Light Reading

Huawei Aggressively Courts Rural US Telcos

Carol Wilson
1/16/2014
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Rumors of Huawei's departure from the US service provider market have been greatly exaggerated, and Bill Gerski is perhaps the greatest proof of that.

Gerski, a former VP with the National Rural Telecommunications Cooperative (NRTC) who also represented Dish Network LLC (Nasdaq: DISH) in sales to rural telcos, is a veteran of the rural telco market and is now aggressively taking Huawei Technologies Co. Ltd. 's story there, believing the time is right for rural resurgence. Named VP of sales for Huawei USA earlier this year, he sees a good fit for his company's broadband access products among the Tier 3 telcos that are trying to find a way forward in the post-Universal Service Fund era.

"What I am seeing is renewed interest out there," Gerski says. "Many companies have held off spending for a couple of years trying to figure out what was going to happen after the USF funding cuts, and some of those companies have held their cash pretty close to the vest. Now they are in a position to make a decision."

Gerski is not alone in thinking that rural telcos, after a period of hand-wringing, are trying to fight their way back. Other people including Shirley Bloomfield, CEO of the NTCA - The Rural Broadband Association , and a number of rural telco execs are not only urging action on the part of rural telcos but noting where it's happening. (See Rural Telcos Admit Major Changes Are Needed and NTCA CEO: US Needs 1 Rural Network Entity).

One of the more intriguing trends Gerski and others have observed is the move of rural telcos to consolidate in regional or even statewide groups -- at least to the extent of sharing management resources and buying equipment and services as a single entity -- to improve economies of scale.

"Going forward, they know they need to cut costs and add services," Gerski says. Through consolidation, they can share general management and administration costs to save up to 40% of operating costs, while buying in volume to improve purchasing power. Huawei is prepared to work with these new consolidated entities, which are just now in the making, he says.

Survival of the fiber fittest
Those rural operators that will survive must push fiber closer to the customer and be able to deliver bandwidth that not only supports the newer services they want to offer but also keeps them competitive with new companies moving onto their turf. That will include satellite broadband and LTE offers and lets them cherry-pick customers on the edge of their current footprint who might be unhappy with their cable or telco providers.

That's not to say every rural telco is on board: Gerski admits 5-10% of the companies are likely to either just close up shop or sell their way out of the business. But many Tier 3 telcos are co-ops: They are owned by the community and have a stake in its economic development, and those companies that have more aggressive managers are the ones now pushing to expand their service offerings.

The hardest thing for all of these companies will be developing more of a sales and marketing mindset, Gerski says, starting with the management and going down through the entire organization.

"These are companies whose employees are used to just answering the phone," he says. Once they invest in newer fiber networks, they need to drive take rates through sales and marketing efforts that are still largely foreign to them.

"It's a mindset -- these guys have to compete. And they've never had to do that before," Gerski adds.

The more successful rural telco providers -- veteran companies such as Calix Networks Inc. (NYSE: CALX), Adtran Inc. (Nasdaq: ADTN), and Metaswitch Networks -- have been working for years to provide more marketing and sales support to their customers. Gerski says Huawei will step up to the task, and in addition to his travels, he is bringing a number of rural telco CEOs into his company headquarters in early February both to show off the company's engineering expertise and to see what kinds of marketing and sales support they need.

Huawei is also prepared to compete with Calix and Adtran on price, beating them by up to 30%, Gerski claims, and expects to continue its US push for some time to come.

"We are here, and we are not going anywhere, and we want your business," he says. "We are asking folks to take a look at a third vendor and give us an opportunity to show them what we can do. We expect to be a major presence in the rural market."

— Carol Wilson, Editor-at-Large, Light Reading

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vishal87
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vishal87,
User Rank: Light Beer
2/9/2014 | 9:06:30 PM
Re: Carole are you Really Serious
Hi Carol et al,

 

Great points made by all, much appreciated! I just wanted to let you know Carol that I shared this article on the Carrier Ethernet Linked In group, and we've had some great discussions there of the reasons for, implications of, and value of such a move, and folks may want to head here to see http://lnkd.in/bUkJZ7i what some members of our Group shared.


Best,

-Vishal
Carol Wilson
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Carol Wilson,
User Rank: Blogger
1/20/2014 | 9:28:52 AM
Re: Carole are you Really Serious
This is not a gimmick - that's not how we do things at Light Reading. This report is accurate - Huawei is making a push for rural telcos. 
redbull187
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redbull187,
User Rank: Light Beer
1/20/2014 | 12:34:36 AM
Re: Huawei is not the classic american vendor
Thats an interesing comment on the UK market. The main culprit in that debacle was Matt Bross - who was in exhile at the time as the  CTO of BT. After that the role expried he became the CTO of Huawai ----enough said !
redbull187
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redbull187,
User Rank: Light Beer
1/20/2014 | 12:29:16 AM
Carole are you Really Serious
Is this a real post or a controversial one - I know Huawei used to advertise a lot with Lightreading so not sure with this is a sort of gimmick for them.

Yes the an IOC may entertain them initially becuase they 'DUMP' the price of products. There is NO way their pricing is consistent with the market. 

 

 
MarkC73
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MarkC73,
User Rank: Light Sabre
1/18/2014 | 7:37:27 PM
Re: Huawei is not the classic american vendor
You have to think of it in two stages

Old Huawei – when they first started up they were suspected of stealing designs, such as certain vendors finding their object codes embedded in Huawei's designs.  Also in labs of several Tier 1s, certain things couldn't and wouldn't be explained, such as wireless signals and data that wouldn't be turned over to the labs.  Thus, many decided not to deal with Huawei.  I've left names out of it because a lot has been settled out of court, or is additional information received from collogues in the industries.  You can google and get most of the high level details, then decide for yourself what to believe.  As far as congress, I believe that topic has already been discussed.

New Huawei – now that they've got what they needed to start, I am sure they are playing more fair and 'nice' to have a more international appeal.  They have spent money to develop their gears as well as contribute to the standards base.

And yes I also thought the head guy said they were officially giving up on the NA market.  I guess it's like quitting smoking for a day.
mendyk
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mendyk,
User Rank: Light Sabre
1/17/2014 | 3:56:29 PM
Re: Huawei is not the classic american vendor
You have a nice day as well ... glad to see you're open-minded about things.
stroydex
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stroydex,
User Rank: Light Beer
1/17/2014 | 3:51:57 PM
Re: Huawei is not the classic american vendor
Yes, because the business-is-business craniums would never give a microsecond's thought to national security.  You sound like the type.  Not surprised you had no idea Britain was having second thoughts about Huawei.
mendyk
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mendyk,
User Rank: Light Sabre
1/17/2014 | 3:14:01 PM
Re: Huawei is not the classic american vendor
Do we really want to look to Congress to make technology deployment decisions? Also, in what way are "the Brits" furiously having indigestion -- I mean, other than the literal kind triggered by the local diet?
sam masud
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sam masud,
User Rank: Light Sabre
1/17/2014 | 3:11:19 PM
Re: Interesting
The way I see it, it's not the telcos, but the US Government that's been putting pressure to keep Huawei out. So it might look bad from a PR perspective for an ATT, VZ or Comcast to do business with Huawei. But I don't think the rural telcos care because the big service providers muscle into their terrority whenever a rural telco tries to go beyond voice services.

This is a smart move by Huawei; am surprised it did not happen sooner. Huawei also has the deep pockets to help these telcos get its gear in the ground.

 
brookseven
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brookseven,
User Rank: Light Sabre
1/17/2014 | 1:17:35 PM
Re: Huawei is not the classic american vendor
 

If you do a bad job in the IOCs, they will shut you out very quickly.  There is lots of Word of Mouth spread.  Calix, Adtran and Zhone are all mature competitors in the business.  Showing up with a half baked product just won't work.

As I said earlier, if Huawei shows up in this market then Calix and Zhone in particular will fee pressure.  Adtran is not as big in the Tier 3 markets (by that I mean the < 100K line carriers).  

seven

 PS - One thing that may not be clear to those who have never sold in this business is that their spend is Access dominated.  How many routers do you really think a 10K line phone company needs (2 for redundancy.)?
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