Cisco’s New Kid

Jim Duffy at Network World reports that Cisco is going to announce a new core router to replace its aging CRS-1. The new one supposedly boasts 120Gbps per slot, which would best Juniper’s T-1600 by about 20 percent.

Let’s put this in a larger context. Cisco’s Nexus switch, which replaced the Catalyst two years ago and works on the Net’s backbone and VPNs, can process up to 15 terabits per second. If you assume that a DVD-quality H.264 video stream runs at about 1MB/second, a single Nexus could handle 15 million streams. Or enough for everyone in Illinois.

Small wonder that the telecos, which have bet the farm on pumping HD video to America’s masses, were breathing like Tiger Woods on Bourbon Street when Nexus came out. Just like they will with Cisco’s new entry.

Look at what they’re up against: AT&T’s 2 gigabit backbone lasted about seven years. Its 10 gigabit backbone lasted five years and now the 40 gigabit will last perhaps 3 years. Given these facts, it’s pretty obvious why AT&T has the largest capex in the country.

At least Goldman Sachs got it right last week, noting that while higher capex reduces free cash flow, it’s still “absolutely the right move in our view.”