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Inside Facebook's plan to eat another $350 billion IT market

By Julie Bort from Business Insider

On an ordinary workday in mid-2016, a handful of Facebook engineers were sitting on the couches in a corner of the company's Menlo Park, California, headquarters when one of them tossed out a wacky idea.

He suggested doing something that had never been done before and could upend the $350 billion telecommunication market.

"It can't be so difficult to build our own system," the engineer said, referring to the telecom equipment that sends data across cables and wireless networks, a system that could be faster, yet cost less, than the pricey equipment sold by big vendors like Huawei, Ericsson, Cisco, or Juniper Networks.

The engineer was suggesting building the telecom industry's first "white box" transponder, made with off-the-shelf parts such as chips from Broadcom and Acacia Communications, optical equipment from Lumentum, and software from one of the many new networking startups cropping up these days.

Facebook's director of engineering, Hans-Juergen Schmidtke, who was among those on the couch that day, was at first a naysayer.

"I was a little bit skeptical about it at the time," he recounted to Business Insider. As a former engineer at Juniper Networks, Schmidtke knew from experience that building telecom equipment systems was an expensive undertaking that involved hiring teams of specially trained engineers and sizeable research-and-development budgets.

"Building a system 10 years ago was like building a new company," Schmidtke said.

Still, Schmidtke agreed to help this tiny group hack together a white-box system at one of Facebook's hackathons. Three months later the group had a working prototype. Six months later, on November 1, the company announced it to the world as a real product called Voyager.

The product's unveiling sent shockwaves through the telecom industry, putting gear makers on notice that the lucrative market they controlled for decades was about to get turned upside down — and not necessarily to their advantage.

The effort is essentially Facebook, a social-networking company whose bread-and-butter business is online advertising, taking control of its own technical destiny. And the stakes could not be higher for the telecom equipment companies that risk seeing their products become commodities.

Voyager has already been tested by Facebook and the European telecom company Telia over Telia's thousand-kilometer-telecom network. Plus, the German telecom equipment maker ADVA Optical Networking is manufacturing the device and as of a few weeks ago had nine customers trying it out for their telecom needs, a mix of big telecom companies and enterprises, it said. And the Paris-based telecom provider Orange is also testing the device, working with Equinix and the African telecom company MTN.

"We pulled it off essentially showing that when a few engineers can build a system within six months, the world has changed," Schmidtke said.

One person told us that Schmidtke, who is insanely proud of Voyager, has become a star in his own corner of the tech world. When he and his team "go to conferences, they treat him like a tech celebrity, like a rock band," that person said.

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