Pricing vs value
The networking industry has had good margins for a long time. This isn't because of the hardware being intelligent or not (which is the wrong way to think about it btw). It's because there hasn't been much competition. The thousands of features that get deployed mean that the number of functionally equivalent devices for a particular spot in the network is small. With little competition, pricing stays high.
Things like SDN are important for two reasons: first, they reset the architecture to some extent, which reduces the power of all those legacy features, and second, it helps automate workflow. The first point increases competition (read: drives prices down). The second addresses the bigger cost issue: managing all the devices.
Ultimately, Cisco will drop their prices as competition heats up. They will be a player in the future of AT&T, just maybe not to the same extent they are today. But the real battle is going to be over long-term OpEx reduction. Merely making a cheaper switch doesn't really address that. If AT&T just wanted the same network they have today at lower prices, they would put pricing pressure on Cisco. That's not what this is about.
Mike Bushong (@mbushong)