The Three Legs of The Future of Networking

Most everyone who uses telecom these days knows that we’re not in our mothers’ network anymore, but the changes have come somewhat gradually and it’s hard to realize now that we’re only 60 years from the first coast-to-coast non-operator-assist call.  Some recent events may help us come to terms with reality, though.

Verizon and AT&T are both asking regulators to revamp the rules on phone service.  The Telecom Act and other previous legislation oblige the RBOCs to offer PSTN services as the provider of last resort, and both operators want to see that rule changed so that wireless or IP services could be offered instead.  AT&T is also asking to eliminate many of the old rules on wholesaling of copper, and it seems pretty clear at this point that the old copper plant’s days are numbered.  However, this doesn’t mean the end of copper and DSL.  Operators, including those here, tell me that they expect that there will still be fiber/copper hybrid deployments, particularly those in AT&T’s region that will focus on using vectored DSL to deliver U-verse.  Home-run copper is probably dead, and so is a lot of the older non-fiber digital loop carrier plant, simply because the loops are too long or otherwise unsuitable for high-speed digital services.

There’s an intersection between fiber and wireless brewing, too.  Verizon is going to be adding carrier Ethernet capability to FiOS, and I’m told that a major mission for this will be the backhaul needed for smaller cells.  Operators are more and more interested in small-cell service, largely because it’s better in spectrum efficiency since it supports more users by dividing them up into more cells and hauling independent feeds to each.  The trick, of course, is getting those feeds to the cells without exploding costs, and FiOS is deployed in a lot of areas where small-cell deployments are targeted.  Yes, there are business sites also passed by FiOS, but I think most of them would be happy with the business version of FiOS data.  Carrier Ethernet seems more targeted at backhaul.

I think the cloud is going to create the third leg to this colossal industry stool of network change.  Network architecture is governed by traffic distribution, and more and more traffic is being short-stopped in the metro area.  Content alone is a major factor; CDNs cache nearly all valuable content on a per-metro basis.  The cloud will concentrate user access to information on resources that, if not actually in the metro area, are peered with it.  Increasingly traffic to support complex requests will take place within the cloud rather than between user and cloud, for the simple reason that if cloud computing is logical at all, it’s logical to assume it would displace computational activities at the end of a mobile tether.  After all, such a move would also reduce edge traffic and user mobile data charges.

The effect of all of this is to accent the role of Ethernet in carrier networking, not specifically as a subscriber offering but as an infrastructure element.  You don’t need IP routing in the access network, you just need to carry IP over it.  Similarly, inside the cloud you’re more likely to consume Ethernet services because you have resource-to-resource connections.  Recall that even in the IP core we expect to see more agile optics than core routers, and all of this is why we believe that there’s a pronounced shift to Ethernet switches and that future IP elements will tend to look more and more like BRASs.

If you add in the SDN and Network Functions Virtualization (NFV) initiatives you see why commoditization of network-layer and Ethernet equipment is likely.  More and more, Ethernet is an aggregation technology and a resource-network technology.  In these missions, which have limited connectivity needs, you can afford to forego adaptive discovery in favor of centralized traffic management.  It may also explain why NFV proponents put a premium on higher-level IP elements (firewalls, etc.); the functionality of the lower layers is already dumbing down and the prices will likely follow.

But only “likely”; there are still opportunities to build devices for the future age.  Every new model of networking has new requirements and values new features.  The real race today should be to identify these new things and seize them while there’s no competition.  Everyone will get that eventually, but of course only one will get it first.

Cisco, who reports earnings tomorrow, is certainly one who has a lot at stake in “getting it”.  Credit Suisse has noted that Cisco is embracing the transition from a growth company to a value company in a stock sense, but you can’t be a value company if you don’t do what’s valuable.  The CS report notes SDN, the Brocade/Vyatta NFV-like drive, and Huawei as threats and they’re right in one sense.  In another, they’re wrong; the issue is that bit-pushing isn’t going to be valuable/differentiable, period.  There’s no shortage of initiatives and competitors striving to realize that truth so it hardly matters which prevail.

Look at the California university bid news; Cisco overbid by a hundred million dollars on a deal.  You don’t overbid that much unless either you have no idea of what reality is or you had a super-differentiating angle you somehow forgot to mention.  The university said it all when they said their requirements were nothing special.  Nobody’s requirements are really that special these days, and that’s getting worse not better.  Cisco is a cloud company, or needs to be.  Likewise all Cisco’s competitors.


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