Yesterday, Cisco Systems agreed to acquire Starent Networks for $2.9 billion, a company most people have never heard or read about.

Did Cisco in one fell swoop put a bullet into heart of competition and the competitive landscape? Starent represents one big strategic piece of the massively growing mobile infrastructure puzzle – core network software for high speed mobile Internet.

Starent’s technology provides multimedia intelligence, core network functions and services that service providers can use to manage access from any 2.5G, 3G or 4G radio network to a mobile operator’s packet core network.  Starent will become Cisco’s new Mobile Internet Technology Group within Cisco’s Service Provider Business,

In speaking with industry insider who wanted to remain anonymous the following was said

“Cisco just killed innovation and any form of real competition for the coming years.  The Starent deal eliminates any competitive forces or partnerships between Alcatel Lucent, Juniper Networks, Motorola, and even the Chinese.  Even at the expense of their own products and customers. Cisco chose to take Starents’ neutral position as a competitive threats off the table.  For what?  – a measly $2.9 billion and a nice little premium to Starent shareholders.  It makes you wonder what Cisco is afraid of.”

Others are feeling the same way.  The New York Times reports that this is not the normal size of the kinds of deals Cisco does.  In that story NY Times quotes analyst firm Breakingviews :

Yet this deal is bigger than Cisco’s typical $1 billion or smaller target, the publication notes. Small companies usually have weak relationships with potential customers and a small sales staff, so plugging these groups into Cisco’s marketing machine maximizes revenue. Starent’s maturity means that kind of so-called revenue synergy will be harder to come by, Breakingviews suggests.

Moreover, the deals this month for Starent and Tandberg are the fifth- and sixth-biggest acquisitions Cisco has ever made, according to Dealogic. This smacks of Cisco, a $139 billion company, having to perform larger acquisitions — with arguably more execution risk — to move the needle, Breakingviews argues.

My Angle:  Cisco basically bought off the market any competitive threat from Starent neutral position.  Additionally this combination threatens innovation in the mobile infrastructure segment.

BreakingViews via the New York Times makes some very important points about Cisco’s growth strategy. In essence corporate development dealmaking is so Web 1.0 – it doesn’t scale but instead poses execution risks.   Historically, we could all view the dot-com bubble as additional evidence that deal making and mashing up companies doesn’t create value.

Cisco, via Starent in essence owns the innovation timetable in mobile networks.  It was rumored among industry players that Starent was about to run the table on the China market and take most of (if not) all of the US market.  The question is what if Starent with a superior product remained independent?  Could Starent have worked with all the players – more like Switzerland?

Cisco just locked down the market at the mobile core.  In terms of the hardware Cisco will let the radio guys fight for that market.

As an Internet user and entrepreneur, I feel cheated.  Could the possibilities of competition with a neutral player like Starent at the core be better for me?  Better for the industry?  What about developers?

It doesn’t smell right. It smells monopolistic. It seems like evil genius.

I’m sure that I’m going to get spammed by all the Cisco defenders out there. Is the industry better off with this deal?  I’m open-minded to hear such argument.

With big game changing deals like this I monitor keywords like Innovation, Net Neutrality, Competitiveness, Technology Advances, New Venture Creation, among others.  With this Cisco Starent deal many red flags comes up.

Just today a developer named Shazam received investment from a top tier venture capitalist Kliener Perkins Caufield & Byers to bring more innovation at the edge.  This is representative of what is happening around the globe from edge devices like smart phones to advanced radios and hardware tat we need in the network and on the cell towers.

It’s bigger than just industry competition.  It’s about the future of innovation with entrepreneurs out there.  Just today Scott Kirsner, Boston Globe and industry writer, wrote about the entrepreneurial changes in Boston. – there is a counter culture going on among entrepreneurs.  Cisco’s old school mindset of buy at all costs doesn’t work.

In my opinion by eliminating a competitive threat Cisco just sets back innovation years.  This reminds me of the old CLEC days when policy strategy killed the broadband movement before the industry even got going.  As a result of lobbying during the CLEC formation days innovation was stifled for years and the carnage – of dead companies, lost jobs, and billions wasted – were littered on the Internet roadways with companies like Covand, Northpoint, and others.

Look no further than the massive mainstream growth in internet usage over mobile devices and it’s clear this is important critical piece of the new user internet environment.

Did Cisco just put in play a virtual monopoly lock on the mobile core network?

Cisco spin machine was out in force and according to Jim Duffy at Networks World the analysts say Cisco is moving with the market.

"Cisco is now placing its bets on LTE, which will be the big 4G winner," says Laurence Swasey, senior analyst at Visant Strategies. "Mobile operators around the world are all in different stages of moving toward LTE. WiMAX was always a dark horse for the mobile world."

Swasey says LTE provides more voice capacity, "better data crunch" and better revenue per subscriber than mobile WiMAX. He says vendors like Cisco put early bets on the technology as a placeholder until the dust settled around which 4G technology would win out.

Mark Lowenstein , managing director of Mobile Ecosystem, echoes those views. "It is becoming clear that WiMAX is not being adopted for large scale deployments, outside Clearwire and a couple of Asia contracts," Lowenstein says. "Most wireless carriers on a 3GPP (WCDMA) or 3GPP2 (CDMA 2000) track are going to LTE. So Cisco wants to play in that sandbox as well, and with Starent it can capitalize."

Starent also allows Cisco to play a broader role in optimizing wireless networks for the 20-fold increase in usage that will be driven by smartphones, netbooks, and a new range of wireless embedded devices, and for new types of usage such as multimedia, Lowenstein says.

If it’s true that Starent had the superior product, market leadership, and a lock on all the mobile deals then Cisco isn’t placing a bet.  It’s locking up the market.

This kind of position is defacto platform lock-in or monopoly.  This might give Cisco a massive competitive advantage to innovate only their equipment and dictate to partners and customers which software and protocols to be used.

The Cisco Starent deal feels more like predatory move rather than one of innovation and advancement with benefit for their customers and users.

Maybe a brilliant corporate development move by Cisco that flexes corporate muscle and market power, but all I see is Cisco buying up the market, eliminating choice for developers, customers, and users.

Cisco Starent deal might look good on paper, but I just don’t get it.  Will someone share with me how this is good for innovation, competitiveness, and the advancement of the mobile Internet.

Evil genius or just plain evil?