The Truth About Open-Standards Transceivers and NEM Warranties

The truth about open-standards transceivers and new warranties

The “Open Networking” trend continues to gain momentum, as customer requirements lead them to seek the greater flexibility and savings afforded by disaggregation of software, hardware and open port networks.

While many network equipment manufacturers (NEMs) have similarly begun increasing their open networking offerings, others are a bit slower to open their platforms and are more defensive of their current business model and its revenue stream. When customers ask these network NEMs about open-standards transceivers like Champion ONE’s, the NEMs may threaten to void their existing warranties if these optics are used. However, as discussed in a recent article from Gartner Research (warning: paywall), this threat is largely unenforceable, and is very possibly illegal.

The tactic NEMs attempt to employ in these cases is a form of “tying” (or more specifically, “vertical tying”): requiring customers to purchase related products from the same manufacturer. This was effectively outlawed through the passing of the Magnuson-Moss Warranty Act in 1975. However, NEMs will claim this law doesn’t apply to business purchases, but instead applies only to companies selling “consumer products” to individuals.

The courts, by and large, have disagreed. In case after case, courts have established precedent that vertical tying is illegally anti-competitive for both businesses and individual consumers. Cases on point include Illinois Tool Works v. Independent Ink Inc. (2006) and Johns v. Visa Inc (2004). In the words of the Federal Trade Commission: “The general rule is that tying products raises antitrust questions when it restricts competition.”

When you consider the average margin on transceiver sales (a markup of up to 350%, Gartner estimates), this is an entirely understandable tactic for NEMs to employ (especially at higher data rates like 40G and 100G), However, it’s important that customers recognize that it’s just that: a marketing tactic designed to introduce fear, uncertainty, and doubt (FUD). You have more choice than they would like you to believe.

In reality, here is how the warranty coverage will play out with an open-standards provider like Champion ONE and NEMs: if a network issue arises, troubleshooting will determine the relevant warranty. If Champion ONE parts are at fault, the Champion ONE warranty will go into effect; if the problem is deemed to derive from a failure in the NEM network equipment, the NEM’s warranty will be triggered.

In our own experience, these situations tend to result in a highly collaborative environment in which both sides – open-standards supplier and NEM – put the needs of the customer first to deliver the best possible service. This is a key benefit of open networking that has driven its widespread adoption across industries. Choosing open networking means more choice, better availability, and tremendous cost savings that can be applied throughout your network!

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