Primer on DOCSIS

OLYMPUS DIGITAL CAMERAAnybody who uses a cable modem at home has probably heard the word DOCSIS. This is a set of standards that define how data is transmitted over coaxial cable networks. DOCSIS stands for Data Over Cable Service Interface Specification. It was developed by CableLabs, which is a research and standards organization that the cable companies have created for research and development purposes. CableLabs is to the large cable TV companies what Bell Labs has been for the large telephone companies.

DOCSIS 1.0 was first issued in 1997 as a standard and created the basis for cable modems. It established a data network that started with a CMTS (cable modem terminal system) that talked to cable modems in each home. DOCSIS 1.0 was limited to a single data channel which means that data speeds were limited to a usable 38 Mbps download and 9 Mbps upload for everybody together on a cable node. Because the data was shared with anywhere up to 200 homes, speeds on DOCSIS 1.0 were practically limited to a maximum of about 7 Mbps, although these speeds could be much slower at peak times.

The standard was updated in 1999 to DOCSIS 1.1 which allowed for QoS (Quality of Service) which enabled cable systems to carry voice calls, with priority, on the cable modem data path. There are still a significant number of field deployments using DOCSIS 1.0 and 1.1, particularly in smaller and rural cable systems.

DOCSIS 2.0 came out in 2001 and the major improvement was to increase upload speeds. Version 2.0 also improved the ability to transmit VoIP. The standard still kept the single channel downstream. As cable companies lowered node sizes there were DOCSIS 2.0 systems that supported speeds of up to 15 Mbps download.

The biggest improvement with DOCSIS came with version 3.0 which was released in August 2006. This standard allows for bonding cable channels together to make larger data paths to each node. Cable companies that have deployed DOCSIS 3.0 are offering much faster speeds than in the past. Comcast in the US offers 107 Mbps download in urban markets using the newer modems. In Canada, Shaw Cable and Videotron have used DOCSIS 3.0 to offer products over 200 Mbps download. Virgin Media in Britain announced a speed of 1.5 Gbps download and 150 Mbps upload.

Why don’t US cable companies offer speeds that fast? There is a trade-off in any cable system between the number of channels that are used for programming versus data. While US cable companies have undergone digital conversion to free up channels, they have used most of that new space to add high definition channels to their network rather than dedicate the extra space to data. In the future, cable companies will be able to free up even more space for data by converting their cable channels to IPTV. Today they multicast every channel in the system to every home, but with IPTV they would send only the channels people are watching.

The CEOs of the largest cable companies have often been quoted saying that they are providing the bandwidth that people need. And I am sure that the believe this. But we have a very long way to go to just convert all of the cable systems in the US to DOCSIS 3.0 and increase speeds. I work every day in markets where the speeds are far slower than they are in upgraded urban markets. But it’s good to know that the tools are there for the cable systems to increase speeds, when they finally decide the time is right to do so.

Privacy Bill of Rights

SpyVsSpyLike most people I am uncomfortable by the online invasions of my privacy. It seems like every day there are articles telling me how the NSA or some large corporation is monitoring me and profiling me. It seems like we only have two options these days – become a Luddite and stay off the Internet, or take part in the modern world and have companies gather information about us.

The whole world is wrestling with this issue and Europe is ahead of us in trying to place some constraints on the data gathering. The European Union is putting a lot of pressure on the US government to create standards of personal privacy.

A few years ago the White House endorsed a list of rights that are known as the Consumer Privacy Bill or Rights. At the time this came out companies like Google, Microsoft, Yahoo and AOL agreed to support the ideas. These rights include:

  • Individual Control: The right of individuals to exercise control over what personal data organizations collect from them and how they use it;
  • Transparency: The right to expect easily understandable information about privacy and security practices;
  • Focused Collection: The right to place reasonable limits on the personal data that organizations collect and retain;
  • Accountability: The right to have personal data handled by organizations with appropriate measures in place to assure they adhere to the Bill of Rights.

But these principles have never been codified into law and so we still have no U.S. Privacy Bill or Rights. John Kerry and John McCain tried to get this passed into law in 2011, and Jay Rockefeller proposed similar legislation in 2013.

The industry has created a mechanism which could be used to implement a “Do Not Track’ process. A standard was developed that would put ‘DNT’ into the HTTP header field to notify that a user had opted out of being tracked. And some browsers like Firefox, Chrome, Safari and Opera all support this protocol and have implemented the Do Not Track header.

People want to opt out. About 14% of Foxfire users have enabled the Do Not Track feature. However, without a law to mandate its use, there is no compulsion for businesses to recognize and honor the request to opt out, so for now opting out is an empty gesture and nobody is honoring it. I’ve had offers from software companies trying to sell me software t,hat will stop me from being tracked. They know that the vast majority of Americans want that ability. But such software is vaporware until Google and the other companies that track information about us will honor a Do Not Track process.

I don’t know if I’m more uncomfortable with big business or the government tracking me. Like most Americans I have done nothing that should make me nervous about having the government look over my shoulder. But I also fully understand that knowledge is power and it would be too easy for somebody unscrupulous in the government to misuse that data. Go back and re-read George Orwell’s ‘1984’ if you want a reminder of what can happen with government gone awry. Look today how China and other countries monitor and control what can be seen on the Internet. Even Britain, who we think is like us is trying to stop people from seeing pornography.

Recent revelations about the way that the NSA spies on us revealed that the government has been tracking us using the same cookies and other tools that big business is using. So when a company puts a cookie on your machine it is enabling you being tracked by everybody who knows how to read that cookie.

I am cynical and my gut tells me that even should this law pass that the big companies and the government are going to keep tracking us anyway. It’s just too tempting to do so, and they both believe the benefit outweighs the risk of being caught. It would certainly be disingenuous for the government to ever prosecute a business for engaging in spying on us if the government is doing the same thing.

Sell or Hold?

1854_gold_dollar_obvEvery telecom business ought to periodically ask the question of whether it should stay with the business or sell. Asking this question prompts you to take a measure of your business and to think about the future. One of the best tools to measure your performance is to periodically get a valuation. I recommend a valuation every three years. This gives enough separation in time to understand if the business is gaining or losing value over time.

A good valuation is going to be detailed enough to dig into the details and will find the real value to a buyer. Telecom valuations are no longer done on value per customer. Instead a buyer will offer a multiple of the cash flow that they will inherit after a purchase. A well-prepared valuation is going to start with your books and ledgers and will make adjustments to reflect the actual cash flow a buyer will see if they bought your company.

There are almost always expenses that would disappear if a company was sold. For example, there might be higher than normal salaries paid to owners in lieu of paying dividends. There might be benefits for executives that wouldn’t be paid by the new company. There might be company cars or other assets that won’t convey to the new buyer. There might be employees that are not expected to be retained by a buyer. In an actual sale the seller would want to acknowledge these sorts of adjustments, and so they should be reflected in a valuation.

One must also consider normalizing revenues. It’s not unusual these days to sell services on a long-term contract that have up-front payments. So if you sell things like transport to a cellular tower but only get such revenue in the years when the contract renews you need to adjust to show that as annual revenue at the appropriate level.

Getting a good valuation is only a start to looking at your business. A valuation will tell you about the overall health of a business, but it doesn’t tell you how to make your business worth more in the future. So along with a valuation I also highly recommend that you look periodically into the future to see where the business is headed. Take a look at the services you are selling today and see if those same revenues will be around in the future. For example, if you count a lot on cable TV or voice revenues you must consider that the customers from both of those products are disappearing each year.

I call this process of looking into the future a strategic review. You need to periodically take hard look at your business and ask yourself if you are doing the right things. Are you staffed right? Are you selling the right products? Are you marketing right? Should you outsource things done internally or bring external functions in-house?

It’s not always easy to look at your business critically and you ought to consider bringing in some outside advice to get a fresh set of eyes looking at your business. You can do this by hiring a consultant like me, and I regularly help companies take a hard look at themselves. But you can also get this advice elsewhere. You might know somebody who runs a telecom company that you know and trust who could give you the same look. But what you want is somebody who will ask the hard questions and who will challenge the assumptions that you take for granted. It’s very easy in a telecom business to get stuck thinking that the status quo will never change, but you don’t want to look up some day and see that you have lost a lot of margin and value and didn’t take steps to avoid it.

Finally, the really critical step is to use the information you learn. If your business is not meeting the goals you set for it, in terms of generating cash flow or growing in value, then you must decide what steps need to be taken to meet your goals. A valuation is a tool and not an end to itself. Only undertake valuation and a strategic review if you intend to learn from the process and are willing to deal with whatever you learn during the process.

The IoT of Health

Medical_Software_Logo,_by_Harry_GouvasTo me one of the most exciting things that is promised by the Internet of Things is the way that medical care is going to move into our homes and get personalized. Within a decade we are going to be able to monitor ourselves and diagnose the more common maladies. This kind of constant and steady monitoring is going to revolutionize health care. This will make preventative medicine the norm and our IoT devices will warn of problems at the very earliest stages. The monitoring devices are going to be paired with the diagnosis power of supercomputers to bring us quick and accurate diagnosis of problems. Current software on IBM’s Big Blue is already able to diagnose things right over 95% of the time. Doctors will be freed to cure ailments rather than spend all day diagnosing colds.

The first generation IoT medical devices are starting to hit the market and there are dozens of firms feverishly trying to develop more. Here are a few of the things on the horizon right now, including some devices you can buy now or soon:

  • The Qualcomm Foundation has an ongoing Tricorder XPrize that will award $10 million to the team that develop a handheld device capable of precise monitoring and diagnosis of diseases. This must be an in-home and hand-held device capable of capturing key health metrics and diagnosing a set of 15 diseases. Metrics for health could include such elements as blood pressure, respiratory rate, and temperature.
  • There are tools out today that can monitor the quality of your sleep. Research is showing that getting good sleep may be one of the most important aspects of good health. For example, a bed pad from Withing can give you a record each night of your sleep pattern and the deepness and length of your REM sleep.
  • Google announced a contact lens that is going to be a real-time monitor for blood glucose levels for diabetics. Rather than needing periodic blood tests, the lens will monitor 24/7 and will alert the wearer any time their sugar levels are high or low.
  • There are numerous devices available to monitor people while they run or exercise. These monitors have gotten very sophisticated and can even tell you when you are overtraining.
  • One of my favorites is the new biofeedback monitors. These devices are related to the devices that let people control machines using brainpower. But instead of looking externally, devices, like Interaxon’s Muse headband help you look internally and help you slip quickly into various meditative states.
  • There are also now devices that will nag you into having good behavior. One of the funniest, and yet serious devices I have seen is a pin that vibrates whenever you slouch your shoulders. My fifth grade teacher would be so proud of this device.

These new tools are just the beginning of the home medical IoT revolution. It’s really exciting when you look at what companies have on the drawing board. One of the most promising fields to me is that within a decade we ought to have a host of devices and tools that are going to let seniors stay in their homes for extra years rather than have to go into an institution. This will be transformational in terms of the quality of life and of dying.

And following that will be devices that can detect disease and cancer early and can then nip problems in the bud. There is real hope that within 50 – 75 years that most forms of cancer will be things of the past, diseases that have been cured. Cancer will hopefully become one of those diseases found only in history books.

The Future of Triple Play Providers

HK_KEN~1I am asked often about what I see coming in the future and anyone who reads this blog knows that I look into the future a lot, be that two years, five years or 100 years. One thing that I have thought about a lot is the future of the small triple-play carriers that make up the majority of my client base. What is there business going to look like ten or fifteen years from now?

I see two very contrasting choices and I think every small carrier that survives into that time is going to have to choose one of these two paths. I think the choices are between being a dumb-pipe provider or a full service provider, and I don’t think there is much room for success to stay at status quo and be somewhere in the middle.

I think by now that everybody understands that cable TV penetration rates are going to erode over time as more and more people eschew the high price of cable TV and opt out for programming on the web. And there is always the chance at some point where the migration away from traditional cable could become a flood if somebody can find a way to get enough programming to the web to make that an attractive alternative.

A lot of small carriers today offer the triple play in a fairly passive way. They market and try to sell their products somewhat, but in their footprint they have most of the customers and they don’t do a lot of hard selling. For instance, they don’t push upselling of existing products very hard. But as they lose cable customers and even more voice customers the way they have been doing business is not going to work any longer.

If a carrier elects to become a dumb-pipe provider (or maybe calling them a distribution provider sounds a little better), then they are going to make a living by bringing fast Internet pipes to their customers and they are going to let customers pick up most of their products over the Internet.

If you are a dumb-pipe provider you are going to increase the speeds of your Internet product enough to keep customers happy. You are going to have to charge a lot more for that Internet connection than you charge today. If you are a triple-play provider today you will probably keep some voice, and maybe even some cable customers years from now, but for the most part those will have gone away and the data pipe is going to be your only significant product. From an operational perspective you will have to cut your staff and overheads back to the bare bones needed to keep the pipes working. Your company will be a stripped down version of what you do today, but you can make a profit doing this.

The other alternative is going to be a full-service provider. That means you will replace telephone and cable revenues with a host of other products and services that your customers are going to want. I am always asked what the next big thing is that people can do to make money, and the unfortunate answer is that there is no one big thing. There are a whole host of new product lines that you might get into, but no one of them is going to be as big as your telephone or cable business you are trying to replace.

So you will offer a host of new products – things like security, home automation, energy management, medical monitoring, cloud service resale and device monitoring and maintenance. Every one of these product lines, and the dozens of other that might pop up over the next decade will be of interest to some of your customers. And by having a suite of products you will have something for everybody.

Being a full service provider is going to require you to operate very differently than today. These new product lines are going to need you to spend a lot of time in people’s homes doing things like connecting new devices to their home automation system, making sure their medical monitoring devices are working right, making sure all of their computer-like devices are properly accessing everything.

And there will be one other big change in the way small carriers operate. Today the typical small carrier handles every aspect of a product from beginning to end. If they are in the cable business they have a full cable headend. But in the future when you will need to be in many product lines you are instead going to partner with and buy a lot of these products from wholesalers. That is going to take a big shift in thinking.

Finally, you are going to have to be nimble. The products you sell are always going to be changing and you will need to keep up with those changes. You will not have the luxury you have today to leisurely analyze new business opportunities, but instead you will need to be able to implement new products on the fly. You will need a very well-oiled product implementation plan to make changes fast while keeping customers happy.

Lessons Learned With Gigabit Squared and Seattle

Hollow-core_photonic_bandgap_fiberChristopher Mitchell of the Institute for Local Self-Reliance recently wrote a 3-part article talking about why Gigabit Squared (“G2”) failed in Seattle. His articles talk about the challenges that any competitor has when going head-to-head with a large competitor like Comcast. I would take that discussion one step further and talk about why G2 specifically failed in Seattle. I think there are valuable lessons to be learned from their experience for anybody entering a new market.

The biggest problem faced by G2 is that they had a hard time raising development capital. This is an issue faced by almost every new infrastructure project in the country, both private and public. The US investment community no longer has much taste for the high-risk involved in funding the first step of a project. I call this development capital, but when this capital comes from private sources it is often called angel investing.

Up until a decade or so ago new start-ups were able to find angel investors who would take a chance on a new venture that had promise. For taking that early risk the angel investors got really large returns and a piece of equity in the business. But today it seems nearly impossible to get enough money to get a project to the point of being ‘shovel-ready’. I think a lot of this reluctance comes from the last few decades that saw the implosion of a lot of tech start-ups. There were a lot of start-up telecom and web-based businesses that failed since the late 90’s and a lot of angel investors lost their entire investments.

Second, G2 planned to launch the business in phases, probably due to the hard time they were having in raising money. They planned to raise $20 million to first build around the University of Washington campus. Then they planned to raise a little more and build a little more and repeat until they built most of the City. In the investing world this is referred to as raising the money in tranches.

The problem with raising money in tranches is that it makes it even harder to raise the early money because the early investors can’t understand the big picture. They can’t know how any equity they get from the business will be diluted by future waves of investors. This approach also makes it nearly certain that the business will fail at some point, because every time the company needs to raise more capital they end up on a financial ledge. For example, even if they raise two rounds of money, they will probably fail when they can’t raise the third.

There is a general understanding among people that raise money that it is far easier to raise $100 million than $5 million or $20 million. I know that sounds non-intuitive, but G2 probably would have had an easier time raising the money to build the whole City than they did in trying to do something smaller. Investors can understand the big picture a lot easier than they can understand a project done in phases.

The third issue that killed G2 is that they didn’t hoard their early money. They had raised some early money and they did some of the right things with that money like doing engineering and building relationships with the City and with other carriers. That is the sort of developmental steps you should do with early money, and I would characterize those steps as getting the business shovel-ready and ready to raise the construction money.

But before G2 was funded they put enormous pressure on the business by announcing a timeline for when they were going to launch retail service. They announced products and prices and even went so far as to launch a website where customers could get on a waiting list for service. They created a lot of public expectation. They opened shop and hired a few employees in the market. The company began eating into their very limited cash with operating expenses rather than sticking with pure development of the project.

It’s fairly easy to see why G2 did this. They were having problems raising money and I think they were trying to create a stir about the project by showing community support. They hoped that public support would make it easier to attract the needed angel investors. But all this did was to cut short the amount of time they had to raise money.

G2 is not the first start-up to fail in a market, and they failed for some of the same reasons that have sunk other ventures in the past. Anybody thinking of opening a new market or new venture should look at the lessons to be learned from this. First, never underestimate how hard it is to raise developmental capital. It is probably the hardest thing there is to do in the business world. Second, have a business plan that contemplates the full build. I think G2 might have had more luck if they were trying to raise money to build the whole City than in trying to build a neighborhood at a time. And third, never spend money on operations until you are fully funded. If you have some seed money use it only for raising the bigger money.

And who know, maybe Gigabit Squared is not quite done in Seattle and can take another shot at it.

Work Force Management

800px-OSU_Bucket_TruckI don’t do a lot of specific vendor recommendation in my blog. But I ran across a software system that companies can use to bring a whole suite of useful tools to your field technicians that is affordable and easy to use. The product is called Service Proz. This software can be used as an add-on to any legacy OSS / billing system to make your field technicians more efficient.

Service Proz brings you the same kinds of tools used by big companies like FedEx. You can use any or all of the Service Proz features, making it very flexible to meet your needs. The program works by installing an app on a smartphone or tablet.

Following is just a sample of the features that come with the software:

  • Tracks the location and schedules of your field techs in real time.
  • Gives you the ability to communicate with field techs at all times (instead of getting voice mail).
  • Provides an easy clock system to log time spent at each customer.
  • Synchronizes with your OSS system to give your techs changes in real time.
  • Interfaces with Google Map to show the location and most efficient route to the next appointment.
  • Tracks inventory and hours in real time, meaning that techs don’t have to come back to the office and transcribe their hours and materials from a clipboard.
  • Allows a field tech to view a customer’s history. They can see a log of past trouble calls or other pertinent information to make their trip as productive as possible.
  • Allows you to transmit documents to the tech via cell phone or tablet. If a technician is missing a piece of paper, a contract or other key document you can get it to them immediately.
  • Allows for electronic signatures from customers that approves an installation or the purchase of an additional product.
  • Allows technicians to modify the work order on the fly. The best use of this is to allow a technician to upsell a customer to an additional product while at their premise.

Why should a company consider this kind of software? Maintaining and operating a fleet of field technicians is one of the biggest costs of operation for most carriers. This software brings a number of efficiencies to your field staff that is going to let them operate better – and time is money. They will be more productive at the customer site since they will have access to all of the documents they need to understand the customer’s situation. With Google Map they should save fuel by taking the most direct route to the next customer. And giving them the ability to upsell customers on the fly means that this software can pay for itself immediately. Probably the biggest advantage is that it can take paperwork out of the field tech’s life, providing them more time to interface with customers.

And it’s affordable. It costs $25.95 per month for the dispatcher and $10.00 per month per field technician. This seems like an incredible bargain. Competing software systems are going to charge tens of thousands of dollars up front for similar features plus require an expensive integration. I would think that the efficiencies in even the first month are worth far more than the cost of Service Proz, and this comes pretty close to a no brainer to me.

Challenging CAF Funding

USAC LogoLast week the FCC accepted a challenge by OnlyInternet Broadband and Wireless that had been filed against Frontier Communications. Frontier had filed to get Connect America Funds (CAF) to spend capital to enhance broadband to some rural areas that were either unserved or underserved. The FCC agreed that OnlyInternet already served the area in question with broadband.

There have only been a few of these challenges, but there is going to be a lot more coming since the FCC is expected to expand possible recipients of the funds this month. In the past few years the major recipients of CAF funding for construction have been a handful of very large telephone companies like Frontier. However, the FCC is expected to broaden the list of recipients to include other companies like rural electric utilities.

Today a company must be certified as an Eligible Telecommunications Provider (ETC) by their state Commission to be eligible for CAF funding. But as the FCC expands the definition they also are thinking about changing this requirement.

The CAF funding is intended to provide support for constructing broadband facilities in unserved or underserved areas. An area either has to have no broadband today (unserved) or a majority of residents that can’t get broadband that meets the federal broadband definition of 3 Mbps  download / 768 Mbps upload (underserved). The FCC is expected to increase this threshold in the future, although they will probably never do anything so bold as to set the threshold to something that would be really considered as broadband. But I guess they think that if households have no broadband that they will be grateful to get 3 Mbps.

This FCC ruling is worth pointing out because other large companies are going to also be requesting CAF funding. For instance, Frontier has requested funding for huge rural swaths of its own service territory where it had never spent the money to put in DSL. This ruling shows that you need to be on the alert if the large companies are planning to use federal funds to bring broadband to an area where you have already made the investment. You can challenge such an attempt and win.

Interestingly, Frontier had previously challenged funding for OnlyInternet for not providing fast enough upload speeds for some other markets where they were providing broadband.

If your company is close to areas that are unserved or underserved you might want to consider applying for CAF funding. CCG has been successful in the past in getting numerous federal grant awards for clients. The CAF funding awards are going to require some capital from the grantee, and the more of your own money you are willing to put in, the higher the chance of getting a grant. But it should not be unreasonable to think that CAF funding could be used to finance a significant percentage of a network build-out, as long as you are building to unserved areas.

The bottom line is to keep your eye on the CAF funding requests. The large carriers are requesting funding for large areas and some of those areas are bound to already have broadband. Don’t let the big companies get a foothold in your area using free federal funds.

Charge It!

Accupack_10_cellen_side_by_sideThis is the time of the year when it’s popular to talk about the new gadgets that hit the world each year at CES. But I don’t think there is anything more important than the breakthroughs that are being announced for battery storage and charging which are going to be needed to power and maintain the Internet of Things. Let me look at a few of the more recent announcements in this area.

Harvard researches just announced that they have developed batteries based upon quinones. This is an organic material that is found in plants like rhubarb, but which can also be synthesized cheaply out of petroleum. The potential for quinone batteries are that they will greatly reduce the price of flow batteries, which is the technology that is used to store electricity for later use.

Today’s flow batteries cost about $700 per kilowatt hour of storage capacity, and with quinones that can be reduced to around $27. For now the quinone technology can replace vanadium in the negative side of the battery, but it looks like they also might be able to replace the very caustic bromine used in the positive side of the battery.

Quinone batteries would be a huge breakthrough because the lowered costs will make it economical to store wind and solar energy. The other huge benefit is that the quinone batteries look like they might last 15 – 20 years. This technology also has a lot of potential for the Internet of Things because it would allow storage of electricity that could be used to power sensors off the electric grid. This could enable the repowering of IoT devices and sensors used for things like monitoring crops, tracking wildlife or cleaning up pollution.

An even more amazing technology has been announced this week by the University of Texas at Arlington. They have developed micro-windmills that can be used to charge small devices. The little windmills are really tiny and ten of them can be put onto a grain of rice. Hundreds of these could be embedded in the case of a cell phone and the phone would be recharged by moving it around or by sitting it in a slight breeze.

But the real potential is for these windmills to be able to recharge tiny IoT sensors. It’s easy to think of the Internet of Things being smart thermostats and smoke detectors, but the real promise for the IoT will be to fill our environment with small sensors and devices that perform important functions behind the scenes and out of sight.

There are uncountable ways that such sensors might be useful. Tiny sensors could be used to monitor and direct chemical process that could be used to produce super-materials. Sensors could provide hidden monitoring system that could detect and alert homes or factories to the presence of noxious or dangerous chemicals. Little machines could clean up chemical spills or toxic waste sites, could keep pests from food crops or could clean our homes.

There are a lot of technologies that are going to be needed to make the IoT come to its full potential. Generating small amounts of power everywhere and storing power are two of the key technologies needed to be able to unleash the IoT from homes and businesses into the wider world.

Huawei in the US

Huawei Many western governments have banned Huawei, the Chinese equipment manufacturer from bidding on government contracts. In the US the government warned the industry against using Huawei because of security concerns and most of the large carriers have said that they won’t use their equipment. But Huawei is not officially banned from the US and they are now making proposals to sell equipment to smaller carriers like independent telcos.

Huawei can make a convincing sales pitch. It’s been reported that their equipment runs about 30% less expensive than similar equipment made by Calix, Adtran and Metaswitch. Since small telcos have been losing historical revenues on many fronts they are feeling pressured to do everything possible to find ways to be competitive and survive. So any offer for less expensive equipment can look really attractive.

Huawei is an interesting company. The company was supposedly founded on a shoestring by founder Ren Zhengfei and has grown to be the number one telecom equipment manufacturer in the world. There are reportedly over three billion customers on Huawei-made cellular networks. But this was not your typical startup and the company got a huge leg up with gigantic early orders from the Chinese government. They are successful in large part due to being the preferred equipment manufacturer in the exploding Chinese market. But Ren has never given a public interview and is a mystery to the world.

It’s understandable that western governments would be nervous about allowing Huawei equipment in US government offices. There is some fear that the Chinese government could somehow build spyware into the operating software. But are there any reasons for the government to block Huawei from selling to general network providers? Should telcos have any fear of using their equipment?

The only fear I can think of is that there might be a hidden Trojan horse inside the operating software that could allow Huawei to shut down networks remotely should the US and China ever get at odds with each other. But this just doesn’t seem like a credible threat to me. This would only have to be done once to any network anywhere and Huawei would be forever shunned outside of China. And while such a shutdown could be devastating to the network involved, this would not be hugely crippling to the US economy.

A more credible reason to not use Huawei is that they are not a good corporate citizen. Cisco has found large swaths of Cisco code, right down to syntax and punctuation errors in Huawei operating software. Huawei seems to come out with innovations very soon after they are announced elsewhere and they clearly do not have any notice or respect for western patents. Stealing technology and software so blatantly would not be tolerated in the western world and any manufacturer caught doing this would be sued out of existence.

So western network owners are faced with a dilemma. They can buy tried and trusted equipment from the largest manufacturer in the world at significant discounts. Or they can boycott Huawei for philosophical reasons. Companies that steal US technology ultimately do our economy a lot of harm, and this is reason enough in my mind to boycott them for their bad behavior.