Larscom Inc. (Nasdaq: LARS) has spent the last couple years working on a new premise -- that the RBOCs (regional Bell operating companies) want to ramp up Ethernet services, and to do so they will require some simple, low-cost access gear (see Larscom Launches Multiservice Platform ).

Today the company announced just such a product, the Orion 7400, which uses emerging technology such as Generic Framing Procedure (GFP), Link Capacity Adjustment Scheme, and Virtual Concatenation (VCAT) to efficiently pack data from Ethernet, T1, and T3 services into existing Sonet networks, making the rollout of Ethernet more RBOC-friendly.

The launch of the new product marks a corporate makeover for the company, which has been struggling on the public markets for years. In the mid-90s Larscom was an innovator in the Frame Relay and ATM multiplexing market, but growth in that market was soon exhausted and the products were rapidly commoditized. For several years Larscom faced shrinking revenue and its shares now trade under $1.

With today's announcement, the company is attempting to embark on a new chapter of growth. Two years ago, major investors forced the company to bring in a new CEO, Daniel L. Scharre, to help inject new life into the company. Scharre, the former chief of Adaptive Broadband Corp. (Nasdaq: ADAP), installed a new management team, which set off on the current Ethernet services route.

Unlike the vast numbers of next-generation Sonet, Ethernet, and multiservice switching players, however, Larscom is sticking to the low-end customer premises market. It has not announced a larger metro Sonet ADM (add/drop mux), which many startups are rolling out along with their access gear. Larscom plans to work with the incumbent metro-area Sonet gear, touting wide interoperability with major next-generation Sonet players such as Cisco Systems Inc. (Nasdaq: CSCO), Lucent Technologies Inc. (NYSE: LU), and Fujitsu Ltd. (OTC: FJTSY). Many of those companies also market access devices along with their larger ADM equipment. Other startups looking to market Ethernet access devices include Calix Networks, Metrobility Optical Systems, Turin Networks Inc., and World Wide Packets Inc.

The strategy might just work, considering Larscom's approach -- the exact same approach it took in supplying Frame Relay access gear: Make it cost less.

“Larscom has come up with a very interesting alternative to multiservice Sonet boxes that do everything, by selling what looks like a T1 mux product and handling Ethernet for under $5,000,” says Michael Kennedy, president of Network Strategy Partners LLC. “Maybe, like their T1 muxes, this type of product will be a home run.”

The big question for such a product, however, will be how fast RBOCs jump on Ethernet services. Right now the major telcos have been slow to market Ethernet, which ranks behind Frame Relay and T1 services for corporate data connection. Larscom is counting on the fact that RBOCs will need to roll them out to compete with offerings from IXCs like AT&T Corp. (NYSE: T) and MCI (Nasdaq: MCIT).

Larscom officials point out that Ethernet services will be competitive to T1. Although the prices for T1 services and Ethernet are comparable at slower speeds like 1.5 Mbit/s, Ethernet services quickly become much cheaper as the bandwidth increases.

Initially Larscom’s product line will target access at multitenant buildings, at a cost under $5,000. The product can be equipped with 10/100 Ethernet, Gigabit Ethernet, T1, or T3 ports. The boxes will route the service connections over OC3 and OC12 Sonet pipes on the service end.

— R. Scott Raynovich, US Editor, Light Reading