(UPDATED 2/14, 9:30 a.m., to add details of the partnership.)

Ericsson is departing the optical networking business in favor of a joint development and distribution agreement with Ciena.

The partnership was announced as markets opened on Valentine's Day (we'll wait anxiously for the Hallmark Channel movie to come out), and it reflects two major trends among equipment vendors.

First, AT&T's Domain 2.0 program and similar moves associated with software-defined networking (SDN) seem to be putting pressure on OEMs to provide entire ecosystems — which means we could see more mid-tier vendors pairing up in deals like this one.

The partnership is also a bit of long-awaited consolidation in optical networking, a market still carrying the baggage of the late '90s boom.

Domain 2.0 is a conscious effort by AT&T to widen its supplier base. Picking two domain suppliers for each major product area limits AT&T's choices to a handful of big companies. As networking intersects new ideas, including SDN and the AT&T-backed network functions virtualization (NFV) effort, AT&T doesn't want to miss out.

That means incumbents could be unseated — incumbents including Ciena in AT&T's packet-optical networks and Ericsson on the wireless side. To shore up their positions, these companies are feeling the pressure to provide entire ecosystems rather than specialize in a couple of areas.

So, Ciena is "probably positioning to maintain their preferred position" at AT&T, says Matt Palmer, a partner with IT consultancy Wiretap Ventures and a founder of SDxCentral.

It's not just an AT&T phenomenon, though.  In general, we could see more partnerships initiated by "mid-tier networking suppliers who are market leaders in one or two important product categories" and need more complete portfolios to keep the attention of the larger service providers, Palmer says. "Mid-tier suppliers who don't have dance partners to offer a whole solution to the largest service providers have to go out and find one."

You might wonder why Ericsson doesn't just keep the optical division, if optical is so important.

The market for optical equipment sold to carriers is badly fragmented, with no vendor typically grabbing more than 25 percent market share. Beyond the leaders — Alcatel-Lucent and Huawei among them — is a long tail of vendors that got into this market during the boom of the late '90s, only to see the business crash a few years later.

At Light Reading, I covered that decline for more than a decade. The effects are still being felt, in that there are too many suppliers (particularly on the components side) chasing a small herd of carrier customers.

For the perennial also-rans, that means hard work and low margins. Cisco has rekindled its interest in optical, but I'm convinced the company seriously tried to sell the division sometime around 2006. (The problem: no acceptable bids.) Ericsson, whose optical technology includes products acquired from Marconi, has apparently done the math, too, and decided to bow out.

As for what Ericsson and Ciena will actually be doing:

• Ericsson will resell Ciena's 6500 and 5400 platforms. That does include standalone deals that don't involve Ericsson equipment, Jan Häglund, Ericsson’s head of IP and broadband, said on a conference call Friday morning (California time). The reseller agreement starts "almost immediately," he said.
• Ciena's WaveLogic will be integrated into Ericsson's routers. WaveLogic is a processor for sending coherent optical signals, "coherent" being the key to 100-Gb/s optical transport. This integration of packet and optical technologies has been a huge theme for Ciena for the past few years.
• The companies will collaborate on service-provider SDN technologies. On the call, Häglund described the companies joining forces on data-plane technologies for the IP and optical layer, all under SDN control.

(Visible spectrum photo by Flickr user davidsancar, licensed under Creative Commons 2.0.)