CoSine Sells VPN Combo to China Netcom

CoSine Communications Inc. (Nasdaq: COSN) announced today that China Netcom Corp. Ltd. has selected its IPSX 3500 to roll out network-based IP services over its Multiprotocol Label Switching (MPLS) network (see China Netcom Picks CoSine).

China Netcom will be one of the first carriers to incorporate MPLS, IPSec encryption, and firewalling -- all separate approaches to network security -- in a single service offering. To date, most carriers have offered either network-based MPLS VPNS (virtual private networks) or they have offered managed secure VPNs using IPSec. Few have offered services that combine both.

Now carriers like China Netcom are offering integrated solutions that include MPLS VPN technology along with IPSec functionality. British Telecom (BT) (NYSE: BTY; London: BTA) has been offering similar services with Cisco Systems Inc. (Nasdaq: CSCO) gear, as has Cable & Wireless (NYSE: CWP) with CoSine’s platform.

The deal includes deployments of the IPSX in the Beijing area, but the company is hopeful it will lead to deployments in the 35 other provinces where China Netcom has a network. The size of the deal hasn’t been disclosed, though Mark Weingarten, vice president of marketing for CoSine, admits it's small in comparison to other contract wins with Sprint Corp. (NYSE: FON) and Cable & Wireless. Still, he says it is important because it provides the company a foothold in Asia, which is seeing a big surge in IP VPN deployments.

In many ways, the move shows signs of CoSine having a technological edge. Some experts say that the trend could play out well for CoSine, which currently claims to have the only box out there that supports firewalling, Layer-3 MPLS, and IPSec encryption.

China Netcom had been offering MPLS-based VPN service using Cisco equipment since last year. But now it will use the CoSine platform to integrate this service with a secure VPN service that implements customer premises IPSec deployments.

“It’s a natural progression to combine these services,” says Simon Jenner, principal security consultant with Trinity Security Services. “I think we will be seeing other carriers following suit very soon.”

“Service providers need to offer a range of options for VPNs,” says Kevin Mitchell an analyst with Infonetics Research Inc. “I think that is one of the reasons why revenues for VPN services haven’t taken off in a big way. But we are already seeing that start to change.”

Juniper Networks Inc. (Nasdaq: JNPR) offers IPSec encryption blades for its ERX and M series edge routers, but it lacks the firewalling functionality of the CoSine box, says Mitchell.

What’s the benefit of combining these services anyway? It allows carriers to integrate their secure traffic with their MPLS VPN services. Mitchell says this is similar to the plan that BellSouth Corp. (NYSE: BLS) unveiled at Supercomm. As these service providers rollout managed MPLS VPN services, they will need to find ways to include off-network traffic, like traffic from remote users using IPSec encryption with the MPLS network.

“IP service switches like CoSine will increasingly play a role in bridging these two networks together,” says Mitchell.

Eliminating a connection may also help reduce provisioning costs for the carrier.

"Cost is a top concern when it comes to IP,” says Mitchell. “So anytime you can provision one circuit instead of two you save money, and that will be attractive to carriers as well as to enterprise customers.”

According to Infonetics, the edge aggregation router and IP service switch market in Asia is expected to grow to $1.85 billion in 2005 from $298 million in 2001. Revenue for these products in that region is expected to become a larger piece of the total pie in the future, as well. In 2001 Asia made up 18 percent of worldwide sales in this category, and by 2005 it will likely make up 26 percent.

CoSine has already generated revenue from its deal with NTT Communications Corp. And other equipment vendors are announcing big deals in the region. Redback Networks Inc. (Nasdaq: RBAK), which makes a router that supports MPLS VPNs but not IPSec encryption, has announced contracts with China Telecom subsidiary Shanghai Telecom and Chunghwa Telecom Co. Ltd. in the past few months (seeRedback's Router Gets Shanghaied and Chunghwa Deploys Redback).

— Marguerite Reardon, Senior Editor, Light Reading
lucifer 12/4/2012 | 9:43:05 PM
re: CoSine Sells VPN Combo to China Netcom PR 101 --- how to sell news!

1. China is sexy, probably the only growing market for carrier telecoms

2. Cosine is not doing as well as they would like (only they know just how well they are really doing....)

3. CNC means two things in China. One is the incumbent carrier in North China, the other is a relatively small IP wholesale carrier.

4. Cosine has made a sale to the second CNC(sources say it's one switch...I cannot say more)

5. Now you can write a press release that creates the impression that Cosine has broken into a major carrier in China...

6. Light Reading takes this at face value...and writes really positive press for Cosine. The Media is the message; or should that be the message is that the media doesn't check...(apologies to Marshall McLuhan)

My congratulations to Cosine's marketing guys!


broadbandboy 12/4/2012 | 9:42:55 PM
re: CoSine Sells VPN Combo to China Netcom From the web site of the company cited in the press release, this company does not sound like a small ISP. Are you sure of your facts?

China Netcom Corporation Ltd. (China Netcom, CNC)
9/F, 15/F, Building A, and 15/F, Building C, Corporate Square, No.35 Financial Street,
Beijing 100032, P.R.China
Tel: (8610) 88093588

China Netcom Corporation Limited ("CNC" or the "Company") is a facilities-based broadband telecommunications operator in China. The Company provides a full spectrum of services and solutions to meet the broadband telecommunications needs of businesses and individuals. Its core business include providing Internet broadband access and
integrated telecom services to residential and corporate customers, and building the infrastructure for China's New Economy. Its comprehensive collection of telecom licenses, including the license to operate international gateways out of China, puts it in peer with incumbent operators such as China Telecom.

In 2000, CNC has finished the first phase construction of a nationwide fiber optic backbone network, CNCNet and metropolitan access network, which pioneered the deployment of advanced IP over DWDM transmission technology in the world. The company recently extended its last mile broadband access network to cover residential users using Fiber LAN technology.


lucifer 12/4/2012 | 9:42:53 PM
re: CoSine Sells VPN Combo to China Netcom China Telecom was broken into two parts in mid 2002. It was a complex restructuring; as part of it, China Telecom ansorbed some smaller carriers, including China Netcom, an IP wholesaler, not an ISP.

The two parts of China Telecom got different names. The southern regions carrier retained the China Telecom (CTC) name; the northern region was renamed China Netcom (CNC) and is a major carrier.

Sources in China tell me that the Cosine sale was to the "old" CNC which is slowly being absorbed into the "new" China Telecom CNC.

Don't trust lucifer, check sources. There are lots of reports on the Chinese telecoms industry, most cost quite a lot. Pyramid has a good analysis "China Telecom and China Netcom" published in August. There is at least newsletter that is freely available that provides lots of gossipy info (and no I am not associated with them, just a subscriber).

Website is http://www.mfcinsight.com/cont...

lucifer light bearer!
shapeib 12/4/2012 | 9:42:38 PM
re: CoSine Sells VPN Combo to China Netcom Just want to share some information with you about the "current" China Netcom who wants to do trial with CoSine VPN.

China NetCom:
Revenue < $150 million
Asset < $900 million
Employee < 2,000

According to the officer who works at Netcom, they have not made any decision about using CoSine for commercial services. That is why there is no press release from CNC.

However, CoSine folks at least got a chance to deal with one of the major carriers in China.

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