The communications market is changing rapidly. Phone companies are merging as they consolidate their disparate voice and data networks onto the Internet to save costs. Soon, everything from telephone calls to TV programs will travel over an Internet Protocol network and into the home via a broadband connection.
Businesses large and small are also moving more of their applications and processes onto the Net, enabling offices throughout the world to stay connected as if they're right down the hall.
Cisco, considered the world leader in Internet equipment, is poised to benefit from this communications revolution. But critics wonder if Cisco still has the fire in its belly and the technological vision to remain at the top.
The company, which made a name for itself selling Ethernet switches and IP routers, will have to branch out with new products and services to remain competitive in this quickly changing environment. It has already named six new technologies, or "Advanced Technologies," to help it stay ahead of the curve. These technologies include storage area networking, wireless, IP telephony, home networking, optical networking and security.
While in aggregate, sales of these six technologies make up less than 20 percent of Cisco's total revenue today, they are among the fastest-growing market segments for the company and will likely play an increasingly important role in the company's future.
CNET News.com recently spoke with Cisco's chief technology officer, Charles Giancarlo, about some of the hottest technologies on which Cisco is focused. Giancarlo also talked about the impact of the recent carrier consolidation.
Q: What do you think of all the carrier consolidation? First, SBC Communications said it would buy AT&T, and now Verizon Communications plans to buy MCI. How do you think that's going to impact the telecommunications industry and networking in general?
A: We think that there does need to be greater consolidation in the telecommunications industry. Up to now, the market has been very fragmented in the United States, and that does some harm to the industry. For example, each carrier believes that it has a very unique environment, and then it builds its internal network in a different way. Therefore, the requirements for vendors are extremely varied.
When consolidation occurs, it makes it easier for vendors to be able to build their solutions to fewer standards or fewer architectures. We also think it will inevitably cause greater consolidation in equipment markets, and that will be something we have to respond to.
Do you think the mergers could slow down the industry and growth for equipment companies?
Whenever you have some consolidation, there is always a period of time where the companies have to go through an internal process of reorganization. That could cause some slowdown in their decision-making process. We understand that. So there could be some short-term slowdown that we may have to deal with. But on a longer-term basis, it's not only inevitable, it's also the right thing for the industry.
Do you think, when IP consolidation is complete--meaning that voice, video and data will all run over an Internet Protocol network--that there will actually be less money to be made on telecom services?
I think that there will definitely be less money in the areas that have been the traditional moneymaking areas for carriers. But the public's appetite for new services is such that carriers can make the same, if not more, money in areas of new services.
Take cell phones as an example. We're paying less per minute, but we're using more minutes. We're sending these instant messages, and we're now sending pictures and downloading ring tones. So even though the amount of money on a per-minute basis has gone down, the total amount of revenue going to carriers has generally gone up.
I think that we need to look at the same phenomenon in the wireline area. Carriers may be making less money from voice minutes, but they need to offer new services--things like video calls, not just audio calls or customizable ring tones, downloadable MP3s, picture sharing. A variety of other capabilities and services will allow these carriers to continue their role.
Let's talk about some future technologies that Cisco has its eye on. I heard you guys were working on XML routing. Can you talk about that?
We've not really made big announcements in that area. There's a lot of curiosity as to where we're
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