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Cisco: Starent purchase ‘completes’ the mobile core

Portfolio fills the remaining gaps in Cisco’s 3G and 4G cores, but it also allows Cisco to take advantage of Starent’s building global momentum

Cisco Systems’ (NASDAQ:CSCO) mobile radio access business may be limited to WiMax, but it has much greater ambitions for the mobile packet core. If its $2.9 billion acquisition of the Starent Networks (NASDAQ:STAR) goes through, it will have filled in the remaining holes in its 3G and 4G core product portfolio, which, according to Cisco, will allow it to offer an end-to-end mobile core solution—one that pairs Cisco’s strength in the IP routing market with Starent’s increasingly sought-after expertise in mobile data gateways.

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“We will be able to offer a complete solution, minus the radio, going back into the multimedia core,” said Starent Networks president and CEO Ashraf Dahod, who will head Cisco’s new Mobile Internet Technology Group once the deal closes. “The operator will be able to build a complete core using the suite of Cisco products.”

Specifically Starent adds two key products to Cisco’s portfolio: the mobility management element (MME) of the long-term evolution (LTE) evolved packet core, the control node that terminates all sessions on the mobile network, and the UMTS 3G network’s equivalent, the Serving GPRS Support Node (SGSN), which has become of increasing importance as new high-speed packet access (HSPA) networks have encouraged unprecedented levels of mobile data use.

Cisco has traditionally focused on the routing elements of mobile networks—packet pushers like the gateway GPRS support node (GGSN) for HSPA networks and the packet data serving node (PDSN) for CDMA EV-DO networks. It’s followed the same strategy with LTE, developing the two primary routing components for the evolved packet core, the serving gateway (or S-gateway) and packet data node gateway (P-gateway), which direct the packet flow through, off and on the access and core networks.

Starent also has a full complement of routing elements and has actually been much more successful in selling them than Cisco. Its first-generation ST16 platform became the mainstay PDSN for CDMA 3G operators, which makes North America Starent’s primary market accounting for 90% of revenues, but in the last few years its second-generation ST40 platform has made inroads with global HSPA operators such as Vodafone (NYSE:VOD). For those contracts, Starent’s main competition has been the entrenched wireless infrastructure providers like Ericsson (NASDAQ:ERIC), Nokia Siemens (NYSE:NOK, NYSE:SI) and Alcatel-Lucent (NYSE:ALU), rather than from Cisco. In fact, Starent was one of the first companies to break the lock that the incumbent vendors had on core networks deployments, convincing operators that they could source their gateways separately from their radio access gear.

That best-of-breed approach has carried over into 4G. Verizon Wireless (NYSE:VZ, NYSE:VOD) selected Starent along with radio vendor Alcatel-Lucent and Ericsson to build its LTE core, a marquis win for Starent and one it may have one in spite of itself, according to Mark Sue, analyst at RBC Capital Markets. Though a publically traded company, Starent is tiny compared to the major infrastructure providers and supplies only a small part of the overall 4G network, which makes it a gamble for a major wireless operator, Sue said in a research note on Cisco and Starent. Sue said that Starent wasn’t originally in the running for the contract as VZW looked to big full-service vendors to supply large chunks of the network, but with the major vendors’ core gateways falling short of expectations Starent was brought in to fill the gaps. Sue added that Starent might win AT&T’s forthcoming LTE core contract the same way.

“AT&T is trying to reduce the number of vendors they use to reduce costs by creating technology ‘domains’ and choosing two vendors to serve each domain,” Sue said. “Large carriers with more proven experience and performance have the advantage, and those vendors lacking any function AT&T requires for a domain would have to partner up. As a result, sources within Starent do not expect a domain win but plan to take a bigger role in supplying the core if incumbent vendor equipment cannot meet AT&T’s needs. This was the case with Starent’s largest customer, Verizon, where they were first overlooked for the packet core for their small size and inexperience but then were later brought back in.”

Becoming part of Cisco, however, will make give Starent the backing of an enormous global vendor, one whose routers already populate the IP data networks of many of the world’s operators. And as Cisco points out, Starent’s portfolio will allow it to offer every element of the core all the way down to the data center. Cisco has had some initial success selling its routers to 4G operators. In May, Clearwire named Cisco the key supplier of all of its IP infrastructure, in effect supplying all of the routers in its network accept the first one, the access service network (ASN) gateway, which terminates sessions from the WiMax radio network. The ASN contract went instead to emerging 4G core vendor WiChorus.

Once the acquisition is complete, Cisco will face some complex product choices. Though Starent’s portfolio fills in gaps in Cisco’s product line for the MME and SGSN, it simply can’t slot those elements in. Cisco and Starent’s network architectures are radically different. Cisco designed its gateways as software upgrades to its existing family of IP routers, while Starent developed a self-contained platform, which uses a distributed architecture to handle individual or all elements of mobile core in a single box. Considering the success Starent has had in the market, Cisco could choose to discontinue its own products in favor of Starent’s, but Cisco senior director of service provider marketing Simon Aspinall said that one be case, at least not initially.

Cisco won’t make any firm decisions about products until the deal closes, Aspinall said but it will most certainly continue to support its current mobile core customers with its router-integrated products. As for new customers, Cisco will make product lines available, he said. Some customers may take a data-centric approach, choosing to design their network around the Cisco’s edge routers, including the mobile core gateways, Aspinall said. Others might take a more mobility-centered approach and opt for Starent’s purpose built platform, he added.

“We’ll give them a choice of whether to follow the integrated route that Cisco offers or the dedicated router that Starent brings,” Aspinall said.

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© 2014 Penton Media Inc.

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