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Cisco to Carriers: You're in the Internet Business Now

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March 11, 2010

Cisco to Carriers: You're in the Internet Business Now

By Jon Arnold, Principal, J Arnold & Associates

This week Cisco (News - Alert) made a high-profile announcement about CRS-3, its updated Carrier Routing System, which is a core offering for service providers. Even by Cisco’s standards, the news was heavily hyped as something that would “forever change the Internet.” Routers are not my forte, but CRS-3 is a threefold increase in capacity, but even I know that doesn’t really tell the story.

Having participated in the webinar to announce CRS-3, we heard more down-to-earth examples of what this capacity means to you and me, and these have been widely reported in the mainstream press. It all sounds very impressive, but I want to focus here on what Cisco is really saying and what it means for service providers.
The higher capacity is needed because the earlier version of CRS was built for a market that was voice-centric, and didn’t have mobile broadband or smartphones. For carriers, seismic shifts have occurred since then, and we’re all familiar with their recent challenges of delivering the cool services and apps we all of a sudden cannot get enough of. At least in the consumer world, the cat is out of the bag, and there’s no turning back.
This creates a huge dilemma for mobile operators, and Cisco has come to their rescue. The webinar prominently featured AT&T (News - Alert), and via telepresence we heard about this first hand, as well as how Cisco is helping them address this. If anyone needs help it’s AT&T, especially with the runaway success of the iPhone (News - Alert), and its faster-than-expected impact on mobile broadband adoption.
For me, the main message here is that Cisco views the communications world differently than most carriers, and to survive they need to both see and embrace this broader vision. Most service providers may still think they are in the telephony business, and that voice is the main offering. This, of course, is a very 1.0 and dangerous path to remain on. For Cisco, CRS-3 is not about telephony at all – it’s about video, it’s about mobility, it’s about the cloud, and most importantly, it’s about the Internet. Sure, carriers can – and will – offer voice services, and continue to make money there, but they really don’t need CRS-3 to do that.
In Cisco’s eyes, video and the Internet are the big drivers, around which everything else follows. While it’s easy to get spoiled by the intimacy of telepresence, I do agree with Cisco that video makes everything better, and as John Chambers (News - Alert) said, “video brings the Internet to life”. The Internet by definition is purely a virtual phenomenon, and anything that makes it more real will make it more relevant. Cisco knows this, and the off-the-charts growth stats they will cite in a heartbeat leave little doubt about video’s importance.
Video is nice on its own, but when paired with the Internet, you have two very big building blocks. Together, the result is an exploding demand for bandwidth and all the associated network upgrades needed to provide a high quality experience. Once this is in place, another Cisco mantra comes to the fore – collaboration. Businesses certainly know why this important, and consumers are quickly learning how to mix media and collaborate in their own way. This creates a virtuous circle of constant communication, more engaged modes of communicating, and a broader set of people to communicate with. If this isn’t a dream scenario for a service provider, I don’t know what is.
Not surprisingly, a strong network is the prime enabler of all this, and CRS-3 is Cisco’s driver for their service provider customers. CRS-3 gives them the capacity to manage all this video, support more mobile broadband offerings, and offer cloud-based services. At a base level, this allows carriers to more readily meet everyday demand, but more importantly, it gives them a broader toolset to reinvent themselves around the Internet. It may be early days still, but there is little doubt that new services and business models will arise for both business and consumer customers. This should be welcome news to carriers, and interestingly, telephony has nothing to do with it.
So, now the onus falls to service providers to make these transitions, whether just starting or accelerating existing initiatives. Cisco is making a lot of bold proclamations here, and while I think their vision is on the mark, in many ways they have the lighter end of the load. The real heavy lifting – and risk – lies with the carriers who need technologies like CRS-3 – not just to keep up, but to survive. Now that they have the tools, Cisco would argue service providers no longer have any excuses to not go down this road. Fair enough, but this is easier said than done.
Nothing is easy of course, but the message I’m hearing from Cisco does have a sense of inevitability about it. Nobody wants to be told what to do, but carriers of all stripes – wireline and wireless – have a better future ahead of them in the Internet world than the telecom world. They have the networks and subscribers, and Cisco is giving them the horsepower to make this transition.
It’s really a matter of how you reinvent yourself. Video opens all kinds of new worlds, especially when tied to the cloud. Think about hosting services such as movies or television productions. How about live streaming of sporting events, concerts, distance learning, technical support, etc.? Think about what this could mean for content creators, digital rights applications, e-commerce engines, endpoint vendors, archiving services, training organizations, contact centers, etc. The possibilities are equally interesting for consumers as well as businesses.
At this point, Cisco is just the enabler. For service providers that see opportunity here instead of threat, they won’t take offense to Cisco’s vision and the tone of this article. Cisco may not be the only game in town, and they have their own growth needs to address, but the bigger picture rings true for me. I love talking on the phone as much as anyone, but that’s not a business I’d want to be in if I look around and see what’s coming.

Jon Arnold, Principal at J Arnold & Associates, writes the Service Provider Views column for TMCnet. To read more of Jon’s articles, please visit his columnist page.

Edited by Patrick Barnard

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