Review our CEO, Tom Nolle's, comments on key industry events here! This page will be updated regularly, and approximately 13 months of material is kept online at any time. Earlier positions may be available on request. Media: you may use any of this material as a quote on the topic, attributed to Tom Nolle, president of CIMI Corporation.

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Who Is This Guy?

Tom Nolle is the founder and president of CIMI Corporation. Tom started his career as a software engineer, evolving to the role of project director and software architect. During this period, he was in charge of the team that built a major financial network and one of the software architects of a packet switch used throughout the world. He also designed and developed retail distributed computing networks and multi-computer network-distributed information publishing systems.

In 1979, Tom became an independent consultant, working first with equipment vendors to develop new and efficient devices for financial networks, and then with major financial institutions in deploying advanced network technology.  CIMI Corporation was incorporated in 1982 as a continuation of this activity, and through the 1980s Tom led CIMI Corporation in developing effective new strategies for market forecasting and surveying, as well as innovative techniques in distributed transaction processing, multi-processor protocol handling, and information storage and retrieval.  CIMI, during this period, functioned as a network and systems integrator, software publisher, and strategic consultancy.

Tom's technical knowledge of network hardware and software have been a major reason his views of the market have been sophisticated, accurate, and insightful.  He is still in demand as an auditor of engineering and software products and organizations, a validator of technology claims in the final stages of company financing, and a high-level designer of hardware and software.  He's equally in demand as a maven on the business of networking, and his predictions of the growth and decline of market sectors are sought after by investment bankers, VCs, and security analysts worldwide.

A key to the success of his predictions is a computer forecast model based on simulating buyer decisions on key technology purchases using available econometric indicators and a base of 17 years of survey data. This model has produced the most accurate forecasts of industry trends available, and continued development is expanding its scope from enterprise networking to mass-market services and technology products.

A prolific writer, Tom is a columnist for Business Communications Review (where his column focuses on issues at the service demarcation point, Network World ("Reality Check"), and Telecommunications Magazine ("Technical Perspective"), and also contributes articles to these and other publications. He’s been a regular columnist for Network Magazine, but no long writes for that publication effective with the April 2004 issue. Some of Tom’s columns and articles for the magazine may still be available on their website. He is also the author of our newsletter, Netwatcher. His positions on technology and industry issues are colorful, contrarian, and highly accurate. He's predicted many of the major shifts in our industry, most at a time when popular opinion was against his position.  Tom is a member of the IEEE and ACM, and has served on the executive board of the North American ISDN Implementors' Forum and the ANSI committee on electronic interchange. He's one of less than 4,000 who have been members of the IEEE Communications Society for 20 years or more.

Tom is also a believer in industry ethics. He discloses client relationships to the press, refuses founder shares in companies, and treats clients and non-clients alike in making public comment. He also refuses to consult with companies whose mission and value proposition are at odds with market reality.  When you read a comment of his in the media, or in our own publications, you can be sure that it reflects his real views on the issue.  Nobody paid for that public position, and nobody ever will.  That's a promise.  No paying client gets less than his best, and that's a promise, too.  Ask anyone in the industry about either of these points; we know what you'll find.

Important note! Tom’s views on not only networking but on the broad telecommunications, media, and technology space are now available as a daily audio newsletter! See our homepage for details on subscriber qualifications and trials.

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November, 2005:

November 26^th regarding Cisco’s acquisition of Scientific Atlanta.

“We think that there is a chance that the SA deal could bring good things for Cisco, but it’s far from a sure thing. The acquisition could allow Cisco to create a bimodal remote, capable of delivering linear RF in a cable-like configuration, and high-speed data. That would fit better with both Verizon’s strategy for FTTN in lower-value areas, and with the broader strategies of BellSouth. SBC, likely a primary Cisco target, might also like this product better. However, there is no immediate indication that Cisco sees the trend away from pure broadcast IPTV, and if it plays the SA deal as a pure IPTV game, it will not realize any meaningful benefit from it.”

November 14^th, regarding Cisco’s future and LinksysOne.

“Cisco is clearly in a growth hiccup, and they clearly need to either create a massive new revenue stream or break themselves into smaller business units who can develop some shareholder equity. It appears that LinksysOne is an attempt to do the former while preparing for the latter. LinksysOne is a program to sell Cisco LAN and VoIP products through a service provider as a package for the SMB space. It is likely to generate significant revenues (up to a billion dollars) and more important to create some leverage for Cisco in carrier VoIP. However, it’s not likely to be enough, by itself, to solve Cisco’s stock appreciation problem.”

November 5^th, regarding the FCC’s NPRM/NOI on franchising.

“The FCC has issued a notice indicating that it will examine the issuing of TV franchises to determine if franchising entities are withholding them unreasonably, which is contrary to law. This process is likely to require considerable time, six months or more, and we believe that it is most likely an indirect coercion of franchising authorities. States and municipalities, reluctant to lose control of the process to the FCC, are more likely to move quickly to admit additional competitors, notably the RBOCs. However, we also note that the FCC has asserted that refusal to grant franchises to competitors who fail to offer service uniformly across all economic zones of the franchise area is not ‘unreasonable’. This is yet another clear assertion that economic red-lining will not be tolerated, and we believe that this will have a major impact on RBOC video plans because it limits their ability to create high rates of return by targeting premium-spending neighborhoods. Since it is still very legal to target high-income franchise areas, rather than the high-income portion of mixed areas, we expect this drive will induce more states to follow Texas’ lead and make franchising state-wide in scope. Under the current law, this would prohibit economic targeting state-wide. That, in turn, would make it more difficult to deploy either broadcast IPTV or FTTH, and would move the market more toward hybrid fiber/coax broadcast delivery with VOD and perhaps PPV over broadband.”

October, 2005:

October 31^st, regarding the FCC’s conditions on approval of the SBC/ATT and Verizon/MCI mergers.

“The FCC has approved both mergers with generally neutral requirements imposed, except in three areas. First, the FCC requires that both carriers agree to maintain at least as many settlement-free peering agreements for Internet service as the combined entities had in the past. Second, the FCC requires that the carriers offer “naked DSL” within one year. We are concerned about the first requirement in that there is no guarantee that there will be enough surviving ISPs to peer with in three years as to permit compliance. In the case of the second requirement, we believe that it does nothing but encourage portal vendors to wholesale naked DSL and develop VoIP strategies that are calculated to undermine the PSTN by displacing traditional phone services. This could place additional burdens on the USF. Third, the decision to make the FCC’s non-binding statement of Internet principles enforceable on the merged parties seems to us to bring back bubble-minded idealism to a market that was only beginning to recover from it. We wonder why the parties involved were willing to accept these conditions. We’re also puzzled why the FCC would take steps to deregulate DSL in general, and then impose increased burdens in association with the merger approvals. However, Congress can make the whole issue moot at any time through legislation. Perhaps everyone is betting Congress will do the right thing?”

October 28^th, regarding the FCC and franchising.

“It appears that the FCC plans to take action in the franchising space to relieve the RBOCs of some burdens. Kevin Martin, the Chairman, spoke to this issue at Telecom ’05, and the FCC has an item on its agenda for November 3^rd relating to the franchising provisions of the law governing cable companies, in particular the section that says that local authorities cannot unreasonably refuse franchising of competition.”

October 24, regarding IBM’s acquisition of DataPower.

“IBM, in the late 1980s, did a positioning of terminal emulation that was calculated not to seize that market but to warn it. We think the DataPower deal by IBM is exactly the same thing. IBM wants SOA to succeed, and wants application networking to develop under IT control, with traditional IP-based networking as simply an underlayment. That has been the goal of the web services equipment and platform vendors from the very first. Remember, Microsoft called web services “the application layer of IP”. We recall to our readers that all the OSI layers above layer 3 are outside the network in the end systems, and that is exactly what we think Microsoft and IBM have in mind for SOA and web services. With DataPower, IBM can sell an application fabric based on web services to IT professionals, and use this fabric to control the important features of networking, the features that equipment vendors could otherwise use to prevent price and profit erosion in the equipment space. This is an absolutely critical development, and it shapes what we think will be the major battle for data networking in the balance of this decade. Will network features that are deployed to support applications be IT features or network equipment features? The profit margins, winners, and losers of both the IT space and the network equipment space will be determined by how this battle goes.”

October 3^rd, regarding the FCC DSL order.

“The DSL order was finally published on Monday of last week, and we have now reviewed it in full. The FCC is promising a new regulatory posture on broadband that essentially abolishes Title II regulated services and the whole series of FCC Computer Inquiry steps. Under the new order, DSL is an “information service” with a “network component”. While this regulatory device is not new, the FCC is applying it to require that DSL be provisioned by the incumbent and offered by the subsidiary, as a mechanism to circumvent the Telecom Act’s separate subsidiary requirements. We are of the view that the order might well be vacated on appeal, but we also note that Congress is moving to make the matter moot by exercising much the same vision through legislation. In a separate matter, we strongly hold to our previous view that SBC and BellSouth will be rethinking their IPTV approach, in part due to the iffy nature of the FCC order and in part because their early exploration of the Microsoft/Alcatel option seems to show that it cannot deliver broadcast channels competitively with DBS or cable—or with Verizon’s RF-linear-over-fiber approach. We believe they will instead move to a hybrid fiber coax delivery system. We will be producing a special TMT Advisor^TM issue on this order on October 5^th, and it will be emailed to subscribers on that date.”

September, 2005:

September 26^th, regarding the publication of the FCC DSL order.

“The FCC today published the text of its DSL order, and the order includes a sweeping removal of regulatory restrictions and subsidiary requirements for DSL services. We had not expected the FCC to go this far in their decision. Under the new order, RBOCs are relieved of Computer Inquiry and regulatory subsidiary requirements and are free to offer DSL either as a tariff or non-tariff service, as a competitive or non-competitive service. The order does not impact the unbundling requirements established for physical plant in prior orders (03-36), so unbundling requirements remain in effect for the copper loop. We believe that it is likely this order will be appealed because it appears to circumvent sections of the Telecom Act, but since the major competitors of the RBOCs are now being acquired by them, it may be that no one with the financial resources for the appeal will step forward. In general, we believe the new order will improve DSL spending by eliminating the subsidiary requirement for DSL. We also believe that, independent of this issue, the RBOCs are moving away from an IPTV model for broadcast channels. Thus, we believe that there will be considerable adjustment made to the scheduled deployment of SBC’s and BellSouth’s IPTV. We note that Verizon has launched its FIOS TV, a non-data model using simple broadcast over fiber, and we believe that this model sets an impossibly high bar for IPTV offerings. Thus, we would expect to see SBC and BellSouth adopt a variant on the Verizon model, using hybrid fiber coax. We will be preparing a summary of our analysis of this order for our TMT Advisor customers this week in audio form, and will include a written summary in the October issue of our newsletter.”

September 19^th, regarding the launching of TMT Advisor^TM.

“We are pleased to announce that we have begun trial subscriptions to our audio multimedia daily publication, TMT Advisor. We are limiting the number of concurrent trials to manage the service launch process, and each prospective subscriber must take a 2-week trial first. If you are interested in this publication, please check the information on this site and/or contact us for more details.”

September 18^th, regarding the “new” telecom legislation introduced in the House.

“The passage of new legislation on telecommunications introduced in the House is likely to be delayed by the combination of Supreme Court hearings in the Senate and the Katrina agenda of Congress in general. However, it seems very possible that this legislation will pass in some form, and even more likely that the general principles embodied in it represent what the FCC will undertake on its own. We believe the most significant points of the legislation are the forbidding of barring any lawful traffic, the imposition of registration requirements for broadband, video, and VoIP providers, creation of a uniform franchising requirement set, and most notably prohibition against ‘red-lining’ or discriminating against an area for video services on economic grounds. We believe this last provision would essentially eliminate broad-based FTTH without another form of video to serve less-affluent areas. Thus, we believe another video strategy is likely to emerge, with better price points.”

September 16^th, regarding the eBay purchase of Skype.

“There are surely better reasons for eBay to buy Skype than for Yahoo or Google to do so, but in our view the reasons just aren’t good enough. We do not believe that Skype in particular or voice over IP in general will be a real benefit in the online auction process, and we do not believe that advertising on a VoIP service would be effective. If eBay wanted to simply facilitate voice communication between bidders and owners, there are many less expensive ways to acquire that link even if one accepted it would be valuable at all. We think the most likely goal of eBay is to promote a broader role for themselves as a portal, and while recent voice incursions by Yahoo and Google make it clear that voice (like IM and email) may be part of a portal strategy, eBay still lacks the biggest part—a search engine.”

September 6^th, regarding Katrina’s impact on the telecom industry.

“We extend our profound sympathy to those who were caught in the awful aftermath of Katrina. We believe the events show that communications in the US is far more vulnerable than most had expected; certainly more than regulators and carriers had thought. We also believe that Katrina shows the risk many companies are taking by not having adequate disaster planning. Addressing these risks will now likely become a priority that will boost overall network and IT spending somewhat in the next two years. It’s terrible that such a price has to be paid for realization, but better that it not be paid again.”

September 2^nd, regarding our new broad-based technology newsletter.

“I am pleased to announce that beginning September 19^th we will be accepting limited trial subscriptions to a new newsletter, TMT Advisor^TM, a multimedia newsletter issued most days and covering our analysis of the key technology events that shape the telecommunications, media, and technology market. We invite you to review our description of the new publication and ask for a trial if you’re interested. I will be personally recording each of the briefings, and they’ll be published every day that I have access to the Internet and the necessary sound recording tools. It is my personal hope that this will be the most timely and valuable technology news summary available in the marketplace at any price.”

September 2^nd, regarding Ciena’s quarterly report.

“Ciena reported good earnings growth this quarter, and we believe this shows the growing strength of the optical transport market, particularly in the metro space. Our forecasts show metro optics to be the area with the best overall growth potential in the carrier equipment space for the balance of the decade. However, it is also true that large carriers like to buy ecosystems and not just piece parts, and Ciena will need to develop a good broadband access, metro Ethernet, and IP story. Other pure-play packet/IP technology players in the carrier market will need to look at optical introductions, partnerships, or acquisitions to keep up.”

August, 2005:

August 26^th, regarding rumored IPOs and high valuations in the VoIP space.

“We are of the view that VoIP is not a service that can be made profitable except as an adjunct to a broadband access offering to the same customer. That means that any overlay player in the space has, in our view, a challenging revenue future to face. Incumbent carriers will be offering VoIP services as soon as the US regulatory framework is defined, likely early this fall. That and the inevitable competition from free services and IM-based voice services will insure very low prices and profits in the space. We think the rumored valuations of Vonage and Skype are unrealistic given these factors.”

August 24^th, regarding our TMT research cooperative venture.

“The term of our involvement in the publication of independent TMT Wall Street research lapses with the end of this month, and the agreement will not be renewed. We will be exploring a variety of new options to serve the special interests of our clients in the financial industry, and we invite all those clients to feel free to contact us with suggestions. Programs to serve this important segment of our customer base will be announced beginning in October and will be in place for 2006.”

August 7^th, regarding the FCC decision to declare DSL an information service.

“This order is interesting because it opens as many issues as it resolves. Under the Telecom Act, the RBOCs must now deploy DSL via a separate subsidiary, and that means that they’ll have to carefully balance the way that they separate equipment between DSL and legacy voice/data services to meet regulatory requirements. We don’t expect this will delay DSL deployment, but we do believe that over time it will change the baseline architecture for RBOC outside plant. It may also have a positive impact on Microsoft’s IPTV strategy because it reduces the regulatory collisions that implementing an efficient broadcast over IPTV approach might otherwise create.”

June, 2005:

June27^th, regarding Cisco’s AON launch.

“We’ve finally received enough information on Cisco’s AON to comment. There is no question that AON is the most web-service-friendly articulation of network evolution that any major vendor has so far made. There seems little doubt that if Cisco continues to execute on this vision, it has a real chance of gaining a prime role in defining how the whole critical issue of network-to-application coupling will develop. However, the current execute falls short of the full potential, likely in our view because Cisco has additional announcements to make. We’ll be watching this space for how the rest of the AON architecture emerges.”

June27^th, regarding the Supreme Court decisions today.

“We are not surprised by either of the Supreme Court rulings today; the decision that cable companies need not share their infrastructure and the decision that file-sharing players may be liable for copyright infringement. In the former case, we believe the Court agreed to hear the case only because of conflicts in the Court of Appeals rulings in various parts of the country. The Court held, in 1999, that the FCC had broad discretion in these cases, and we believe the FCC’s ruling was well within that discretion. The Court believed this as well. With regard to file sharing, we note that the ruling does not ‘make file sharing illegal’ as some will say, but rather only makes it possible to sue file sharing players for any role they play in encouraging infringement. Both these decisions are, in our view, affirmations of policy that will in the long run benefit the industry. Absent a way to limit competitors’ rights to arbitrage their infrastructure, access players will not invest to create consumer broadband. Absent a way to protect intellectual property and content from piracy, that material will be withheld from network distribution. Either would severely cripple the industry, so we are in the balance favorable to the decisions.”

May, 2005:

May 20^th, regarding the IBM/Nortel Pact.

“This may be one of the real trend-setting events in the industry. Not only does it suggest that carriers will be shifting more of their capex to servers, it also suggests that IBM may be taking aim at the telecom space, hoping to displace Sun as the primary vendor for network-located server technology. This may also spawn a wave of partnerships or even M&A in the server/telecom spaces.”

May 2^nd, regarding Juniper’s Enterprise Infranet announcement and Avaya partnership.

“We think these announcements show that Juniper isn’t going to chase Cisco to the detriment of its margins. For the Avaya partnership, we see this as a way for Juniper to use relationships to extend its credible scope on premises rather than acquisitions. With respect to the Enterprise Infranet, we believe Juniper is working to establish a complementary enterprise relationship to its carrier-oriented Infranet initiative, ceded to a standards group and now developing into a significant influence in carrier planning. The Enterprise Infranet concept seems to develop a theme of “relationship management” as opposed to the carrier theme of connection management. Juniper also indicates it will have an “Infranet Connector” element that will link the two, and this will likely be an interface through which dynamic services to the enterprise can be brokered. We will cover this more as details emerge.”

March, 2005:

March 29^th, regarding Juniper’s acquisition of Kagoor Networks.

“Juniper announced today that it was acquiring a session border controller company, Kagoor Networks, in an all-cash deal. The SBC product area is the secret sauce of VoIP, since an all-IP voice community without significant PSTN intercalling would not be likely to need much in the way of softswitch products, the class of product most believe to be linked to VoIP success. Kagoor is a strong complement to Juniper’s Infranet activity as well, and the deal may suggest that Juniper is about to move more aggressively to productize the Infranet concept it sponsored almost two years ago, and which is now being supported by an international consortium.”

March 29^th, regarding the MCI decision to accept the Verizon offer.

“The decision by MCI to accept Verizon’s offer was good for Verizon, but not for the reasons many believe. We believe that Qwest, had they acquired MCI, would have quickly moved to merge with BellSouth, creating a formidable competitor to SBC and Verizon. Clearly, Verizon is better off without that competition, but it is important to Qwest, BellSouth, Sprint, and the industry overall that a third competitor develop. The question now is how a new combination of these three remaining players can be created. Sprint holds the key to this. If they decide to sell their wireline LD assets, that combined with a Qwest/BellSouth alliance might create a competitor of national stature, but only with precise execution. A better deal would be to have BellSouth sell off their Cingular stake to SBC and merge with Qwest and Sprint. The next quarter should tell the tale.”

March 9^th, regarding AOL VoIP and Microsoft’s “Istanbul”.

“We think these developments, both of which link IM and VoIP in a much tighter way, could be the beginning of an important trend. IM-mediated VoIP, where IM is used to signal calls and pass caller options like video/voice, or even select wireline or wireless ringdown, could be an alternative way of moving the VoIP market. The FCC’s preliminary position on regulation of VoIP has already indicated that such IM-based voice services would not be regulated. Some of the features that are being rumored for AOL, like E911 support and the ability of customers to keep their old phone numbers, would imply a greater level of PSTN integration, though. The FCC has also suggested that VoIP services that used PSTN numbers and provided PSTN intercalling would be regulated. We’ll have to wait to see how both the Microsoft and AOL offerings emerge to make a complete assessment of how they might impact the market overall.”

February, 2005:

February 3^rd, regarding the rumored Qwest/MCI deal.

“While both Qwest and MCI certainly need a new lease on life, we do not believe the proposed deal to be optimum for either party. Qwest’s debt problem stems largely from the long-haul legacy of the original Qwest, a network that the MCI acquisition would overlap. Qwest has few large enterprise headquarters in its territory, and would have to rely on MCI’s sales force, and thus likely on the MCI brand. This is hardly sterling at the moment. We also doubt the new venture would be large enough to compete with SBC and VZ. Thus, we propose that either this deal is a precursor to a BellSouth merger with the Qwest/MCI pair, or that Qwest is a stalking horse for MCI in soliciting a bid from a larger and more credible player.”

January, 2005:

January 31^st, regarding the decision of SBC to acquire AT&T.

“SBC’s and AT&T’s boards have approved an acquisition of AT&T by SBC, a move which we believe is probably not in the best interests of either company. SBC is paying a significant price to obtain entry into the enterprise market, which will probably experience a 14% or more revenue decline between now and the closing of the deal. AT&T will see massive reductions in force in an attempt to develop profitable operation. We expect that both companies will attempt to ally on services before the deal closes to slow AT&T’s decline and to fend of competitive responses. We also expect that there will be reactions from other IXCs and RBOCs. The greatest truth to be learned from this is that IXCs cannot be profitable, or even survivable—period.”

January 28^th, regarding SBC and AT&T merger rumor.

“We don’t believe that the SBC/AT&T merger rumor is, in the balance, likely to move forward. In our view, regulatory delays in approval would be formidable even if approval could be assured, and in any event the combination is non-optimum for either player. AT&T would be better served via a BellSouth deal, and SBC would be better off with MCI, or buying Sprint’s wireline LD business. We don’t believe Verizon would be likely to enter any major merger deals, though they might pick up a second-tier long-haul player. In equipment terms, we don’t believe that merger plans even extended to other players in a general absorption of the IXCs would have a significant impact on capital spending, though it might accelerate the shift from circuit to packet.”

January 25^th, regarding rumored Alcatel win at BellSouth.

“We’ve heard a rumor, to which we attach some credibility, that Alcatel has won the BellSouth IPTV RFP award. The rumor also indicates that the bid includes a ‘two-stage’ DSL architecture with a remotable line termination backed up by the 7330 IP remote DSLAM. Again, a major reason for the selection of Alcatel appears to be the firm’s ability to systematize the entire IPTV delivery system rather than to provide simply a collection of gear. If true, this would mark a major victory for Alcatel, who was counting on its DSL products to pull through the rest of its packet line.”

January 20^th regarding AT&T’s earnings report.

“We are very disappointed, but not very surprised, by AT&T’s earnings report today. The company’s revenue decline appears to be accelerating and there does not seem to be any indication of concerted activity to stem that decline. We are concerned that their CapEx for 2005 is pegged at $1.5 billion, below the levels of 2004, when their only hope of independent survival is a combination of new high-level services and more effective IP convergence of legacy services. While it is not impossible that they have invested in both (and simply cut legacy CapEx more than enough to offset the increase), we did not see or hear anything that would suggest AT&T has taken the steps they outlined in their “profitable by 2006” presentations to Wall Street in the past. We’re afraid that AT&T may now be buffing its financials in the hope of a merger. If that’s the case, there will likely be no survivors in the traditional IXC space. MCI would also have to seek a partner, and Sprint would likely spin its wireline business out to sell off, concentrating on wireless.”

January 19^th, regarding Comcast and Verizon announcements.

“Not to our surprise, Comcast and Verizon now seem to be taking direct aim at their true longer-term strategies. Countering Verizon’s ads for higher-speed business DSL and for FTTH broadband, Comcast announced it would increase its cable speeds to 4 Mbps. Verizon has announced plans for more FTTH deployments, and announced intentions to file for franchise to deliver multi-channel cable TV over fiber in these locations. We believe this proves several important points. First, the FTTH seems universally targeted at high-income residential communities without a current cable choice. This is reflective of the need to earn a good return on the fiber deployment, which we estimate to cost between $1,000 and $1,500 per customer passed. Second, we believe that it is clear now that any TV-like video over fiber will be delivered in the broadcast model and not as IPTV. Verizon has not yet indicated whether, or how, it will deploy IPTV but we believe it will follow the store-for-play model. Third, we believe that Verizon will shortly announce higher-speed residential DSL availability. We note that its FTTH broadband speeds are all within the range of DSL capability, far lower than could be supported on FTTH.”

January 11^th, regarding Comcast VoIP.

“We think that Comcast is making a serious error in its estimates on the potential of VoIP services for cable customers. They are not likely to be able to sustain a per-month price much more than half their goal, and we also believe that their uptake will be considerably smaller than they are projecting. Finally, to assume that VoIP could be a ten-year revenue contributor is more than optimistic given the low barriers to competitive market entry. If currently proposed legislation has its way, the cable companies will not enjoy any less a requirement for equal access than the RBOCs, and that would prevent Comcast from blocking competitive voice-over-cable solutions from players like Vonage. We view this announcement as either creative positioning or an indication of a serious lack of strategic insight, as we’ve already characterized Verizon’s FTTH as being.”

December, 2004:

December 23^rd, regarding some recent trends in WDM and their impact on carrier spending.

“Recent tests by and input from major carriers suggests that for long-haul transport they are looking at smaller numbers of wavelengths and larger capacity per wavelength, rather than a traditional high-number-of-wavelength DWDM formula operating at 10Gbps. If this continues to be true, as we expect, then there will be less near-term pressure on core router vendors created by the so-called ‘agile optics’ products that would replace some deep-core routers. Our forecasts for the router space have suggested this trend for some time, and the fact that it is developing means that core router sales should be strong through at least 2007.”

December 18^th, regarding the FCC’s unbundling order.

“The FCC has issued a revised unbundling order in response to the DC Court of Appeals vacating of their prior order. In the new order, the FCC declares that local switching is not subject to unbundling, which finally kills the UNE-P issue. There is a transition period for existing services fulfilled under UNE-P. We believe that UNE-P has been destructive to both ILECs and IXCs, and has fostered a CLEC industry with no long-term chance of success. While there may be difficulties in adapting to the new rules, the trend in regulation has been clear and the major parties have faced that trend since the summer. We also note that the Covad/Verizon deal on contractual line sharing shows that competition may now move to broadband on copper, which is where it should have been all along.”

December 9^th, regarding the Cisco Analyst Conference.

“Cisco, in its 20^th-anniversary analyst conference, announced a couple of new products but most significantly announced a new strategy of virtualization that we believe they will promote as a competitor to Juniper’s Infranet. While the details on their Service Exchange notion are sparse, they did announce the Service Control Engine, a product that uses XML/SOAP and web services in at least some service control missions. Juniper has not yet released a specific product supporting their Infranet theme. This Cisco development puts Cisco back in the service provider architecture game, and puts pressure on Juniper to deliver more substance to its Infranet story.”

December 3^rd, regarding the telecommunications market in 2005.

“We believe that 2005 will be a strong market for telecommunications equipment worldwide, but we also believe that the market will reflect some truly seismic shifts in product requirements as the common carrier buyers begin to dominate all sectors of spending. We have noted before that this year marks the transition point between an Internet-dominated IP spending pattern and a public infrastructure pattern in which common carriers dominate. We are also seeing a significant shift in optical spending focus, from core to metro, and the beginning of a major access buildout based on IP and DSL. There will be a number of significant surprises in the 2005 market, and we plan to lay the groundwork for the year in our Annual Technology Forecast issue to be released later this month.”