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Cisco, ip.access Prep Femto Combo

Michelle Donegan
LR Mobile News Analysis
Michelle Donegan
5/13/2008
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Cisco Systems Inc. (Nasdaq: CSCO) is jointly developing a femtocell offering for mobile operators with ip.access Ltd. , the home base station vendor in which it holds a stake, Unstrung has learned. (See Cisco Invests in ip.access.)

Collaboration between the femtocell vendor and the IP networking giant has reportedly already paid off with a big win at AT&T Inc. (NYSE: T), according to industry sources and a report from ThinkPanmure.

The research and investment banking outfit suggests in its report that the AT&T deal could even lead Cisco to acquire ip.access.

An AT&T spokesman says only that the carrier is interested in femtocell technology "and we are testing it, with a view to a trial later this year. We have not been specific about which vendors we might or might not use," the spokesman added.

The success at AT&T, which has been confirmed by industry sources, gives ip.access its second major carrier scalp, following its RFP (request for proposal) success last year at Vodafone Group plc (NYSE: VOD). (See Vodafone Picks Femto Vendors and Vodafone RFP Fuels Femtocells.)

Cisco is a strategic investor in ip.access, but the relationship involves more than just a stakeholding, and the companies are now actively working together to develop an extended femtocell solution that stretches from the mobile core network to the home base station customer premises equipment (CPE). That sort of integrated package would compete with the strategies of Nokia Networks and NEC Corp. (Tokyo: 6701).

But the extent of any product integration is not yet clear.

"We have a very positive partnership with Cisco... We are working closely with them to deliver an end-to-end femtocell solution that leverages both companies' strengths in wireless and IP technologies," says Andy Tiller, vice president of marketing at ip.access. "The whole solution that we're putting together will have some bits that are Cisco's and some bits that are ours."

But Cisco isn't ready to spill the beans yet about what it's doing with ip.access.

"We use direct investments such as the one in ip.access to gain market insight, to create linkages into adjacent markets, and to capitalize on go-to-market opportunities through complimentary organizations such as service providers," says a Cisco spokesman in an email response. "That's the extent of the relationship at this point."

The relationship with Cisco seems to have already helped ip.access to win a femtocell request for proposal (RFP) at AT&T, which has been widely reported. Unstrung sources can confirm the AT&T win, but not the reported size of the order.

ThinkPanmure's research note suggests ip.access has won a deal to supply AT&T with up to 7 million femtocell units priced at less than $100 each, with the total value of the deal coming in at $500 million or more. According to the research outfit, ip.access beat Motorola Inc. (NYSE: MOT), Alcatel-Lucent (NYSE: ALU), Nokia Networks , Airvana Inc. , and 2Wire Inc. to win the AT&T deal.

Unstrung sources are not convinced that the size of the initial order is as large as ThinkPanmure suggests. One source, who did not want to be named, believes ip.access won an order for femtocells that will be used in friendly user trials in two of AT&T's markets, and that other vendors will have a chance to bid again after the trial.

Cisco's pulling power
It's understood that Cisco -– and more specifically, Cisco's home gateway subsidiary Scientific Atlanta -- was instrumental in ip.access securing the winning bid in AT&T's RFP.

“It is widely rumored that it's the Scientific-Atlanta guys [at Cisco] who won this at AT&T, and that Cisco is doing the integration and using ip.access boxes,” says Stuart Carlaw, vice president and research director at ABI Research .

ThinkPanmure goes so far as to suggest the AT&T win could make ip.access an attractive acquisition for Cisco, which is already a strategic investor in the firm. Such a buy would follow other Cisco acquisitions of Linksys , Scientific Atlanta, and Navini Networks Inc. (See Cisco Buys Navini for $330M, Cisco Buying Linksys for $500M, Cisco to Acquire Scientific-Atlanta.)

Tiller at ip.access would not comment on AT&T, but said it was important to partner with a large equipment supplier.

"Operators are saying they want to buy their femtos from a large supplier," says Tiller. "They want to buy their femto access point from large companies. We provide the hardware and software that go into the CPE."

Ip.access has a partnership with Thomson S.A. (NYSE: TMS; Euronext Paris: 18453), for example, to integrate femtocells into home gateways. (See Thomson, IP.access Team and Femto Players Gun for Gateways.)

Working together
Tiller would not provide specific details on what kind of products ip.access is developing with Cisco. But we have some ideas of what the two companies could be planning.

There are three scenarios where Cisco and ip.access can collaborate: Cisco can act as a systems integrator for ip.access femtocell access points and gateways; the pair could develop a femtocell gateway together; or they could integrate ip.access femtocell technology into Cisco's CPE equipment. Of course, the companies could be doing a combination of these scenarios.

On the CPE side, an ip.access femtocell module could be integrated into Cisco's Linksys wireless networking platforms or the Scientific Atlanta set-top boxes. This strategy would fit with the partnerships ip.access and other femto vendors, such as Ubiquisys Ltd. , have formed with home gateway providers. (See Netgear, Ubiquisys Team and Netgear Gateway Goes Femto.)

Given Scientific Atlanta's reported involvement in the AT&T RFP, the CPE integration scenario seems the most likely joint product development for the two companies.

In a femtocell gateway, ip.access could combine its existing femto gateway with security gateway capabilities from Cisco that could sit on Cisco's 7600 edge router platform, for example. So, the ip.access element in the gateway would handle radio access management, which is what its existing gateway does, while Cisco would contribute the security, IP routing, and authentication.

Such a strategy would throw Cisco into the path of mobile packet core vendor Starent Networks Corp. (Nasdaq: STAR), which is busily developing just such a gateway product. (See Starent Intros Femto Solution.)

An end-to-end femto solution from Cisco and ip.access would be competitive with NEC's partnership with Ubiquisys, or Nokia Siemens's CPE partnership strategy, for example. (See NSN's New Femtofriend, NSN, Pirelli Partner, and NEC, Ubiquisys Team.)

— Michelle Donegan, European Editor, Unstrung

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