SBC: Key Switch Battleground?

It used to be that if an equipment RFP required optical grooming switches, Ciena Corp. (Nasdaq: CIEN) was the vendor to beat. Ciena's CoreDirector product emerged in 2000 and 2001 as a new product defining the category.

But times have changed -- and so have the products. This may be most clearly demonstrated by some RFP activity in which Ciena is looking to fend off competition in the metro switching market, as it tries to win business in a top RBOC account, SBC Communications Inc. (NYSE: SBC).

SBC is said to be in the market for a next-generation optical switch, according to a research note by UBS Investment Research analyst Nikos Theodosopoulos. The note says the contract is for less than $50 million and the winner(s) will likely be chosen by this summer.

Ciena is expected to be a major contender. But so are Lucent Technologies Inc. (NYSE: LU) and Alcatel SA (NYSE: ALA; Paris: CGEP:PA), according to Theodosopoulos. “Given that Ciena has emerged as a more significant supplier to SBC via recent acquisitions, this may better position CoreDirector to win this contract,” he writes.

A Ciena spokesman says the company's CoreDirector product is in three RBOC lab trials and is also involved in some RBOC RFP responses.

The question that most people have, however, is whether Ciena can break that glass ceiling and win a big account at an RBOC network with the CoreDirector. So far, CoreDirector's bread and butter has traditionally been the competitive local exchange carriers (CLECs), and inter-exchange carriers (IXCs), which have very different core switching needs.

This has been the heart and soul of Ciena's acquistion strategy, where it bought WaveSmith specifically for a shot at business with Verizon Communications Inc. (NYSE: VZ), which it appears to have landed (see Ciena Seals Verizon Deal). As Theodosopoulos points out, many believe that Ciena’s entrée into RBOC networks via acquisition will help it get attention for its aging product lines.

But given the raft of new switching/grooming competitors and the company’s financial misgivings, there is a reason to doubt Ciena’s odds (see Ciena Buying Binge Alarms Analysts). And a further examination of the RBOC's needs reveals a weakness in Ciena's approach.

What SBC most likely needs is a product category that Light Reading Inc.'s research division, Heavy Reading, calls the MSSP (multiservice switching platform). (See The Money's on MSPPs and The Death & Life of Sonet/SDH.) These boxes are designed to sit in large carrier points of presence (POPs) to consolidate the functions of several disparate network elements, including Sonet ADMs; wideband and broadband digital crossconnects; and ATM and Ethernet switches.

Table 1: MSSP Universe at a Glance
Vendor MSSP
Nortel OME 6500
Alcatel 1670 (SDH), 1677 (Sonet), 1680 (Sonet)
Lucent LambdaUnite
Cisco ONS 15600
Siemens Surpass hiT 7070
Huawei Optix 10G (SDH)
Tellabs 5500 NGX-MX
Ciena CoreDirector (Note: No packet aggregation or VT1.5/ VC12 switching)
Marconi SmartPhotoniX PMM Multi-Layers Switch (MLS)
Sycamore SN16000 (Note: No packet aggregation or VT1.5/VC12 switching)
Photonic Bridges MetroWave 8100MC, MetroWave 8300
Mahi Mi7
Mangrove Barracuda Transport Aware Switch
Polaris OMX
Source: Heavy Reading

While Ciena’s CoreDirector addresses this space, it doesn’t compare favorably to some other competitors, including SBC’s incumbent supplier Lucent. That's because RBOC networks are more likely to need aggregation than core switching, according to Scott Clavenna, chief analyst at Heavy Reading.

"If you look at who's in the metro for SBC, you'd have to think Lucent's Lambda Unite has a good shot here,” he says. “Nortel’s OME 6500 also makes sense. The wildcard is Mahi Networks, which has been tracking along fairly well with SBC and has proven interoperability with all their MSPP vendors."

The bottom line? The resurgence of some key incumbents -- such as Alcatel and Lucent -- as well as upstarts like Mahi is turning the switching market into an entirely new battle, and an interesting one to watch. The SBC contract may provide a clue as to where the market is going as RBOCs step up their interest in optical switching and aggregation devices.

SBC declined to comment on the RFP.

— Phil Harvey, News Editor, Light Reading

oni_guy 12/5/2012 | 2:11:11 AM
re: SBC: Key Switch Battleground?
Is MSPP supposed to be Cisco's 15454 (cerent) or
Ciena's now abadoned K2 (cyras)?
If Ciena indeed loses out because of lack of MSPP
(k2), it only has itself to blame.
Texoptics 12/5/2012 | 2:11:08 AM
re: SBC: Key Switch Battleground? oni_guy: The K2 is not an abandoned platform of Ciena's. They're still selling it; mostly abroad. As a former ONI/Ciena guy myself, I can tell you that it's not a suitable platform for the RBOC's though, and has not been...and probably never will be OSMINE'd.
lambdawave 12/5/2012 | 2:08:31 AM
re: SBC: Key Switch Battleground? Looks like they have a realistic chance because of MSPP.

Anyone knows what is going on inside?
Edward Van Halen 12/5/2012 | 2:03:48 AM
re: SBC: Key Switch Battleground? The waters inside Mahi seem to be very very quiet. No one is saying much about anything. Progress at MCI is a big plus, but continued large negative cash flow has go to be a big minus. Given MCI, they have to maintain and even grow staff in some areas to at least appear to have corporate infrastructure to deploy product ... no extreme cash conservation here. Yet, Mahi is approaching 2 years since the financial restart several positives but can they go to the bank on anything yet? The M7i is a strong offering, but how long can they sustain 150+ employees on crumbs of revenue? Why would an SBC go with M7i and deploy only $50M if they thought there was a possibility that Mahi would be no longer within 5 years? Who might be a buyer for Mahi and what is Mahi worth on the open market today? Mahi's position has probably never been better, but it remains to be seen how long they can stay in the tube on this venture and if they can convince the risk adverse carriers to jump on the board with them.
roy g biv 12/5/2012 | 2:03:46 AM
re: SBC: Key Switch Battleground? Seem to recall that Mahi and Polaris were really watching each other in this space.

Anyone know what is going on at Polaris? Are they a player at SBC as well? They seem to have gone really silent.
Cygnus X-1 12/5/2012 | 2:03:43 AM
re: SBC: Key Switch Battleground? I think that Ray Kao is still waiting on the PO from AT&T.

I see that LR still has them as number two.
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