Doesn't Cisco end up with the bad end of the deal if these items are covered by SmartNet and fail?

Well, no more than we, or other vendors, do who warranty them ourselves. That's why I would say that our interests and Cisco's are truly aligned when it comes to counterfeits.

Do you think there would be any resistance to needing a separate reader to "read" the (non-duplicable) covert security info?

I would buy one certainly...

Are any purchases from NHR considered authorized for SmartNet maintenance by Cisco? Or are they all subject to an inspection by Cisco prior to being eligible?

Cisco's policy states that any secondary market item may require an inspection and/or a relicensing prior to being eligible for SmartNet. This is similar to Cisco's intellectual property language that states customers "may" be violating Cisco's IP if they do not relicense a product. We have seen Cisco partners wave one or both requirements, and we have seen Cisco partners require both. NHR (among others) also offers its own 24-hour, NBD maintenance on all Cisco hardware at a fraction of the cost of SmartNet, so there are options.

Mike, do you foresee a day when Cisco would ever work with the non-authorized reseller market to combat counterfeit product?

Oh, I think so, and certainly hope so. If we worked together, closely monitored the auction sites and other online channels, worked with law enforcement (which we do already) I think we could end the problem in under a year. If the counterfeiters have no buyers, they will move on to other things. Through a combination of education and monitoring, we could eliminate their channel.

What kinds of gear is most commonly counterfeit these days?

GBICS and SFPs, WIC, VWIC, VIC, and NM cards are the most common. But it's important to realize that the efforts of the secondary market and the FBI and others seem to be working - even within these products we see many fewer counterfeit cards than in 2002.

Cisco is able to maintain price margins by forcing end users to return product using the allegation that the product is counterfeit. Does that happen to NHR on certain big sales to resellers? If so, how does NHR respond?

We hear that Cisco often tells customers products "may" be counterfeit, and almost always talks about the risks associated with products not being licensed and thereby "may" violate Cisco's IP. We have had a few deals returned, but much more often we are able to talk the customer through what is really going on - a highly competitive fight for a deal - and we end up fine. If the issue is potential counterfeits we demand proof as we are certain they are not. More often it is not "Cisco" saying this but Cisco salespeople, and their statements are often nothing more than extreme flights of fantasy - once called on it they have to back off.

How much of a security problem do you think counterfeit gear might be? I can think of several scenarios where the counterfeit gear allows someone from the outside to spy on targets who have installed what they thought was legitimate equipment.

I don't see any evidence of that, nor have we ever seen anything - hardware or software - installed on a Cisco router for these purposes - it is certainly possible, but we haven't seen it.