Service providers carrying US federal government communications, including submarine networks that are not based in the country, should be allowed to purchase optical systems from the two major Chinese vendors, Huawei Technologies and ZTE. While the official explanation has involved protection, we believe that it has been more about preserving the existence of domestic suppliers than it has about securing state secrets. All of these carriers should not be penalized in lacking the opportunity to purchase lower cost equipment enjoyed by operators in other parts of the world. By removing this kind of market protectionism, it would force companies supplying the US to offer greater differentiation in their product lines to counter the difference in cost, which would benefit the entire world.
It does not matter that China itself has blocked vendors like Ciena from competing in that nation. Despite having over 12,000 tariffs on products in place, the US needs to get back to its tradition of a totally open market.
With all of the hype about the explosion in the need for bandwidth, the one aspect that is barely discussed is by substantially lowering CAPEX, there is a greater likelihood of the incumbent service providers in the States, often intractable to change of any kind, to significantly increase their expenditures. Also, it is hardly a zero-sum proposition in terms of employment in the US, notwithstanding the prevailing political rhetoric in the country about the ill effects of greater foreign-based manufacturing, in that there is always an increase in opportunities, such as for ancillary products, and for supporting the efforts in general of these outside firms.
While there is no doubt that the Chinese government has been sponsoring cyber-hacking throughout the world, on balance, the relatively low risk of much greater threats to national security resulting from what would be for sure carefully inspected optical gear, is outweighed by the growth potential for the US economy in general. Allies of the US that obtain intelligence from us are certainly using networking equipment from Huawei and ZTE, and we are not aware of one public report of a breach resulting from such gear.
By allowing a powerful optical player, especially Huawei, to completely enter the US optical space, it would help to keep the incumbent vendors more honest to the requirements of their customers. For example, perhaps Ciena would have thought twice about discontinuing the Cyan metro transport product line (as it did with its CN-4200), which has been quite disconcerting to tier 2 and 3 customers. In the case of Infinera, possibly there would not be the appearance of shifts in outlook regarding technology including as to whether its new Gen 4 concept is resulting in delays in current sales.
In addition, it is also possible that Verizon would not have been forced to admonish Fujitsu at OFC 2016 about the customer’s lack of interest in moving to disaggregated platforms. However, with the metro 100G deployments at the buyer being gradual, we are still optimistic that the supplier has adequate time to recover with a more attractive solution and still get a reasonable share of this business.
[written by Mark Lutkowitz]