Router Interface Pricing's Dirty Little Secrets

Mar.12.07 | About: Global Crossing (GLBC)

Great stuff today over at the Global Crossing (NASDAQ:GLBC) blog, where they spill the beans on their internal investigation into the cost/bit for Ethernet vs. SONET/SDH router interfaces.

The conclusion? The biggest price disparity isn’t necessarily Ethernet vs. SONET interfaces. It’s the difference between big iron routers from vendors like Cisco (NASDAQ:CSCO) and scaled up switch routers like the Cisco 7600 or Cat 6k or equivalent products from Force 10.

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Router Vs. Switch/Router

In short, 10G OC-192 interfaces are priced at ridiculous levels, particularly considering their cost isn’t substantially different than a well engineered 10GbE interface. The really big shocker is the 5x difference between the carrier class Router and a bootstrapped switch router.

This is not surprising if you’ve had your ear to the ground for a while. Its best known dirty secret is that vendors rape and pillage when it comes to high-end Telecom equipment pricing.

What is surprising is a major carrier like Global Crossing is publicly agitating - in essence, putting their vendors and the investment community on notice that something should change.

I will tell you that if these costs don’t fall in line with each other soon, the players offering these big-iron boxes for tall prices are going to find themselves with a dead-end platform.

If they do drop their prices to compete, it may be too late for them to fix the trend. SONET may have lost favor, and it did nothing to deserve last place in that race… it is the victim of market dynamics.

Global Crossing may be papering over the technical differences between these systems in some cases. Often it is architecturally impossible for all interfaces on these lower end to operate at maximum speed. This oversubscription of links is a simple way to reduce architecture costs and depending on the application, can be a favorable or unfavorable thing to an end user.

I believe that at these cost differences, they’ll figure out a way to make the cheap boxes work.

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