Last week Cisco Systems made a big product announcement that the networking giant said would change the Internet forever. What could it be? Well it was a big router, a really big router that would allow more bits than ever to flow over the world’s fiber backbones. And the market yawned, because bits are a commodity and it is hard to tell a million bushels of wheat in a pile from two million bushels of wheat. And Cisco’s enterprise customers — its biggest business customers — have plenty of bandwidth already, thanks.

Well that’s the entire point: corporations, where T1‘s still dominate, use less bandwidth per person than we do at our house, where Dora the Explorer is our goddess and Netflix rules. So the pundits and analysts looked at this new Cisco router, the CRS-3, and saw it as either logical growth driven by Moore’s Law or logical growth driven by competition from Juniper Networks, or both. No changing the Internet forever, they wrote. Nothing to see here, folks. Move along.

Except this time the pundits and analysts were probably wrong.

The CRS-3 is not for the Fortune 500 guys. Cisco has accepted that they can’t easily get big companies to expand the pipe and expand the router much beyond where they are today. HTTP just is too simple and clean. Cisco’s last stab at building enterprise bandwidth demand was telepresence, which needs a DS3 per node, but their Tandberg acquisition (telepresence lite) shows they are taking even that down-market.

So why the CRS-3?  The CRS-3 is for all the all-IP network of the future and as such is aimed primarily at telcos, not big business. The CRS-3 will enable the all-IP all the time future Internet as described just this week by the Federal Communications Commission:

— Video over IP

— Voice over IP

— TV over IP

— Radio over IP

— 3D over IP

— IP over IP

The difference with the CRS-3 is thinking globally. Why not watch a Russian TV station with subtitles or translations? Listen to music from anywhere, since it generally needs no translation. This is the new market for AT&T and global members of the Fortune 500. They get it; the market is not the USA, but the right demographic group globally. The CRS-3 is going to be the IP carrier to these demographic groups.

It’s a new kind of market segmentation that really makes sense when bits are what is being sold and those bits travel near the speed of light.

And, despite Cisco’s evident failure to explain itself well, the CRS-3 will change the Internet forever.