personal security means? It would be hard for a government or business to enforce such a constitution. Businesses do not want regulation to hinder innovation or sales.

The discussion concluded with the final question of how APIs will look in 10 years? All panelists agreed that presently APIs are in a single-user mode and need to move toward a distributed model. Higher levels of SDKs need to be implemented. APIs should have a different paradigm for deployment such that devices, services and systems govern themselves. For example, applications should automatically inform the API what it can and cannot do during processes. For IoT, this method will allow better integration between devices, reduce human regulation policies and thus optimize security.
     Dennis Ward


Tuesday, April 28, 2015

Arris-PACE: Consolidation, Set-top Box Domination and Tax Avoidance

Arris (USA) has agreed to acquire Pace (UK) for $2.1 billion. According to Arris the key benefits of the deal are to accelerate growth and to improve finances. The growth part is driven by the enhanced international presence and the large-scale entry in to the satellite TV market. The finance part is driven by accretive earnings and corporate taxes.

SP video is still a top five CxO top-of-mind but it’s number five; they still need a compelling video offering to complete a competitive bundle. The driving issue is access to content not number of channels. Ask 100 random people what’s the problem with TV and no one will say resolution. Sorry 4K TV manufacturers. IP video, like IP voice, is just packets, albeit a lot of packets. The impact of video delivery to all devices on all networks is much more interesting to ponder.

With the Arris-Pace deal we have the Number 1 and Number 2 global providers of set-top boxes (STB) combining. If this deal goes through the combined company will have almost 60 percent market share in Cable STBs and 44 percent of the IPTV market. The next vendor, Cisco, will have 10 percent and 15 percent of these markets, respectively. It appears Arris is intent of being the dominant provider of STBs globally.

Set-top boxes have been and continue to be a tough market to sell to. The service providers constantly demand price concessions while at the same time demanding new features. No surprise gross margins are challenging. Cisco realized this late after buying Scientific Atlanta and adopted a “high-end” STB only strategy. As I predicted two years ago this was doomed since high volume is required in this type of market. Simply put, there’s not much of a difference in semiconductor content of a low-end and a high-end STB. Those participating in the low-end, high-volume market thus have a substantial price advantage at the high-end lower volume market because they are receiving substantial volume pricing from all silicon vendors.

Beyond challenging margins, the STB market is facing technical and architectural disruptions. The traditional functionality of the STB is being repositioned between the residential gateway and the cloud, TV manufacturers want a piece of this too, and over-the-top services continue to exert pressure on the legacy linear TV functionality as well. Arris will receive some immediate near-term benefit of entry into the satellite market and will increase its international presence. The value in the long term is less clear as the set-top as we know it is in a state of flux.

On the finance side the deal is accretive: “an increase by natural growth or by gradual external addition: growth in size or extent.” According to the press release the new Arris will be based be “incorporated” in the UK but based in Suwanee GA, USA. Transactions of this ilk, where the acquirer reincorporates to the target country, are not new. You can’t fault U.S. companies from wanting to avoid excessive U.S. corporate taxes. The fundamental of micro economics encourage this.

So, I see marginal long-term strategic benefit in the set-top box area that’s outweighed by the broader portfolio synergies and financial tax gains.
For more information about ACG's video services, contact

Click for more information about Greg Whelan.

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.