Tellabs has, like other network companies, seen its sales slide through the last couple of years, and also like other companies Tellabs has decided to cut back staff, drop a product, and focus on (you guessed it!) mobile and SDN. The big question is whether it’s too late. Tellabs had actually been focusing more on mobile with its 9100 and 9200 products, but never got the former really going and the latter hadn’t really even come out. What’s different?
The big question for Tellabs and frankly for a lot of other players is what COULD BE different. If you look at vendor goals for SDN combined with how operators see it, and how they see companion concept network functions virtualization, you see that this can’t be about mobile it has to be about metro, and metro is a complicated problem to solve.
Some think of “metro” as a city or Standard Metropolitan Statistical Area, and old-hand telco vets like me think of it as a Local Access and Transport Area, which means roughly the areas within which calls could be “local”. Today changes in infrastructure and business structure have merged the definitions a bit. The US, for example, has about 250 “metro” areas and there are over 1200 worldwide. Generally they’ll have a population numbering in the high six to seven digits, and generally there’s some point in the area that serves as a commercial and communications center. Where people are, money is.
The metros of the wireline day had about 40 central offices on the average serving an average of about 25,000 people. There are anywhere between 10 and several hundred times that number of mobile sites in a metro, and with LTE we’re quickly getting to a point where a mobile tower has more bandwidth than a residential CO did even in the early age of DSL. Mobile networks are the fastest-growing component of networking by far. But we’re also delivering content from local CDNs, and increasingly we’ll be working with local clouds. Along the way, we’re changing the model from classical networking to funnel networking. Everything profitable travels 40 miles or less to less than 100 destination points. That’s not connection, it’s aggregation.
The battle in the market today is over how we funnel stuff, in an equipment sense. The big vendors would like operators to build massive IP/MPLS networks in their metro areas instead of using Ethernet and BRASs. They want the cloud to extend IP. When Tellabs commits to an SDN and mobile course they’re committing to a metro strategy that would stand off the determined drive of router vendors to spread routers all the way to the horizon, and inward into the metro area right to the CO.
SDN has to be not a mobile strategy but a metro strategy because mobile and metro and cloud and content are all one delivery network that’s driven by a play on the old saw of politics; “All profit is local”. We are going to use SDN principles to flatten aggregation from three layers to one virtual layer spanning optics to IP. The metro is going to become a big distributed cloud data center.
For Tellabs or anyone who wants to play in the big leagues, that means that you can’t have a mobile strategy without a cloud strategy without an NFV strategy without a metro strategy. This is all one market, and it’s the only market that’s going to have any respectable capex behind it within a couple of years. You win here, or you lose. That’s a very tough market to go after when you’re a low-level network player who is already cutting products and cutting staff. This is a time for naked aggression and Tellabs is not historically the company known for that sort of thing. The question for Tellabs now is “Are you ready?” I hate to see any company sink unnecessarily, but this is not going to be an easy play for Tellabs.
Nor for the other players in the space. The network of the future is going to have to be a LOT cheaper to build and to operate, and that means it’s going to be less profitable to sell on a unit-device basis. So you have to sell EVERYTHING that goes in it, from optics to software. The players who get that point, and who quickly drive to get a leading position in all those critical sectors, will be the players who avoid the Sycamore-and-Tellabs post-mortems down the road.