BT Unveils 21CN Suppliers

News Analysis
Light Reading

4/28/2005

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BT Group plc (NYSE: BT; London: BTA) ended months of speculation today by naming the companies that will supply the equipment for its 21st Century network, or 21CN (see BT Names 21CN Suppliers ).

The biggest shock is that British vendor Marconi Corp. plc (Nasdaq: MRCIY; London: MONI) is NOT among the eight key suppliers, each of which will bring a range of partners. Only yesterday, Marconi was tipped as a "certain" 21CN winner by Dresdner Kleinwort Wasserstein (see Analyst: Marconi in Line for 21CN ).

Marconi's share price plunged 44 percent on the news this morning, dropping to 270.5 pence, from 482 pence.

Other highlights include the involvement of Chinese vendor Huawei Technologies Co. Ltd. in the access and transmission categories, and the notable exclusion of Alcatel (NYSE: ALA; Paris: CGEP:PA) from the access category.

Here's the list of winners:

Access: Multiservice Access Nodes (MSANs)
Fujitsu Telecommunications Europe Ltd., an existing supplier of DSLAMs to BT, is supplying its GeoStream Access Gateway. That choice looks like good news for metro optical vendor Meriton Networks Inc. (see Meriton, Fujitsu Make a Match).

The only other MSAN supplier is Huawei, leaving shortlisted vendors Alcatel and Marconi out in the cold, a decision that will surprise many (see Huawei Picked for BT's 21CN and BT Shuns Marconi for 21CN).

Metro Routers and Switches
Alcatel, Cisco Systems Inc. (Nasdaq: CSCO), and Siemens Communications Group are the chosen ones for the metro nodes (see Alcatel Picked for BT's 21CN, Cisco Picked for BT's 21CN, and Siemens Picked for BT's 21CN).

Alcatel is providing its 7750 Service Router, the former TiMetra IP platform, and its 5620 Service Aware Manager (see Alcatel Eyes Video Market).

Analysts at Lehman Brothers noted that Alcatel's inclusion in the metro category but exclusion from access is "on balance, a slight negative."

Core Routers
No surprises here, as BT will use Cisco and Juniper Networks Inc. (Nasdaq: JNPR) gear, though Juniper isn't named as a preferred supplier.

That honor goes to its partner Lucent Technologies Inc. (NYSE: LU), which will supply Juniper's M320, T640 and TX Matrix routing platforms and its own element management system.

In addition, Lucent's Worldwide Services and Bell Labs divisions will provide "network planning, integration, deployment and support," said the vendor in an official release (see Lucent, Juniper to Supply BT 21CN).

Network Intelligence, or I-node Technology
Ericsson AB (Nasdaq: ERICY) is the sole supplier for systems that BT says "includes softswitches, network intelligence, and bandwidth management capabilities." (See BT Picks Ericsson for 21CN.)

Transmission, Optical Equipment
Ciena Corp. (Nasdaq: CIEN) and Huawei are the winners here. Ciena, which says it is supplying "switching and transmission and Ethernet transport platforms," had been expected to participate (see BT Picks Ciena for 21CN).

Table 1: BT's 21CN Preferred Suppliers

Access	Metro	Core	I-Nodes	Transmission
Fujitsu	Alcatel	Cisco	Ericsson	Ciena
Huawei	Cisco	Lucent		Huawei
	Siemens
Access -- the access domain in this context is the aggregation equipment (multiservice access node -- MSANs) which will link BT�s existing access network, initially carrying voice and data services from end users on to the 21CN core IP-based network. Metro nodes provide the routing and signaling functions for the unified 21CN network for voice, data, and video. Core nodes are the high capacity, large scale routers providing cost efficient connections between metro nodes. i-node is where the service execution functionality is located -- in essence the intelligence that controls services. In the 21CN context, this includes softswitches, network intelligence, and bandwidth management capabilities. Transmission includes the optical fiber transport infrastructure that connects all nodes in 21CN but also the electronics that convert the signals carried at high capacity over the cables connecting the MSANs, metro, and core nodes. Much of the optical fibre infrastructure is already in place and today we are announcing the preferred suppliers for the optical electronics. Source: BT Group plc

The key to BT's decisions appears to be economics. "In order to achieve world class delivery of the programme, the selection of suppliers has been about much more than choosing technology and selecting partners," says BT Wholesale CEO Paul Reynolds in a prepared statement. "The commercial agreements, which the company expects to conclude over the summer, will include open standards and a focus on whole life costs."

In other words, the margins are razor thin, and Marconi says it didn't make the final selection because it couldn't meet BT's commercial needs.

"This is a disappointing outcome from a very competitive tender process," said Marconi CEO Mike Parton in a statement. "Our products performed extremely well technically, but we have been unable to meet BT's commercial requirements."

Marconi notes that it will "continue to supply equipment and services to BT under the various, multi-year frame contracts it has in place."

Given Marconi's long history with BT, its exclusion will come as a serious blow. The price squeeze will likely have favored Huawei, though, given its reputation for providing decent quality but low-cost technology.

BT's decisions will have significant implications for all the vendors involved, as the 21CN will provide a shop window into which other major carriers making their own next-generation network plans will peer closely.

— Ray Le Maistre, International News Editor, Light Reading