As Lightwave sister site Broadband Technology Reportrecently posted, Comcast has reached a deal with ARRIS to buy as much as 8% of the systems supplier's common stock. The more technology Comcast buys from ARRIS, the more of that 8% it can purchase. The advantages for both parties are clear. ARRIS gets very cozy with the largest cable MSO in the U.S. and provides an incentive for that customer to buy more of its products. Comcast helps ensure the stability of one of its major suppliers. (Contrary to the way this paragraph ended previously, ARRIS says that owning company stock will not give Comcast extra influence on product direction, company operations, etc.) From an optical communications perspective, an equivalent agreement would see Verizon offered the chance to buy stock in Ciena based on how many packet-optical transport platforms the service provider purchased. With "Who will fund optical communications R&D?" remaining an open question, could we see a mainstream network operator assume partial ownership of one of its suppliers? The possibility seems less far-fetched than it might have a few years ago. We've seen webscale network operators invest in companies they believe can help solve their data center network bandwidth requirements. And certainly the Comcast/ARRIS deal provides a more closely similar model. So what's stopping an operator such as Verizon or AT&T (not to mention a BT or Deutsche Telekom) from picking an optical systems house with which to partner and invest? It all depends on what you think an 8% stake might buy you. Or, more precisely, what others think. Does such a financial arrangement compromise the supplier's ability to work closely with other service providers? And will other systems houses now think future RFPs are rigged? I don't believe such questions are quite as thorny in the case of Comcast and ARRIS. The cable MSO space, and the role ARRIS plays in it, are quite different from the telco environment. For example, there's much less competition among cable operators than among telcos; in fact, cable operators have been known to share technology, as the recent announcement that Cox Communications would adopt Comcast's X1 video platform illustrates. So it's less likely a cable MSO will wonder if its confidential plans are safe when working with ARRIS than might be the case in the telco world. The RFP question is more complicated. ARRIS holds a more exalted place within the cable MSO supplier ecosystem than your average optical systems company. Few systems houses have the breadth of technology (both HFC and fiber, including FTTH) for cable networks that ARRIS possesses. Cisco is probably closest in product depth (and you wouldn't expect Cisco to offer an ownership stake to any operator). As stated above, ARRIS says any ownership stake Comcast may gain won't affect the way it does business. Still, it would be understandable if a technology vendor wondered if ARRIS will have an inside track on any future Comcast business for which it bids – either because it has more intimate knowledge of what Comcast wants or because the value of Comcast's ownership stake rises with every new piece of business ARRIS receives. It's possible neither Comcast nor ARRIS care what other cable technology suppliers think (and would probably assert that they can't control others thoughts anyway). But I'm not sure there is a telco and an optical systems house (at least in the Western world) with the kind of brass necessary to follow their example.
Is the Comcast/ARRIS deal a model for optical communications?
With "Who will fund optical communications R&D?" remaining an open question, could we see a mainstream network operator assume partial ownership of one of its suppliers?
Jul 6th, 2016