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Cisco bullish on service provider market

CEO John Chambers sees growth potential in service provider market, but security is key to getting consumers to trust the new services.

CHICAGO--Cisco Systems CEO John Chambers sees big potential in the service provider market as phone companies move away from providing basic broadband and telephony to offering rich interactive services such as TV using the Internet Protocol.

"We're optimistic about the service provider market," he said during a keynote address at the Supercomm tradeshow here Tuesday. "The service provider market isn't just about transport. It's about services."

Cisco has been addressing the service provider market--which includes sales to large local and long-distance telephone companies, Internet service providers, Web hosting companies and cable companies--with IP infrastructure equipment such as routers and switches for several years. While the segment accounts for only about 27 percent of its total revenue each quarter, the company spends nearly 50 percent of its research and development budget on it. And in four of the past eight quarters it has been the fastest-growing segment of the company's business.

As network traffic grows more than 100 percent a year, Cisco sees great potential in the future of the service provider market. IP has become central to the strategies of every major carrier, as they use it to collapse separate data and voice networks onto a single network. IP will also be important as carriers begin offering common content and user experiences over their wireline and wireless networks.

In addition, IP will enable service providers such as the phone companies to enter entirely new industries like television.

While IP provides a wealth of opportunity to service providers and to equipment suppliers like Cisco that help build these networks, it's worthless unless carriers can ensure customers a safe and secure experience.

"The market is coming to you," Chambers said. "But a lack of security will slow down the industry more than anything else."

Cisco has focused on developing and integrating security products into its portfolio for the past couple of years. On Monday, it introduced software that will run on its routers to better protect against denial-of-service attacks. The software, called Cisco Guard and Cisco Traffic Anomaly Detector, learns what is normal on a network and adjusts the routers' behavior on the basis of that information. It also communicates that information, along with user-established security policies and administrative changes, to the service providers.

During his keynote speech, Chambers emphasized the importance of building security directly into the network via products such as routers, so that attacks can be prevented from occurring.

"Security isn't a service on its own," he said. "It needs to be integrated into a comprehensive architecture."