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TELECOMS AND SOFTWARE NEWS
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Cisco acquires mobile core gear vendor Starent Networks for $2.9 billion
John Mazur, Julien Grivolas
Cisco acquires mobile core gear vendor Starent Networks for $2.9 billion
With the acquisition of Starent's mobile optimized IP infrastructure equipment, Cisco has boosted its capability to play a leading role in the 4G mobile race. With mobile data traffic increasing rapidly, mobile operators will need to enact fair-use policies, policy management and traffic management features to preserve limited over-the-air bandwidth. Starent's IP routers are well positioned to serve the policy and traffic management needs of today's wireless networks while simultaneously enlarging its addressable customer base for future EPC upgrades.
Mobile operators - be careful what you wish for
It wasn't too long ago that mobile operators were complaining that sales of broadband data weren't recouping 3G network investment. What a difference unmetered monthly broadband subscriptions can make - driving mobile data traffic to new heights, with no end in sight! Landline telephone cord-cutters are embracing mobile Internet as well; iPhone and Blackberry users are downloading video-enabled apps, forcing mobile operators to find solutions to avoid localized wireless bandwidth brown-outs. Some operators are exploring smaller, less dense cell sites with femtocells; many are exploring 4G's expanded wireless bandwidth; and most are considering fair-use policies and traffic management tools (see the report Mobile broadband traffic management and QoS prioritization). All for good reason - the average laptop-based mobile data session uses over 400 times the bandwidth of a voice call. Starent Networks' routers have the foresight and feature set to support mobile data solutions - an example of being in the right place at the right time. Founded in 2000, profitable since 2005, and with an IPO in 2007, Tewksbury, Massachusetts-based Starent, with 1,000 employees worldwide, will become Cisco's new Mobile Internet Technology Group.One solution for Cisco's high-end routing market share erosion: mobile
Network operators have unanimously embraced IP infrastructure as the cornerstone for their next-generation networks, and Cisco dominates the IP routing market. But this market has been maturing, and other network equipment suppliers have been gaining share at Cisco's expense through applications focus. Cisco's share of the total IP/MPLS market fell from 51% in 2Q07 to 42% in 2Q09. Alcatel-Lucent gained share by specializing in IPTV-optimized service routers; Tellabs and Ericsson gained share with mobile backhaul-optimized routers. Starent was looking beyond mobile backhaul to policy control, traffic management and the next-generation mobile network. By design, 4G mobile networks will be all-IP networks, from the IP-based mobile device to the evolved packet core. The 4G mobile services vision integrates IP QoS with location-based services, personalization and utility computing or content delivery network capabilities. Cisco has been in the throes of an edge IP/MPLS product transition from the 7600 series to the ASR9000, and competitors have taken advantage of it. While IP network convergence remains a popular theme, along with general-purpose edge and core IP/MPLS routers to support it, differentiation at the services edge has depended on residential IPTV, business Ethernet aggregation, and mobile backhaul.Cisco becomes a de facto leading vendor in the nascent EPC market
The acquisition of Starent brings complementary products (SGSN, MME) to Cisco's existing mobile core business. Starent Networks' ST16 and ST 40 multimedia routing platforms also grant Cisco instant credibility and a strong position in the early 4G mobile evolved packet core (EPC) business. To illustrate Starent's position in the nascent EPC market, note that Starent was selected as an EPC vendor at Verizon alongside the far bigger Alcatel-Lucent and Ericsson, which were also selected to supply LTE RAN gear. In addition, Starent has delivered many systems that are software-upgradeable to support EPC functions to CDMA and UMTS operators, including major accounts such as Vodafone Germany. Cisco will seek to combine this already strong position with its wireline IP strengths in a converged vision. This is a business opportunity that would have been more difficult for Starent to target on a stand-alone basis. What does this mean for Cisco's competitors?
Full-line competitors such as Alcatel-Lucent, Ericsson, NSN, Huawei and ZTE should be very much concerned about this acquisition. Motorola may also feel the impact of the deal, as its partnership with Starent may be at risk. Earlier this year, Motorola agreed to resell Starent's EPC solution to form a complete LTE/EPC offering. So far, wireline rival Juniper has said very little about its strategy around EPC. It's difficult to imagine Juniper trying to outbid Cisco for Starent, but Nortel's Next-Generation Packet Core business, which includes ATCA-based SGSN, GGSN, MME and SAE gateway elements, is for sale and provides Juniper with one alternative. It could also consider expanding its cooperation with NSN into EPC. Expect much more to come as infrastructure players realign around the increasing importance of mobile.
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