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what did you mean by flaws in my application?
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I meant the Nios application, not your telnet client.
I suggested you use ping instead of telnet, because ping use only a minimal part of the network stack, so it's less prone to any software/driver problem. In other words, ping always works when telnet (or generic tcp connection) does; the reverse is not true.
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By the way, other than defining the IP address in the simple socket server.h file and disabling the DHCP Server through BPS Editor, what se should I do to configure the system to be using Static IP address?
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Ok. This is enough.
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Do you think that unconstraint design will cause DHCP Server fails to acquire an IP address?
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Timing problems can lead to very subtle defects, not easy to identify and reproduce.
From your description the problem seems to be located at the mac/phy level, but I can't say if due to timing or any logic error. I'd exclude any error on Nios sw/driver side, since you said you are using the sss template with nearly no changes.
Timing: make sure you have at least the minimal (core) constraints; you should have time quest analysis enabled, timing driven synthesis option checked and your project must include the .sdc file generated by sopc builder / Qsys
Logic: check if the RGMII signals are correctly routed to the proper fpga pins connected to ethernet phy. Also check in the Nios terminal log: it should report the ethernet phy has been identified, initialized and ethernet link established.