Thinking about Electronics Obsolescence

carrier-cardsWe are in the process currently of helping a number of clients make major upgrades to networks, something we’ve done many times over the years. And this got me thinking about obsolescence and when and why we replace major electronics.

There are a couple of different kinds of obsolescence. First is physical obsolescence, which is when we replace things because they simply wear out. We do this all of the time with vehicles and hard assets but it’s rare with electronics. I can only think of a few times over the years we’ve helped people replace things electronics that were failing due to age. A few that come to mind are some T-carrier systems in the customer network that lasted for far more years than anybody expected.

A more common phenomenon is functional obsolescence where the electronics are not up to the task of handling newer needs. While this can happen with all kinds of electronics, the most common such upgrade has been replacing the electronics on fiber backbone or long-haul networks. There has been such a prolonged explosion in the amount of data our networks carry that it’s been common to overwhelm transport electronics.

In these cases we yank out fully functional electronics and replace them with something that can handle a lot more data. I would hope in the future that we will see a little less than this. One of the reasons we’ve needed these kinds of upgrades is that network engineers would not consider exponential bandwidth growth into their future projections. The naturally conservative nature of engineers didn’t let them to believe how much traffic would grow in just a few years after they build a network. But I finally see a lot of them getting this.

We also see technologies that are much more easily expandable. For instance, a lot of fiber electronics are now equipped with DWDM and other tools that allow for an upgrade on the electronics without a forklift upgrade. The network operator can light a few more lambdas of light and get a boost in throughput.

My least favorite form of obsolescence is vendor obsolescence where functional equipment is made obsolete when a vendor introduces a new generation of electronics and stops supporting the old generation. Far too many times this feels like nothing more than the vendors trying to force more sales onto their customers rather than looking out for the customer’s best interest.

This is not a new phenomenon and there was nobody better at this in the past than companies like Nortel and Lucent. They constantly pushed their customers to upgrade and were famous for cutting off support to older equipment while it was still functional. But the practice is still very much alive today.

Losing vendor support for electronics is a big deal to a network owner. It means you will no longer be able to buy a replacement for a card that goes bad unless you can find one on eBay. It means that the vendor won’t talk to you about any problems that crop up in your network.

The industry is now entering the second round of vendor obsolescence with FTTH electronics. Vendors cut off BPON and other first generation FTTH gear almost a decade ago and are now planning to do the same to GPON. I remember when BPON stopped being supported that every vendor of the next generation of equipment promised that the newer generation of electronics would be frontwards compatible – meaning that the ONTS and field electronics would work with future generations of core electronics. But as I always suspected this isn’t going to be the case and there is going to be another forklift from GPON to next generation of PON electronics.

The shame of this is the older PON equipment still works great. I have a few clients who have kept BPON working for a decade after it was supposedly obsolete by buying spares on eBay. Those networks are now finally becoming functionally obsolete as customers are using more data than the network can handle. But the equipment became functionally obsolete ten years after the equipment was declared as vendor obsolete. Most BPON electronics were well made and the ONTs and other field electronics have been chugging along a lot longer than the vendors wanted.

It’s not always easy to decide to keep operating equipment that the vendor stops supporting. But I’ve seen this done many times over the years and I can think of very few examples where this caused a major problem. It takes a little bravery to keep operating equipment without full vendor support, but management often chooses this option from the pragmatic perspective of economic reality. Most networks don’t make enough money to fund replacement all of the electronics every seven or ten years, and perhaps it is lack of money as much as anything that provides courage to network owners.

ALU Sells to Nokia

sculptura phoneIt was just announced that Nokia will be buying Alcatel/Lucent. It seems that this was done so that Nokia can pick up the latest 4G technology from ALU. As one who has been in the industry for a while I have a long memory of the history of Lucent.

Before the Lucent name, the business was a part of AT&T and was the combination of Western Electric and Bell Labs. Bell Labs was always a wonderment for techies like me because they employed some of the smartest minds in the world. The lab was started by Alexander Graham Bell and over the years they developed such things as the transistor, the laser, information theory, and the UNIX and C++ programming languages. There were eight Nobel Prize winners from Bell Labs. I worked in the Bell System for a few years pre-divestiture and it was a point of pride to work for the same company that operated Bell Labs.

There was a time when Western Electric was the sole manufacturer of telephones and telecommunications devices. I recall that when I was a kid the only option for a home phone was the ponderously heavy, black Western Electric phone. These were hard wired and didn’t have long cords and when you talked you had to stand close to the phone. Over the years, Western Electric introduced smaller phones like the Princess phone and introduced longer cords that provided a little more freedom when using the phone. But all of the Western Electric phones were solid and they rarely had problems or broke. They were solid America technology made in America.

The first big change I remember for Western Electric was when AT&T started licensing other companies to make some handsets. I remember when the Mickey Mouse phone, the Sculptura phone (pictured here) and other colorful phones hit the market. Within a few years, the FCC began to widely license handsets made by numerous companies as long as they passed Bell Labs certification, and Western Electric lost their monopoly on handsets.

Western Electric also made the bulk of the electronics used by AT&T. These included voice switches, line repeaters, and various kinds of carriers used to carry more than one call at a time across a piece of copper. But Western Electric never had a total monopoly and companies like Nortel often sold equipment to non-AT&T telcos.

The big change for the companies came during the divestiture of AT&T in 1984. During the divestiture both Western Electric and Bell Labs were placed into the AT&T Technologies subsidiary. The companies went on, largely unchanged, until they were spun off from AT&T as Lucent, a standalone corporation, in 1996. Most of Lucent’s business was still with the various Bell companies, but they were branching out into numerous fields of telephony technology. At that time Lucent was the mostly widely held stock company in the US and had a stock price of $84 and a market capitalization of $258 billion.

Lucent fell onto hard times at the end of 2000 and was one of the first companies to be hurt by the telephony and dot com crash. The industry as a whole had heavily pursued the new competitive telephone companies (CLECs) that had been authorized by Congress and the FCC in 1996. Unfortunately, the large companies like Lucent and Nortel provided significant vendor financing to the fledgling CLEC industry, and when those companies started folding all of the large manufacturers were thrown into financial trouble.

Lucent never fully recovered from that crash (like many other tech companies that disappeared at that time). Their stock lost significant capitalization from the crash, but then really got slammed when it was revealed that the company had been using dubious accounting methods for recognizing sales and revenues. By May of 2001, the company’s stock had fallen to $9. I remember at the time that everybody in the industry could quote the Lucent stock price and we all watched in wonder as the company crashed and burned.

Over the next few years Lucent tried to gain some value by spinning off business units. It spun off its business systems into Avaya and its microelectronics unit unto Agere Systems. By 2003 the Lucent stock price was down to just over $2 per share and the company had shed over 130,000 employees. Lucent merged with Alcatel in 2006 and became Alcatel Lucent (ALU). That company did well for a while but then had a long string of losses until positive profits were recently announced.

And now the business has been absorbed by Nokia, mostly to pick up the division that makes 4G wireless equipment. There is not much of the old company left. Bell Labs is still around and one has to wonder if Nokia will continue to operate it. The Lucent history is not unusual for high tech companies. Western Electric had a near-monopoly for decades, but over time everything made by them changed drastically and newer companies ate away at the old giant. Today we have new giant companies like Apple and Samsung, and if history is any indicator they will someday be supplanted by somebody new as well.