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Alcatel-Lucent Entry Signals Fierce Core Router Vendor Competition

The entry of Paris-based telecom vendor Alcatel-Lucent into the $4 billion-a-year market for Internet core routers signals the fierce competition for this market during the next two years. The 7950 XRS supports 32-Tbps capacity and 160 100-Gbit Ethernet ports in a single system, which is five times the density of today's core routers and slashes power consumption by more than 66% compared with typical core routers, according to the company.

Based on Alcatel-Lucent's 400G FP3 network processor unit, the router can support both IP backbone networks and regional "metro" core networks. The company says 7950 XRS also extends its commitment to tighter integration between IP networks and optical transport networks, including support for transponder integration into the 7950 XRS at 10G, 40G and 100G speeds. It can be managed with the 5620 Service Aware Manager platform and an Optical Extension Shelf capability that integrates the 1830 Photonic Service Switch with the 7950 XRS.

Last month, Broadcom introduced a line of programmable 100 GbE switch processors to address the exponential traffic growth on Internet back-haul switches. A forecast from Infonetics Research predicts a compound annual growth rate of 170% in the number of 100-Gbps ports deployed through 2016.

Cisco Systems unveiled in February 100 GbE capability for its Nexus 7000 line for data center and service provider networks. By 2016, sales of 40 GbE and 100 GbE products will amount to $3 billion, reported Dell'Oro Group in its five-year forecast for the Ethernet switch market. According to Dell'Oro, the market includes Alcatel-Lucent, Cisco, Avaya, Brocade, Extreme Networks, Dell, HP, IBM and Juniper Networks.

Service providers face a serious problem as they tackle 100G, the next great inflection point in their routing, switching and optical networks, says Michael Howard, co-founder and principal analyst, carrier networks, at Infonetics Research. If they keep adding more of the same equipment to their networks, they will end up multiplying space and power requirements.

All the major router players--Huawei, Cisco, Juniper, Alcatel-Lucent and even Brocade, although it's a smaller SP router player--have 100 GbE blades for at least some of their routers, says Howard. "There have been two very formidable core router competitors in the market for many years--in 2011, first-place Cisco and second-place Juniper held around 80% of the market. In the first quarter of 2012, Cisco, Juniper and Huawei had 96% of the core router market."

Howard adds that he doesn't believe Alcatel-Lucent's entry will substantially change the total available market (TAM) for core routers. "Service providers invested [about] $3 billion on core routers worldwide last year, and we expect [about] $4 billion to $5 billion in 2016."

While Alcatel-Lucent won't grow the TAM, Howard says it's the only router company that could credibly enter this mature stage of the core router market. Service providers must trust their router vendors with their core networks, which carry the highest customer traffic loads and therefore represent the greatest risk if a failure occurs or a service does not work properly, he says.

"We believe Alcatel-Lucent will sell core routers and grow their revenue, at a minimum with the existing edge-router customer base," he says. "Alcatel-Lucent's current customers will be getting hardware and software that has already been proven in the 7750/7740 edge router platforms--that is, the FP3 chip set and the same network operating system software."

Infonetics expects Alcatel-Lucent to be evaluated by some non-customers, since many operators are looking at 100 G/100 GE as a major inflection point around which they are refining the design of their optical and data networks and that over time will take market share.

"It won't be easy. Alcatel-Lucent faces a big challenge: It is hard for service providers to change or add new products and/or new vendors in any critical area, and core routing is a critical area," Howard says. "The competition among core router vendors could get fierce over the next two years."

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