This issue hangs on the question of how you regulate market concentration in rapidly evolving markets. Avaya and Cisco may be the two biggest choices for the largest domestic enterprises today, but does the potential for more aggressive North American market entry from Siemens and Alcatel-two legitimate, globally dominant players in this customer size segment-offset the fact that their current market shares here are modest? Does the entry of Microsoft as a direct competitor-even though it, too, has very small market share right now-provide enough of a competitive prod to the leaders in installed base and current shipments? Certainly no one could argue that these other competitors are tiny upstarts whose efforts could easily be squashed by the big, bad Avaya-Cisco tag team.
The most obvious analogy to reach for would be the RBOC mergers of the 1990s and early 2000s. In nobody's imagination could these acquisitions be seen as anything other than extreme concentration of a market narrowly defined as "wireline public telephony." Yet the deals were allowed to go through in large part because of the belief that a new sort of competition, with new sorts of players, was emerging. It was thought that the new dynamics of the new market made hitherto-unthinkable combinations a reasonable step toward the new future that was emerging.
The fact that these giant mergers were allowed will be taken by some as a reason to accept the same type of deal in the large-enterprise CPE market; while others will point to the very limited state of competition and choice that remains in the carrier industry, and see the history of that regulatory regime as a cautionary tale whose repetition is to be avoided.
Ultimately, much of the duopoly talk seemed more focused on the channel than the end customer-though the very highest end is also where direct sales are most common. To me it's also debatable whether there's any reason to split the high end off from the total market for the purposes of anti-trust consideration.
Going back to the prospects for success if Avaya does get the deal done: Any big combination, whether it's a merger or an acquisition, is tough to pull off--tough, but not impossible. It's kind of like, say, Laurel and Hardy dancing to the Gap Band: Sounds improbable, but there's always the chance it'll turn out better than you'd think:
Any big combination, whether it's a merger or an acquisition, is tough to pull off--tough, but not impossible.