While an alternate universe continues to exist regarding discussion over radical changes and transformations occurring in the datacom/telecom realm, the number of genuinely major new fiber optic projects in 2016, may easily be few and far between across the globe. Nonetheless, Nokia/Alcatel-Lucent is evidently a major beneficiary of an especially aggressive large Data Center Interconnect (DCI) deployment at a highly prestigious enterprise company. At the same time, there are obvious indications that the “Nokia” ownership of the extensive optical product line has already resulted in adverse consequences.
Last August, we wrote, “…Nokia’s purchase of Alcatel-Lucent means that Ciena’s position particularly in the US market has been strengthened (at least one big carrier in the States wants as little to do with Nokia as possible)….” We were talking about Verizon, which we knew then had a deep prejudice against the vendor going back a long time ago, and the service provider has been unwilling to objectively view AlcaLu at all as a separate entity. Later in the year, a post in Light Reading reported from an investment institution, “We think Verizon intends to abandon Alcatel-Lucent as a second source for its long-haul network and focus future investments toward sole-sourced Ciena,” stat[ing an] analyst [from Raymond James Financial] in a research note….” Interestingly, the article further quotes the note: “[W]e suspect operators are uncertain regarding Nokia’s long-term commitment to invest in the possibly unprofitable Alcatel-Lucent optical unit…, [with the expectation that] Ciena…pick[s] up extra business from AT&T.” (As an aside, we firmly believe that Verizon has never been serious about deploying Infinera’s gear in any kind of substantial way, and that AlcaLu’s well-known tactic in using its optical products as a loss leader to gain additional business on the wireless side entirely ensured itself as a secondary optics supplier to the carrier, and had nothing to do with keeping Infinera out at Verizon.)
Of course, in Europe it is a different situation in comparing Nokia/AlcaLu and Ciena. At present, it is probably still fair to assert that on the continent, the former is still a larger player from the perspectives of both market share and mindshare.
In the DCI space, we understand that competitors are not hesitating to position Nokia/AlcaLu to customers of the manufacturer in a negative light, such as warning on the supposed deemphasizing on optical gear with the takeover. Yet, the hyperscale data center operator mentioned above did not seem to be deterred at all in continuing to move forward with the supplier for its Long-Haul (LH) network, after being given assurances that nothing will change with the merger concerning product development, support, and pricing. While the user may be in for a rude awakening, the vast majority of its connections are still at the very mature 10G technology, which one would think somewhat reduces the level of risk. There also does not appear to be any worries at another big buyer of DCI gear operating at the 100G rate — while Ciena is currently providing most of the transponder shelves as part of an Optical Line System (OLS) metro installation, there is evidently no direct connection with the disparity in supply as a result of the corporate combination. Unfortunately for Nokia/AlcaLu, its major DCI customer still predominantly at the 10G rate has also been driving in an OLS direction as well.
On the submarine side, the inability to sell that division is undoubtedly one of the most demonstrative examples of the lack of the attractive nature of optical companies these days, but of course, it also signifies the complex nature of wet networks. The good news is that although the undersea group will be treated as a separate entity, it seems logical that the important ties with the LH terrestrial faction of the manufacturer will remain in place.
[written by Mark Lutkowitz]