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Google's FTTH: Does Huawei Win?

The fiber-to-the-home (FTTH) initiative launched by Google (Nasdaq: GOOG) has spawned a lot of talk about the search engine giant competing with service providers. But it's possible the parties most in danger are the traditional access equipment vendors.

That's because Google will want to do FTTH on the cheap. And that could open the door for Huawei Technologies Co. Ltd. to finally get a foothold in the North American market, says analyst Eve Griliches of ACG Research .

"This could be their landing pad," Griliches tells Light Reading. (She's also written up the idea on the ACG blog.)

Here's how she thinks the dominoes could fall.

Google is notorious for demanding low prices and threatening to build the equipment itself if that demand isn't met. ("There's not a lot of love between systems vendors and Google," Griliches says.) Huawei is famous for undercutting the competition on price. It would be an easy matchup.

If Google then builds Huawei-based FTTH networks, it would set a new, lower cost point for fiber buildouts. Carriers would be put on the spot, Griliches believes -- and the only way they could keep up would be to start using Huawei themselves.

This wouldn't be so outlandish. Griliches notes that North American service providers already have Huawei gear in their labs, often in customized variations. They'd like to use Huawei's gear, she believes. What's stopping them so far is a hesitation to run government traffic on Huawei equipment.

Google would have no such restriction. Its FTTH network -- reaching possibly 500,000 homes, as announced Wednesday -- sounds as if it would be all residential, with Google hand-picking its markets. (See Google Jumps Into Gigabit FTTH.)

Avoiding government usage wouldn't be tough, and that's why Griliches thinks Google could become Huawei's entry into the market.

There's no guarantee this scenario will play out, but Griliches says it's something the other equipment providers should worry about. Moreover, she doesn't think Huawei would permanently sell cheap PON gear at a loss; the company could offer its cheapo stuff to Google and others as a way to become a known quantity in the market, then come back with a profitable midrange offering.

— Craig Matsumoto, West Coast Editor, Light Reading

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venturecapital 12/5/2012 | 4:42:39 PM
re: Google's FTTH: Does Huawei Win?

This seems pretty wild speculation that Google is going to pave the way for Huawei in the U.S. given Google doesn't use Huawei equipent, its current row with the Chinese government, and its concern over Chinese wiretapping. Google's formula for cheap equipment has been to build it themselves (as Free did the DSLAM equipment it deployed in France). Further, gigabit-to-the-home is a new animal that Huawei doesn't have in its portfolio. A better match might might be the active Ethernet solution from PacketFront, though I'd bet on Google doing a custom solution.

Mark Sebastyn 12/5/2012 | 4:42:38 PM
re: Google's FTTH: Does Huawei Win?

Eve, you are trying to hit way out of your strike zone here.


The Google announcement is clearly one that would lay glass to each home and un-bundle it when other ISP's wanted it. It isn't PON, or at least it would be the first example in the world of unbundled PON.


You might also remember Google just unleashed the full force of its rage on China for its censorship policies as well as criminal hacking. So something tells me tey aren't going to be sending any dollars to a Chinese vendor anytime soon.

Stevery 12/5/2012 | 4:42:38 PM
re: Google's FTTH: Does Huawei Win?

That's because Google will want to do FTTH on the cheap. And that could open the door for Huawei Technologies Co. Ltd. to finally get a foothold in the North American market, says analyst Eve Griliches of ACG Research .


Really?!  Google just had their collective security butt handed to them in China, so the next move will be to let Huawei carry traffic?


I don't think their management has achieved that level of stupidity.  Perhaps Eve knows better, but my guess is that Huawei could be free and goog will say no.

ethbft1 12/5/2012 | 4:42:38 PM
re: Google's FTTH: Does Huawei Win?

I doubt that the cost of an FTTH deployment would mainly be determined by the ONT/OLT vendor.

jepbjr 12/5/2012 | 4:42:37 PM
re: Google's FTTH: Does Huawei Win?

The real point here isn't Huawei, although Eve points to them as a potential beneficiary.  The real point is that when Google builds infrastructure -- for example, server farms -- they do it by sourcing commodity parts at a very low level of the supply chain, and weld them together with their own dark arts in their own secret chambers. As far as I know, HP, IBM, Dell, or Sun/Oracle doesn't get the business -- it goes to the cheapest bit for the buck supplier of generic server cards.  The biggest customer in the world with the highest growth in the market buys virtually nothing from the leading incumbent suppliers.


I think anyone who's been close to the rollout of new infrastructure and new services in a traditional telco environment knows that the planning, sourcing, architectures, engineering, integration, and eventually, operations are among the most cumbersome processes known to the modern world.  They're not complex because they have to be, they're complex because of the unique historical, regulatory, and cultural context of the telecom business.  And as such, they're ripe to be ripped to shreds by a competitor who is unencumbered by precedent. 


jb


http://www.nakinasystems.com/b...


 

Galileo 12/5/2012 | 4:42:37 PM
re: Google's FTTH: Does Huawei Win?

I totally agree, there are so many other companies around to could offer competitve solutions that with all the latest development of Google and China I just don't see this happen.


In order for Google to get true 1Gig speed Active Ethernet is probably the only technology they can choose. Not to mention that it is fully standartized and will enable them to offer true nuetral open system. We have seen int he past 10 years municipalties succees in offering such networks using Active Ethernet.


I doubt if PacketFront with its small market penetration and limited offering will be the solution. But there are plenty of other real playes that have proven to offer successfully such solutions, like Telco Systems and many others

Galileo 12/5/2012 | 4:42:36 PM
re: Google's FTTH: Does Huawei Win? This is a very scary rumor considering the amount of information they keep in their storage...
I just don't see somthing like that working in a residential environment...
Garci 12/5/2012 | 4:42:36 PM
re: Google's FTTH: Does Huawei Win?

The switch part is quite a feasible rumor. At one point in time, they were hiring some networking experts (box builders) and there was some noise about these switches for quite a while. Some speculation here:


http://www.nyquistcapital.com/2007/11/16/googles-secret-10gbe-switch/


As for the servers, you can see them for yourself at the Computer museum in Mountain View, CA or here:


http://news.cnet.com/8301-1001_3-10209580-92.html


So far.. its proven reliable...

Garci 12/5/2012 | 4:42:36 PM
re: Google's FTTH: Does Huawei Win?

Given that they are running their own hown-grown switches in the datacenters (or so the rumor goes) i wouldn't be surprised that they build their own boxes for this.


Their servers, as stated, don't even have chassis on them and use custom (cheap) motherboards, no ups (rather a built in small battery) and a reduced power supply. All held toghether by velcro..


 


Certainly I don't see Huawei getting any of this action!

Pete Baldwin 12/5/2012 | 4:42:35 PM
re: Google's FTTH: Does Huawei Win?

Odo - I understand your disappointment, but I think this story brings up a valid point of discussion, less about Google itself and more about how Huawei might start winning deals with North American telcos.


Huawei has been working hard toward that end, and the telcos reportedly are interested. What's going to finally bring the two together? Here's one theory.


Based on earlier comments, too, I should stress: Nobody is saying huawei HAS WON a deal.  I'm outlining a possible outcome that I believe is worth talking about.  I also wanted to steer part of the Google conversation towards the issue of FTTH cost -- considering so much of the cost is fixed (guys digging fiber), and considering Google's obsession with cheapness, I'm wondering if they see possibilities that other carriers haven't yet.0


As for that analyst note -- we already had a story in progress on that.  Should be up shortly.

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