ACG Research

ACG Research
We focus on the Why before the What

Friday, February 22, 2013

LTE Acceleration and Mobile IP Backhaul Fuel 4Q 2012 Market Growth

4Q 2012 Mobile IP Infrastructure market grew 13.5% Y/Y, reflecting strong growth in Mobile IP Backhaul and LTE acceleration.

LTE spending in 2012 has surpassed industry expectations and will continue to grow at unprecedented levels in 2013. In 4Q 2012, GSMA confirms 32 new LTE networks were commercially launched, now totaling 134 LTE networks with subscribed customers running worldwide. Mobile data traffic doubled on global networks in 2012, and is expected to double again in 2013. The proliferation of Android and iOS is also pushing up monthly average mobile data usage; ACG estimates smartphone usage on mobile networks in 2013 will increase to an average 862MB/month, globally.

As mobile SPs undergo service development and differentiation for LTE networks, they are migrating 3G networks to serve as economy class networks for low- to mid-market segment service offerings, such as value plans, MVNO wholesale, and M2M communications. Compared to LTE investments, 3G vendors' revenues still represent the majority of total market spend but will continue to decline globally over next three years. 

4Q 2012  Worldwide  Mobile IP Infrastructure  Market Share
Market Share

SON, SDN, and Virtualization: Impact on Mobile IP Network Infrastructure
ACG expects Self-Optimizing Networks (SON), Software Defined Networking (SDN), and Virtualization to have a high degree of impact to vendors providing SP Mobile IP Network Infrastructure. Many vendors have plans to announce revised product road maps and innovations at Mobile World Congress 2013.  Currently, Nokia Siemens is the only major packet core vendor shipping products using commercial off-the-shelf components using ACTA standard.

ACG expects the market to radically change and innovate with technology shifts and influences occurring in SON, SDN, and virtualization. These shifts will threaten vendors’ positions and value propositions, as network economics evolve and mobile SPs adopt distributed core architectures.

Thursday, February 21, 2013

Business Cases for Procera Networks Intelligent Policy Enforcement Solutions

Michael Kennedy, ACG Research and Ken Osowski, Procera Networks, discuss Intelligent Policy Enforcement and the ROI for two use cases. Listen to them as they discuss the capabilities of the Intelligent Policy Enforcement system and analyze the costs and benefits of the intelligent charging and congestion management use cases. Click here to watch the video.

For an expanded look at eight use cases, click here to download ACG’s business case analyses.

For more information about Michael Kennedy, click here.

Michael Kennedy

Wednesday, February 20, 2013

Business Case for Juniper Networks Virtualized Mobile Control Gateway

Juniper Networks announced its new software and services virtual Mobile Control Gateway, which enables mobile service providers to build software-defined networks (SDN). “With mobile traffic growth exploding, operators need a virtualized Mobile Packet Core for scaling capacity up and down to both increase service velocity and control costs.  Our research has validated that Juniper’s virtual Mobile Control Gateway (vMCG) has a 54 percent lower total cost of ownership over five years and the time to deploy the initial implementation is 46 percent faster than a standalone appliance-based solution.  In addition, the vMCG provides incremental capacity additions in 87 percent less time, enabling operators to address the volatility of mobile control plane traffic driven by smartphones and smartphones apps.” Dr. Ray Mota, managing partner, ACG Research.

For more information about Michael Kennedy, click here.

Michael Kennedy

How Apple Turned a Loyalist into a Critic in One Transaction

Apple’s current disinterest in customer service, once a hallmark of differentiation, has propelled the company from being outstanding to just ordinary.

I did not realize that I would have a personal experience with how far and quickly Apple has fallen. I am on my second battery with my four-year old MacBook Pro; the new battery is a little under two-years old. Two months ago, it started saying “service battery.” The message said it was not urgent but should be looked into soon. I checked it today and it was under 70% percent of design capacity after 282 cycles. Online, Apple issues guidelines that its batteries should have 80 percent life after 300 cycles ( Several people had written that they got some help from the Genius Bar. Silly me, I figured customer service was important to the company, and it would give me the benefit of the doubt and replace it or at least give me some break. After all, I was quite pleased with my other Genius Bar appointments.

At the store, the tech told me my battery was “consumed” and that it was not covered by warranty because it was over a year old. I mentioned the standard was 80 percent after 300 cycles. The tech searched their support site and found nothing so I asked for the manager. Instead of the legendary service I was expecting, he lectured me in a condescending and combative tone. I was miffed and disappointed and left with a bad taste in my mouth (it was worse than dealing with the cable company).

The point: Apple has changed fundamentally. The old culture of obsessing about innovative products and customer service seem to be a distant memory. Instead, customers are now a transaction, and the profit on each transaction is more important than long-term loyalty.

I wonder how much it would have cost Apple to replace my battery or give me something toward the unused portion (like tire companies do), maybe $20? Now, I am no longer a loyalist. I will need to replace two MacBook Pros in the near future, and if you had told me two days ago I would be considering something other than another Mac I would have looked at you as if you were crazy. I like the iPad, but I will definitely look at other devices when I need to upgrade; I’ll do the same with my iPhone. As for the AppleTV I had my eye on, forget about it. I will probably buy a Roku or Boxee. I calculate the failure to give me that $20 has put thousands of dollars of sure business in jeopardy.

I have been reticent to criticize Tim Cook just because he is not Steve Jobs. Now, I feel he deserves a big dollop of criticism. Although I do not expect him to be Steve Jobs, I do expect him to be great in some other way. Besides the major missteps on his watch, he has allowed the company to delegate delighting customers to secondary priority. This was a key area that always differentiated Apple from everyone else. Now it is just an ordinary company. It has good products and O.K. service, but it does not stand out from the crowd anymore. 

For more about Apple, click Peaking Companies: Apple Has Ripened.

David Dines

Tuesday, February 19, 2013

100G Port Counts, It's Time to Take a Step Back

The current market for 100G ports is hotly contested and competitive, suggesting increasing disparity in the market. 

100G port shipments are simply not lining up with deployments or revenues. ACG Research tracks 100G ports but does not report on them for this very reason. Let's take a look at some of the factors influencing the market:
  • Route distance: In some cases 100G will require regeneration, some will not. Most 100G deployments are layered on top of 10G routes so that regeneration sites are already established, but with coherent technology, longer distances are clearly achievable. If a service provider deploys a longer route, there will be fewer ports. If the provider has to regenerate, the port count will double. Thus, long-distance products can have lower port market share and are “penalized” simply by having better technology. In other cases, the routes are shorter, and more regeneration is an accepted fact. Either way, the numbers get skewed. 
  • 100G ports are often split between metro and long-haul deployments; yet, the definition for metro can be widely assumed to be anywhere from 300km up to 700km. 100G total port counts may be recorded, but disparity of metro definitions by vendors and analysts adds to the confusion.
  • Some shipments are recording nonrevenue field trials, spares and free products as port shipments (not a standard process) and this presents a challenge to defining what constitutes true port counts.
  • As we are in the first year of 100G shipments, there have been the usual technical issues with any new and significantly higher bit rate. This often results in additional sparing or replacement parts, which are added to the total shipped port counts.
  • In some cases, ports reported in previous quarters have been revised upwards.

We know that 100G pricing has been extremely volatile this past year. To determine an average selling price of a 100G port becomes even more problematic when revenues cannot be tied to shipments. 

Success metrics at this time should not be based on port count. Inherently, there are flaws in the current market that are distorting market share. Moving forward, we expect this to change as the market matures. As we see the price of 100G stabilize and the technology maturing, the situation will improve. 

The following are some guidelines if you are looking for overall value and sustainability in the market:
  • Review other success factors in the segment. Are revenues trending up in a difficult market?
  • Which vendors are service providers selecting? Are they announcing them?
  • Request names of customers deploying 100G. Most use two vendors (some exceptions) for 100G.
  • Examine the deployment roll-outs. How large are they?  One route does not a network make.

Note: we target no specific vendor or analyst with this report. These issues will eventually resolve themselves. We merely want to clear the air now until there is better visibility.

For more information about ACG Research's Packet Optical Transport click here or contact or contact Eve at +1-408-200-0967.

Eve Griliches 

Worldwide Optical Market Posts Increases

The worldwide optical market increased 8.9% quarter-over-quarter and decreased 5.2% year–over-year. Last quarter, we projected that providers would post revenue of half a billion dollars below 2011 total spend, which is exactly what happened, because 1) new equipment and 100G revenues were down ~30% in 2012 compared to shipment revenues in 2011, and 2) major Tier 1s have excess capacity on their networks which is slowing their migration to 100G or causing them to move at a slower pace to upgrade capacity only where it is really needed. 

Once again content providers dominated the market; deployments were up 50–70% although the revenue paid to vendors was down 30%. Positive points show accelerating revenues for almost all vendors not focused on Tier 1s. Reported profit margins were up for the same group. We expect this trend to continue into 2013. 

Monday, February 18, 2013

2012 Service Provider Routing and Switching Market Ends in Softness for Core and Flatness for Edge

From 2011 to 2012 Juniper Networks, which was hit the hardest of the top vendors, declined -14.3% in the global carrier routing and switching markets. Cisco increased 2.5% and Alcatel-Lucent increased 6.1%. 

The Worldwide Carrier Routing & Switching markets increased revenue 3.3% in Q4 but decreased 2.3% for the entire year. Additionally, overall profit margins, ASPs, were down -7.9% for 2012 due to softness in core routing. ACG Research anticipates global economic uncertainty, a challenging market and aggressive competition will continue to put pressure on vendors’ pricing and margins in 2013. “Service providers have been deferring spending in the core and, instead, investing in the edge,” states Ray Mota, managing partner. “Despite weaknesses and challenges in global economies, the long-term demand for high-performance and innovative networks continues to be strong. Mobility, Big Data, and software-defined networking will instigate a significant shift in networking and will be top-of-mind issues in 2013.”

Q4 Total Worldwide Carrier Routing & Switching market posted revenue of $2.8B. Core Routing revenues were down 15.8% q/q and 18.5% y/y. Edge Routing and Switching revenues were up 8.5% q/q and 3.9% y/y. 

Cisco posted a total worldwide decline of 3.8% q/q and a decrease of 4.2% y/y. In spite of the decreases Cisco continues to address shifting market priorities by refocusing on the core and edge networking market segments. Alcatel-Lucent, which posted a strong quarter, increased 17.2% q/q and up 8.6% y/y. ALU is benefiting from significant activity by MSOs as they focus on subscriber retention and expansion. Juniper remained flat at 0.2%, q/q and 1.0% y/y. In spite of this flatness, Juniper is seeing good traction with bookings of the MX, and the company reports that it has finally started shipping.

Although worldwide economic issues are plaguing regions, demand for mobile broadband and related services continues to increase and put pressure on providers’ networks. According to Cisco’s Visual Networking Index, global mobile data traffic increased 70 percent in 2012. Other services, such as cloud, virtualization, Big Data, machine to machine and software-defined networking, are also putting pressure on data centers and networks and redefining the way applications run on the network, exposing the underlying limitations of the networks. These demands are fueling operational complexities and costs that continue to be a challenge for service providers. 

  • Software-defined networking is the most recent buzzword to hit the telecom industry. SDN provides distinct control plane that allows fundamental changes to be programmed across the network as “network applications.” Enterprise networks will continue to lead the SDN adoption even though the really big potential impact will be “the great carrier revival,” which will take place when carriers have the WAN infrastructure in place to support new services and to create a new telecom revolution. 
  • Next-gen networks will be much more open, not closed, and include software and hardware components from multiple vendors working together. This development represents significant new business opportunities for those vendors that introduce products that interoperate and can generate new revenue opportunities.
  • The service provider edge continues to be competitive because of diverse range of applications and solutions, requirement variations in the regions, and cross-technology solutions. Core has been in a soft cycle but we anticipate growth in 2013 as the delays in upgrades are addressed.

For more information about ACG Research's Q4 Router and Switching report contact

ACG Expands Cloud Services

Paul Parker-Johnson,  formerly of Juniper Networks, joins ACG Research's cloud computing division.  

ACG Research today is announcing the expansion of its research and consulting services in cloud computing and virtual service infrastructures with the development of new syndicated research and custom project capabilities. Concurrently, we are also announcing the addition of veteran industry innovator and cloud computing expert Paul Parker-Johnson who will lead the development and delivery of these expanded services.

"We have had steadily increasing engagements with our clients on the importance of cloud and virtualized service delivery infrastructures in their plans and have had many requests to grow our offerings in these strategically important areas" said Ray Mota, managing partner. "We are excited to be expanding our efforts in these areas and thrilled that Paul Parker-Johnson is bringing his great experience and deep expertise to our group to lead that work.  I have known PJ as an innovative and results-oriented client for many years and believe the depth of his implementation experience and the strength of his vision will be invaluable to our clients in these new services."

Parker-Johnson adds that "I have worked with Ray and the ACG team on a number of challenging projects over the past several years and have always respected the group’s depth and breadth of coverage in strategic networking disciplines. I am certain that our new services will bring powerful insights and strong value to our clients’ activities in cloud computing and virtual infrastructure initiatives. I am happy to be joining Ray and the rest of the talented ACG team."

His service will initially focus on Orchestration and Virtual Infrastructure platforms in cloud computing. ACG will offer both syndicated research and custom project formats. Work will expand to additional aspects of cloud and virtual infrastructure as offerings evolve.

For more information on these new activities and other ACG services visit or contact ACG via email at

Paul Parker-Johnson

Thursday, February 14, 2013

Next-Generation Inter-Data Center Cloud Infrastructure

Cloud services and increased machine-to-machine (M2M) connectivity have contributed to the explosion of inter-data center traffic. 

Cloud computing has redefined the way applications run on the network, exposing the underlying limitations of the networks. To keep up, content providers have changed the paradigm and built their own large capacity networks. However, operational complexities and cost continue to be a challenge as bandwidth and applications grow at a rapid pace on the network.

The market, therefore, needs a new solution specifically designed to address this growing problem. Next-generation cloud infrastructure platforms must meet massive capacity and scaling requirements. Content and service providers need converged solutions that include optical and LSR functionality (see, especially in the metro regional networks in order to lower the cost per bit of transport and routing. Adding application awareness to a converged solution will also enable content and service providers to meet the performance and scale demands while increasing control and enabling service innovation, all with significantly improved economic efficiencies. 

Wednesday, February 13, 2013

Cisco’s Intucell Acquisition

Cisco just announced that it has acquired Intucell, maker of self-organizing network (SON) software for mobile networks. 

Intucell, a company based in Israel, makes software that lets mobile towers communicate with each other and respond to cell use overload issues by automatically adjusting the network resources to cover imbalances in real time. Cisco's purchase of Intucell is significant in that it focuses on mobility and leadership in the core.

Intucell has been targeting and building out the new and emerging market that addresses the self-optimizing network, where the technology is enabled to bring automation to the space of mobile network optimization, the RAN part of the network, as well as move the network toward the integration between the RAN and the core.This solution will enable Cisco to supply carriers with a software solution to address overloaded cell networks instead of just selling them increasingly commoditized hardware.

Tuesday, February 5, 2013

Peaking Companies: Apple Has Ripened

Disclosure: I am an Apple user; I have a MacBook Pro, iPad2 and iPhone 4S.  I am quite happy with these products, but I am not a raving fan. Why? There are lots of little disappointments and annoying features that seem easy to fix. Now my attitude is positive/neutral, but I would consider other brands when I purchase my next new device.  

Disclaimer: This should not be considered advice for buying or selling any equities. Personally, my stock picking record is not good, so I have given it up and do not hold any individual equities in any companies about which I write. 

We have seen it before: big corporations get so big and consequently, they have difficulty with technology inflections, the need to increase their addressable markets, and adding more markets to continue their glory and meet the expectations of Wall Street.

Historically, I have observed that companies are slow to admit there is a problem and turnaround/comeback plans are audacious and high risk and usually unsuccessful. IBM peaked back in the 1970s before minicomputers ate their lunch. DEC rode the minicomputer wave, peaked in 1987 and was a shell of its former self in just five years. Dell and HP have similar stories. We have too many examples of companies soaring and becoming high fliers and then dropping and in some cases crashing rapidly. History is repeating itself; Apple is now in this category.

Apple has had an amazing run of growth, great products and huge profits. It seemed it could do no wrong, but that was then.  Now, it seems the company can do little right. iPad mini was not very impressive; AppleMaps was a disaster; the iPhone 5 was somewhat disappointing. Not only did the iPhone 5 force everyone to a different charger, but it also broke Bluetooth connections with many devices. The result is that are doing major damage to the brand, resulting in a reduction in demand for iOS devices.

Many Apple fans are abandoning their apple product and are considering other brands — unconceivable just a few years ago. This is natural as the essence of brand is human reaction/feelings, and our emotions are influenced by little things. If enough little things accumulate it triggers a cognitive switch, and we generalize those little negative feelings toward everything about that brand. (Banks, cable and telephone companies have this problem.)

Apple has reached its long-term peak (two to five-year frame), and it will not regain its glory. Since the company no longer has a one-of-a-kind product visionary, Apple needs to either replace the visionary or transition to a different business model. Because it was able to produce great new products or create all new categories every four to eight years, it could beat competitors to market, command higher prices and higher margins. In an incremental product enhancement model, profits are challenged with lower margins, and competitors Samsung and Google are formidable if you do not keep changing the rules of the game or the categories.

IMO, Apple’s major problem is that it lacks a product visionary. Steve Jobs was a genius, and it is hard to replace that. There are other models to foster insanely great innovations absent a superstar, but I do not see this yet in Apple. Tim Cook appears to be a reasonably good manager, and Jonathan Ives is a great designer, but neither are product visionaries. It is not easy, and maybe they need to change the culture, policies and attitudes towards innovation. They have already started to follow Google’s lead with the Blue Sky initiative (employees are allowed time to pursue projects); however, it won’t work without real buy-in and respect from top management. Until we see that, do not expect Apple to return to its former self any time soon. 

For more information about ACG's video services, contact

David Dines