Original URL: http://www.theregister.co.uk/2008/11/13/cisco_wireless/

Cisco battles Meltdown with mobile and video

Pushes into wireless

By Faultline

Posted in Data Networking, 13th November 2008 19:03 GMT

Cisco CEO John Chambers claims to have a ‘playbook’ for coping with recessions, and two of its principles of survival are to prepare for the upturn in order to benefit more than rivals, and to use customers’ own pressures during the bad times to deepen relationships with them. Both of these principles will be tested in the company’s strengthening push into the wireless and converged carrier market, for which its new ASR 9000 edge router – designed for the ‘zettabyte era’ – is a flagship product.

Cisco argues that carriers, in order to survive themselves, will have to progress towards all-IP networks, despite the investment required during lean times, as these networks will allow them to deliver attractive services such as video cost effectively. They will also cut their operating costs and will position them strongly for the recovery.

The move to all-IP has always represented a natural opportunity for the internet router giant to make a stronger mark in the telecoms world, as the closed technologies dominated by Ericsson and others start to wane. So Cisco aims to exploit this opportunity at the earliest point, saying it will create long term strategic relationships with carriers by giving them an IP route through recession. In line with its playbook, it will invest particularly heavily in the US, which it believes will emerge first from recession, and in China and India, which should be the most resilient.

As well as the natural business of routers and core networks, to take mobile operators towards their next generation IP systems, Cisco is looking to expand in other areas of the wireless business, a sector that shone in its recently released third quarter results. It already dominated enterprise WLans and wired/wireless networks, and the home wireless network via its Linksys arm. And new approaches to mobile RANs, with IP equipment and commoditized base station designs, such as femtocells, should also play into Cisco’s hands.

But the star of the show is currently the ASR (Aggregation Services Router) 9000, which the marketing hype says will help prepare carriers to be able to serve zettabytes (a sextillion bytes) of internet traffic, a level that some analysts believe will be reached within six to seven years.

The latest member of the ASR family costs $80,000 and adds 6.4Tbps (terabytes per second) to the capacity of any existing router, says Cisco, which means 400Gbps per slot. This is achieved using the vendor’s IP over DWDM (dense wave division multiplexing) technology. With Chambers reiterating his oft-voiced mantra that video and mobility will drive the next wave of the internet revolution, the ASR 9000 also includes Cisco's new Advanced Video Services (AVS) module to support faster video streaming, content caching, advert insertion, fast channel changing and error correction at the network edge.

Cisco says that service providers, despite their spending pressures, must make decisions for the ‘zettabyte era’ now, with traffic already growing exponentially, and with the main growth driver being customer demand for high bandwidth multimedia web services, and for these to be available on mobile devices as well as fixed. The company claims that some carriers are already showing active interest, notably Japan’s Softbank and AT&T.

“Earlier generations of edge routers were not designed to address the massive growth that IP video is driving across mobile and wireline networks. Softbank Corporation is looking for innovative solutions that enable us to reduce costs, keep pace and converge our broadband, mobile and business networks onto common infrastructure,” said Junishi Miyakawa, director and CTO of Softbank Mobile and Softbank Telecom.

With the carrier Ethernet market - for wireline, wireless and converged operators – in growth mode, Cisco only entered the aggregation services router space eight months ago, with the launch of ASR 1000. The routers are designed to work with Cisco’s core network systems, notably the CRS-1 (Carrier Routing System), which currently supports 92Tbps. Pankaj Patel, senior VP and general manager of Cisco’s service provider technology group, said in a statement: “This platform is designed for IP NGN (next generation network) transformation and will be used as the Carrier Ethernet transport foundation for video and mobility data growth.”

Cisco says internet traffic will increase at a compound annual growth rate of 46 per cent from 2007 to 2012, with video and mobility being key drivers. This will result in an annual bandwidth demand on the world’s IP networks of approximately 522 exabytes, or more than half a zettabyte.

Just before unveiling its new router, Cisco turned in a solid third quarter, and wireless proved the star turn, with a 22 per cent year-on-year increase in revenues. The company believes wireless will continue to strengthen its performance, although it warned its overall revenue could fall by as much as 10 per cent in the current quarter.

Cisco said a major factor in buoying third quarter profits was the increased spending on routers and switches by mobile and fixed carriers, to cope with increased internet traffic. Switch and router business grew by eight per cent and one per cent respectively, while the service business increased by 10 per cent.

Network home sales fell by two per cent but wireless grew 22 per cent overall. This indicates that enterprise and carrier wireless products are strong, but the Linksys unit is suffering from consumer cutbacks, despite its strong market lead in home networks. Cisco is therefore likely to push Linksys into further product areas, such as femtocells, the miniature indoor base stations that carriers plan to use from next year to improve indoor coverage and support homezone tariffs, as well as to build out 3G or 4G hotzones. For Linksys, the femtocells will often be incorporated into home gateways, while outdoor versions will be a clear opportunity for Cisco. With operators targeting a price of under $100, the femtocells will fit the consumer electronics model of Linksys and Cisco’s ODM partners in Taiwan, far more naturally than the high margin tradition of the mobile infrastructure makers.

Despite caution about Q4 and 2009, Cisco reported higher than expected Q3 net profit of $2.2bn, about the same as a year earlier. Excluding one-off items, earnings per share were up from 40 to 42 cents, whereas analysts had expected a drop to 39. Revenue rose eight per cent to $10.3bn, matching expectations. Cisco aims for long term growth averaging 12-17 per cent a year, but has fallen behind that recently. However, it reiterated the target yesterday, once the global economy returns to normal growth rates.

Copyright © 2008, Faultline

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