[c-nsp] Article: Beware of counterfeit Cisco gear

[Ted Mittelstaedt]

----- Original Message ----- 
From: "Gert Doering" <gert at greenie.muc.de>
To: "Ted Mittelstaedt" <tedm at toybox.placo.com>
Cc: "Shane at Doretel" <sbreen at doretel.com>; <skeeve at skeeve.org>;
<cisco-nsp at puck.nether.net>
Sent: Wednesday, October 25, 2006 1:36 AM
Subject: Re: [c-nsp] Article: Beware of counterfeit Cisco gear


> Hi,
>
> On Tue, Oct 24, 2006 at 10:09:46PM -0700, Ted Mittelstaedt wrote:
> > Additionally, in the auto industry, this sort of thing goes on all the
time,
> > and
> > there's nothing illegal about it, they call it "aftermarket parts"
General
> > Motors does not have a problem if I buy a new Alternator from NAPA
> > and put it in my GM car.  Cisco should not have a problem if I buy a new
> > WIC card and put it in my Cisco router.  The fact that they do, pushes
this
> > stuff underground which exacerbates the problem.
>
> Well - the interesting question is: what will GM tell you if you bought
> some important part for your car from a "aftermarket" source, and it
> damaged something in the engine (due to not following specs precisely
> enough).  Will they repair your car on warranty?
>

No, if they can prove that the part damaged the engine.

However, if the part didn't damage the engine, but was merely purchased
from an aftermarket source and, for example, didn't work, then GM cannot
disallow the warranty.

For example, I buy a new GM car.  The car manual says the oil must be
changed
every 6000 miles with API-spec oil.  I religiously change the oil at the
scheduled times in my own driveway with oil and filters I buy on sale from
Walmart,
and I save all my receipts.  The engine blows up before warranty expires.

GM CANNOT legally deny my warranty claim.

For second example.  I buy a new GM car.  The car manual says the oil must
be
changed every 6000 miles with API-spec oil.  I religiously change the oil at
the
scheduled times in my own driveway with Amsoil and filters I buy from my
friend
that sells Amsoil out of his garage.  Amsoil does not carry an API
certification.
The engine blows up before warranty expires.

GM  CAN legally deny my warranty claim

  I'll refer you to the following:

http://www.ftc.gov/bcp/conline/pubs/buspubs/warranty.htm#Magnuson-Moss

"...Generally, tie-in sales provisions are not allowed. Such a provision
would require a purchaser
of the warranted product to buy an item or service from a particular company
to use with the
warranted product in order to be eligible to receive a remedy under the
warranty..."

Oil is the most common example cited because it's so easy to understand,
but there's many thousands of aftermarket parts that this also applies to.
Think
of devices like rebuilt alternators, axles, etc.

This is why, for example, that all aftermarket auto radios have power supply
protection
circuitry in them.  The aftermarket manufacturer doesen't trust that the
alternator
in the vehicle will produce power on-spec.

> I think that's the heart of the issue: some of the clones just don't work
> properly (more likely "those clones that are recognized as such are those
> that have 'problems'")

There are many problems like this in the auto industry even today.  For
example last year I R&R'd the transmission in my van in my driveway.  While
it was out I decided to replace the engine mounts since they were worn.  The
aftermarket mount didn't contain the adjuster bolt that locks the
transmission
in, it wasn't even made to allow the old bolt from the old mount to be used.
That would have caused significant vibration if I had used it.  I returned
the mount
to the supplier and bought the much more expensive factory mount.

> - and I can understand that Cisco doesn't want to
> spend TAC time on chasing IOS bugs that turn out to be cheap hardware
> clones.
>

But you see, if Cisco supported the aftermarket then this would not be an
issue, because they would know the card wasn't theirs, upfront.

> We had a PA-2FE-TX that Cisco claims to be a fake, and indeed it caused
> *very* strange issues, both on a 7500 and on a 7200...
>

OK, let me expand on this since it's such a great example of what I'm
talking about.

For starters, clearly instances where a counterfeit is sold as Genuine Cisco
are very bad, because the buyer is paying full price.  For folks that get
in that situation I am in agreement that Cisco needs to do everything
possible
to imprison and chase down counterfeiters that contaminate the Cisco
dealership chain.

But, I disagree that most counterfeit Cisco parts are sold to ignorant
buyers.
We all know perfectly well what Ebay is, and anyone can get on Ebay and
in 5 minutes see dozens of listings for very cheap Cisco parts that are
obviously
fakes.  Some of the sellers are even so bold as to list the part as being
shipped
from Hong Kong or China.  For every victim that pays $800 for a counterfeit
WIC sold as genuine, there's 50 others that are paying $199 for a
counterfeit
that they know perfectly well is a counterfeit.

The counterfeiters that are selling $199 WIC cards are not manufacturing
WIC cards that do not work.  If they did they would soon be out of business
as they depend on repeat business like everyone else.  They also don't want
the police attention, if they sell nonfunctional cards then the customers
call
the cops and complain.  The counterfeiters making WIC cards that do not work
are the ones that make a small run of them then insert them into the
distribution
chain to get full price on them, so as to make a
fast buck, then shut down shop before the police show up.

Now, think about what is driving all these counterfeit sales?  It's price,
obviously.

Cisco has done incredibly well at driving just about every other credible
router
vendor out of business.  This is certainly no fault of theirs, but the
problem is
that there are plenty of businesses and organizations out there that need
routers, but cannot afford to pay what Cisco is asking.  For example the
small shop that needs Internet connectivity but is located in inexpensive
office space that cannot get cable or DSL, and so can manage the monthly
on a T1, but cannot manage $3K for a new router.

If Cisco had a giant leasing/credit program going, like the automakers do,
then these shops could walk into a Cisco dealer and buy a new router and
pay for it over time.  But, they don't.

If Cisco ran a refurb program that was competitively priced and had stock,
then
these shops could go Cisco Refurb and manage it.  But, I've done Cisco
refurb deals over the years and for starters, the stuff isn't competitively
priced, and secondly, most of the time it's out of stock.  And when it's in
stock it doesen't last.  A common scenario is a customer calls, wants a
used router, I offer Cisco Refurb, get on the Cisco reseller website and
verify price and availability, quote the customer, then a week later when
the customer calls back and has decided to buy, the items are now sold out
in Cisco Refurb.  In other words, clearly Cisco is running their Cisco
Refurb
operation purely to claim that they have an answer to the used market,
not because they actually want to sell anything.  And, how Cisco gets stuff
for Cisco Refurb is a mystery, over the years I've managed many brand new
Cisco router deals from Ingram and such, and registered the stuff and all
that, and never once has anyone from Cisco ever called and asked if
any of the new gear we have registered in the past is now no longer in
use that they might buy for their refurb program.  Yet I get at least 2
dozen calls a year from networking gear dealers who specialize in used
gear asking if we have old routers to sell that we are not using anymore.

If Cisco continued to keep their old, obsolete router models in production
at a reduced cost, then these shops could do that.  For example, Cisco
stopped production on the 1600 series a while back.  But, a 1600 works
perfectly well on the end of a T1 today, the same as it did when it was new.
Sure, you cannot do all the stuff with a 1601 that you can with a 1800 with
a serial port card in it, but since Cisco has now paid for all the R&D that
went into making the 1600, they could churn out millions of them for
next to nothing.  But, Cisco doesen't do this, so that's not an option
either.
Nor does Cisco license their OLD router designs to another company that
could do this as well.

Cisco has gotten all these complaints over the years and their answer
was to purchase Linksys.  So customers like the small shop can go get
their Cisco routers from Linksys.  The only problem is that Linksys does
not sell routers that can take a T1.  Also, the Linksys quality for past
routers has been so incredibly terrible that even the bad counterfeits
are better quality.  So that's really not an answer either.

Another Cisco answer was the "stripped" routers like the 800 series.
I've sold a number of these.  The problem is they stink, and are expensive.
Their IOS is buggy and you have to wait years for Cisco to get
around to fixing the IOS bugs to the point where the IOS finally works
right a few months before they stop production.

And if you don't go Cisco, then you are stuck with Adtran or some other
router vendor.  I've used all those products and they all have lots of
problems.  And, brand new, they are just as expensive as new Cisco
gear, so why bother?

Cisco could shut down a lot of the counterfeiters if they came with a
sub-$500
router that took a T1 and had good functionality.  They could shut down even
more if they went to a pricing model where they priced their stuff to track
their R&D costs.  In other words, for new router models that had many bells
and features, keep them priced as they are.  For older models and older
cards
that had paid back the R&D, be very agressive about lowering their cost.

If Cisco wanted to really shut down a lot of counterfeiters they
could do so by getting rid of their distribution chain.  Dell and HP/Compaq
figured this one out.

You won't have problems with counterfeits contaminating the distribution
chain if dealers are getting the stuff directly from Cisco rather than from
Ingram Micro or some such.  Most dealers out there if they could buy
direct from Cisco they would shitcan their distributors quicker than
grapes through a goose.

The distributors bring only ONE value-add to Cisco at the market table,
and that is product placement and coverage.  Cisco needed that when
Cisco was young and small and couldn't afford to advertise.  Today, Cisco
is giant and is advertising directly to customers.  Customers are going to
the distributors and demanding Cisco, it is mostly no longer a case where
the
distributors are forcing Cisco gear into their sales, and in the few cases
that
it is, the end-users hate Cisco anyway, and get rid of the gear when they
have any opportunity.

That's how the auto industry does it.  The auto dealerships buy cars from
the factory, they don't buy them from some useless middle-man distributor.
The'y been selling autos for damn near a century and they know what works.

We are too small for Cisco to allow us to buy direct from them, and we
have bought all our Cisco from distributors, from 7206 routers on down.
Mostly from Ingram.  I cannot think of one single bit of assistance we have
got from any distributor in any of those sales.  Not technical assistance,
not sales assistance.  A distributor has never once referred a customer to
us.  And when on occassion we have brought in customers that wanted
restricted products (like VoIP gear) the distributor didn't lift a finger to
help us get one-sale permission to sell that gear, we have always had to
go to Cisco to get it.  (and never had a problem getting it, BTW)  I really
fail to see how exactly the distribution chain has helped Cisco with the
dealers actually selling, installing, and servicing Cisco gear.

And, lastly, Cisco could support an aftermarket by giving interface
specs for their router ports.  Very simple, this is how computer motherboard
manufacturers do it.  You're manufacturing a PCI interface card for
a computer and it doesen't work with a specific motherboard?  That
board manufacturer will help you to solve it.

If you could go, for example, to somebody like ActionTec and buy a
port card that was an aftermarket card, it would have their logo all over
it.  Then if there was a problem and you called Cisco TAC you would tell
them that it was an aftermarket card, or a "show tech" would tell them
that it was aftermarket, and they would be off the hook for support.  If
that day ever comes, the counterfeiters will be out of business.

Ted