Both new entrants providing competitive phone services at reduced prices and startup equipment manufacturers providing competitive optical transport gear at superior price points benefitted from the legislation signed into law in 1996, The Telecommunications Act. They successfully challenged the established order and went on to lower the cost of telecom services for consumers prior to the wireless explosion of ubiquitous cell phone adoption.
A number of factors came together that enabled the rise of CLECs and startup equipment manufacturers. One important factor was the need to break the bandwidth bottleneck. To achieve this at the equipment level, bit rate specific boxes like those supplied by Nortel and Lucent during the previous decade were not the answer to solve the capacity problem. Their boxes were inefficient, especially when it came to data traffic carriage and bandwidth management. A new solution was needed . . . and Cerent had it. This frightened the managers at Nortel and Lucent among others making product decisions. Nothing like the Cerent 454 had ever been seen before.
Earl Turner, Time Warner Telecom’s chief architect in 1999, recalls, “Lucent attempted to build a similar box [to Cerent’s box], but Lucent just did what they wanted to do. They didn’t listen to their customers. We asked them to build a box similar [to the Cerent 454] and to put data into their DDM-2000 and they kind of did a mock-up to appease us and went on their merry way and did what they wanted to do. Lucent ignored us. Then Cerent caught them off guard. Cerent caught them all off guard, Nortel and Alcatel too.”
In many of the 1990s mega-deals [especially those struck with CLECs securing vendor financing], startups such as Cerent could not compete. However, when Lucent or Nortel won such a deal at Cerent’s expense, those larger companies were left with a false sense of security over the strength of their product lines and misguided bravado that they could beat Cerent next time in a head-to-head competition for optical transport business. In those cases, Cerent won on the merits of its ability to deliver a higher quality product in a more timely fashion than either Lucent or Nortel.
“I think Lucent and Nortel were sleeping at the switch,” adds Dave Cesca, one of Cerent’s top salesmen. “They just didn’t have the roadmaps and the capability to take advantage of the new technologies. They were still stuck dealing with the RBOCs and the other telcos where it took a long time to make a decision.” Dave continued, “And what caught Lucent and Nortel off guard was the advent of the Internet and how fast things were growing. Companies didn’t have a choice. They had to grow their business.”
The mainstream media was puzzled too. How could little Cerent strike fear across the leadership of large equipment suppliers? Kevin Maney, a reporter for USA Today’s technology beat rhetorically posed the questions about Cerent on September 1, 1999, “What’s the magic? What do they do?”
He concluded, “It was not easy to explain to people outside the propeller-head community” and so he reached out to a couple of Cerent insiders. Carl Russo, Cerent’s CEO, explained it to him thusly, “We build Internet-ready optical transmission pipes. Some people build Internet routers. Others build optical things, like Lucent. But nobody builds optical things that plug and play with the Internet.”
There you have it, the big picture explained in a simplistic way that differentiated Cerent from all of the others in the transport space, struck fear in its competitors, and delighted its customers who embraced Cerent as the change agent of its time.
Of course, a little bit of magic doesn’t hurt either.
 The first "Dinosaur 13" BLOG may be found here: