Cisco riding high on a flood of terabytes

Stuart Corner
Thursday, 03 April 2008 10:24

Opinion and Analysis

Just a few snippets illustrate why CRS-1s are selling like hot cakes: Three years from now, Internet video traffic will be twenty times what it was in 2006; driven by video, Internet traffic will quadruple by 2011; in 2011, online video will generate  one billion DVDs worth of traffic each month.

In short there are three reasons why Internet traffic is exploding: video, video and video.  But at present revenues from all this video traffic are not keeping pace, and in particular are not flowing to the carriers that are buying CRS-1s and all the other gear they need to carry this traffic: much of its is peer-to-peer, much of it is driven by the huge popularity of YouTube. Consumers, meanwhile think they should pay a set monthly fee for their Internet connection and download as many videos as they like.

Cisco might now be well on the way to recouping the $US500m in R&D costs it claims to have put into the CRS-1, but clearly the buyers of those 1800 units, and that includes Telstra, will need new ways of monetising these massive traffic volumes to recoup the investments they have to make in delivering them. Either that of the cost of gear such as the CRS-1 in terms of dollars per Tbps of throughput will have to keep falling fairly rapidly.