In Tougher Environment, Networkers Pitch Services as Revenue Generators

SAN FRANCISCO -- Repeat after us, our networking gear will make you money.

Day two of the Robertson Stephens Technology 2001 Conference here and already a new theme is emerging: The right Internet equipment can help sell new services.

Redback (RBAK Quote - Cramer on RBAK - Stock Picks) said it Tuesday, Extreme (EXTR Quote - Cramer on EXTR - Stock Picks), Cisco (CSCO Quote - Cramer on CSCO - Stock Picks) and Ciena (CIEN Quote - Cramer on CIEN - Stock Picks) echoed versions of it Monday. Of course, the pitch has been tailored to fit a far more cash-strapped communications service industry. But it also reflects a critical tech shift away from speed just for the sake of speed to a method of tapping more sales from the Net; think of the services as new toll highways.

While few of these new services exist yet, the posturing is significant because it addresses a do-or-die crossroads faced by the telephone industry. Anchored firmly in the voice business, telcos have to adapt to the data world of the Internet. With their voice revenue rapidly falling and data traffic quickly rising, the phone folks are searching for a helping hand to lead them across the street.

"Network service providers are getting killed because they can't flip their revenue model from voice to something else," says Robert Rosenberg, president of Insight Research. "Voice junkies need to get off the stuff they've been on for 50 years or more."

Redback, which makes metro boxes that act like access ramps between offices buildings to the Internet backbone, talked Tuesday of smarter equipment that can manage all types of traffic and presumably send, and more importantly allow billing, for new service formatted for wireless devices or digital subscriber lines. Notice the emphasis is on management and grooming rather than plain-and-simple delivery.

Extreme introduced its Avalanche system Monday that it says can combine and perhaps simplify varying communications protocols by integrating them on its momentum-gaining Ethernet standard. The upshot: more tools in the box to make new services, or toll roads, such as virtual private lines that promise secure connections between chosen points.

Now that cash is tight service providers have to more rigorously defend their purchases and convince the bean counters that dollars spent will eventually equal many dollars returned. So it's no coincidence that the new theme of "this stuff will pay for itself" has gained momentum among networking presenters here and across the industry.