Light Reading

Mais Alors! Alcatel Bags $1.7B SBC Deal

Light Reading
News Analysis
Light Reading
10/20/2004
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SBC Communications Inc. (NYSE: SBC) today announced that it has awarded Alcatel SA (NYSE: ALA; Paris: CGEP:PA) a five-year, approximately $1.7 billion primary supplier agreement for its Project Lightspeed rollout. The award makes Alcatel the main integrator and supplier in SBC's plan to overhaul its access network and drive fiber -- and advanced IP-based services -- closer to subscribers (see Alcatel Wins $1.7B SBC Deal).

When Project Pronto, SBC's last big access network makeover, wasn't pronto enough, SBC kicked off Project Lightspeed, an initiative that, the carrier says, will provide 18 million households with IP-based services including super high-speed data, video, and voice services at a price tag estimated at $4 billion to $6 billion (see SBC Speeds Up FTTH Plan).

This contract award is a huge win for Alcatel, given the sweeping nature of technologies involved and the dollar amount that's cited. "Alcatel is one of the premier equipment suppliers on the planet, and one of the few that could put it all together for a company the size of SBC," says Kermit Ross, principal of Millennium Marketing.

Alcatel will be providing SBC with its own IP routing, Ethernet aggregation and switching, DSLAMs, and fiber-to-the-premises gear, as part of the deal. The SBC win, as much as anything, provides the ultimate validation of Alcatel's acquisition of IP router vendor TiMetra. Mike Quigley, president of Alcatel, North America, says TiMetra put Alcatel in a position to be a "serious IP vendor." (See Alcatel Redraws Router Strategy.)

But Alcatel will also have to hammer some pieces into the big IP access network puzzle. It needs to integrate the optical equipment, residential gateways, middleware, and set-top boxes SBC chooses -- which could come from other equipment vendors. "There's going to need to be, for an end-to-end solution, other awards," says Quigley.

And, though Alcatel is said to be the exclusive provider of several of the Project Lightspeed components, there's always skepticism involving that word, "exclusive."

"When we've looked back at RBOC deals that have exclusivity in the announcement, what's in the contract is something you could drive a truck through," said Morgan Keegan & Company Inc. analyst Simon Leopold on today's conference call with Alcatel.

Still, Alcatel's getting a big boost here. Its $1.7 billion award would make up 58 percent to 72 percent of SBC's total projected spend. "They are not missing many pieces here," says Scott Clavenna, chief analyst of Heavy Reading. "It’s not like Alcatel was overlooked for routing, DSLAMs, or Ethernet aggregation equipment.

"I walked away from this feeling like Alcatel is in an awesome position," says Clavenna.

"SBC will convert much of its access network from POTS to pipes over the next few years, and, in terms of lines converted, it's a much bigger deal than Verizon's FTTP project," says Millennium's Ross.

Alcatel has long been considered a favorite to win the access piece of the SBC's project. Last month, Light Reading Insider accurately picked Alcatel among the alliances SBC would form to spearhead its deep fiber push (see Carriers Prep DSL Wave Part II ). And, in a key development, it was made clear that SBC's approach was going to be neither all fiber nor all copper.

SBC says it is trialing FTTP (fiber to the premises) in a number of locations and it will launch trials of FTTN (fiber to the node), which will involved a wide variety of next-generation packet and broadband gear, early in 2005. This, too, bodes well for Alcatel, which can provide DSLAMs and fiber access gear.

"We have the range of technologies to give SBC the flexibility to use DSL technology or fiber technology to ensure that the video services will work," Alcatel's Quigley says.

The losers in this deal may include several vendors, analysts say. Lucent Technologies Inc. (NYSE: LU), for one, is thought to have been one of the other integrators evaluated by SBC, but not chosen. "The first time in the batter's box with the new systems integration strategy, and they strike out," says Ross.

Other vendors biting their nails include Advanced Fibre Communications Inc. (AFC) (Nasdaq: AFCI), which could see its FTTP gear locked out of SBC for years to come, analysts say.

Given the fact that IP routing was included in Alcatel's package, the deal also doesn't look to be doing routing giant Cisco Systems Inc. (Nasdaq: CSCO) any favors. Cisco was known to be courting the SBC deal as an integrator, possibly in combination with a remote DSLAM player such as Adtran Inc. (Nasdaq: ADTN), several sources have said.

SBC has been here before, but never with as complete, complex, and comprehensive a solution proposed on a single network.

The carrier's Project Pronto initiative, announced in the late 90s, proposed to provide 77 million Americans with DSL service by the end of 2002. By October 2001, however, SBC announced that it would reduce capital spending by 20 percent in 2002 and scale back its original deployment schedule. This summer, SBC had 4.3 million DSL customers.

— Phil Harvey, News Editor, Light Reading

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green hornet
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green hornet,
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12/5/2012 | 1:09:59 AM
re: Mais Alors! Alcatel Bags $1.7B SBC Deal
Alcatel has partnered with Tropic Networks for a ROADM solution, so does this win for Alcatel also mean that Tropic and their ROADM solution are winners as well? Hmmm... if so, this would mean the Movaz/Lucent ROADM didn't make the cut, which Movaz was counting on for a significant piece of its future revenue. Movaz has no hope of business from BellSouth or Qwest, and now possibly SBC, so that would leave Verizon as the only RBOC to sell to (fat chance!). Will this be the straw that forces the investors to pull the plug on their $185M investment??
Stevery
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Stevery,
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12/5/2012 | 1:09:58 AM
re: Mais Alors! Alcatel Bags $1.7B SBC Deal
Looks like Pat will have to think up new ways to raid the LU pension monies.
maddog
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maddog,
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12/5/2012 | 1:09:58 AM
re: Mais Alors! Alcatel Bags $1.7B SBC Deal
Wrong! This will be a reason given for paying herself a larger bonus. She will need more "retention" money to help her work harder in the face of this loss.
private_eye
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private_eye,
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12/5/2012 | 1:09:57 AM
re: Mais Alors! Alcatel Bags $1.7B SBC Deal
This must be at the expense of Juniper ERX.
startup_shutup
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startup_shutup,
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12/5/2012 | 1:09:56 AM
re: Mais Alors! Alcatel Bags $1.7B SBC Deal
This was inevitable!
Frank
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Frank,
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12/5/2012 | 1:09:56 AM
re: Mais Alors! Alcatel Bags $1.7B SBC Deal
Hello Ethernet, Goodbye ATM?

It's quite remarkable to me that both Bell South and now SBC have gone the way of Ethernet in their optical platform pursuits, and _apparently_ in the process of doing this they are ditching ATM in the last mile. Last week BLS announced a deal with LU to do this, and more recently SBC with Alcatel (see below):

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SBC Selects Alcatel as Primary Supplier for Project Lightspeed

SBC Communications selected Alcatel as its primary network infrastructure and services supplier for Project Lightspeed. The deal is estimated to be worth $1.7 billion to Alcatel over the next five years.

Under the agreement, Alcatel will supply access and fiber technologies, IP routing and Ethernet switching solutions, and network systems integration services. Specifically, Alcatel will provide SBC with its remote 7330 IP DSLAM solution, which is capable of supporting wire speed triple play services and multiple variations of DSL for SBC's Fiber to the Neighborhood architecture. In addition, Alcatel provides its 7340 Fiber to the Premise (FTTP) solutions. SBC has selected Alcatel's 7750 Service Router and 7450 Ethernet Services Switch which will enable SBC to offer differentiated IP-based services, such as video.

Additionally, Alcatel will work with SBC to ensure seamless video systems integration.
http://www.alcatel.com
20-Oct-04

Earlier this month, the FCC voted to relieve incumbent local telephone companies of most obligations to lease advanced fiber-to-the-home (FTTH) network facilities to competitors at a regulated, cost-based price. Specifically, incumbents are relieved from unbundling requirements for fiber-to-the-curb (FTTC) loops, where fiber is extended within 500 feet of a customers premises. The new rules free companies to choose between FTTH or FTTC networks based on marketplace characteristics, rather than disparate regulatory treatment.


Following the FCC ruling, SBC announced "Project Lightspeed" - its plan to build a new fiber-optics network into neighborhoods. SBC now aims to provide 18 million households with "super high-speed data, video and voice services" by year-end 2007 -- rather than five years as previously announced. Under Project Lightspeed, SBC will provide integrated IP-based television, ultra-high-speed broadband, IP voice and wireless bundles of products and services. Through Project Lightspeed, the company will deploy 38,800 miles of fiber - double the amount used to build out the company's DSL network - at a cost of $4 billion to $6 billion.
---------------
If I'm reading this wrong, someone please advise.

Frank Coluccio
ChatEnChapeau
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ChatEnChapeau,
User Rank: Light Beer
12/5/2012 | 1:09:55 AM
re: Mais Alors! Alcatel Bags $1.7B SBC Deal
>> This must be at the expense of Juniper ERX.

Actually, I believe Juniper, their new found friends (LU) and RSTN bid for the contract. That was a non-starter. The ERX is NOT an ethernet friendly box. For that matter, nothing JNPR does is ethernet ready.

Having said that, with Redback imploding, I suspect the ERX has a little more life.

C-en-C
triple_double
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triple_double,
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12/5/2012 | 1:09:55 AM
re: Mais Alors! Alcatel Bags $1.7B SBC Deal
IP DSLAM = ATM (user side) + BRAS functions (above L2) + Ethernet uplink
First mile is still IP/ATM/ADSL because of the ADSL standard.
ATM & AAL5 still have to be provided at the user side (unless 802.3ah copper used).
The drawback of the 802.3ah copper is bandwidth (10Mbps @ 750 meter for VDSL, 2 Mbps @ 2700 meter for SHDSL. So triple-play might be possible by FFTx. In 802.3ah copper, first mile is IP/VDSL or IP/SHDSL.
There is no doubt that Redback and Juniper will be under pressure, since Alcatel and some other DSLAM vendors has been integrating BRAS functions into their DSLAMs.
OpticOm
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OpticOm,
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12/5/2012 | 1:09:55 AM
re: Mais Alors! Alcatel Bags $1.7B SBC Deal
I think this confirms what I had been saying for some time, that Alcatel will become the major supplier of telecommunication equipment in the world.
NT and LU self destructed, only Cisco stands, but in a different market.
Maybe we will see Cisco move more into telco...
lightreceding
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lightreceding,
User Rank: Light Beer
12/5/2012 | 1:09:54 AM
re: Mais Alors! Alcatel Bags $1.7B SBC Deal
This is a long time play by Alcatel to put IP in their DSLAM and push out the DSL Aggregator. It appears they are making progress.

SBC is/was a big Redback customer. Juniper is/was in trials with SBC with the ERX. This could be a big set back for both and is probably the reason why Redback is imploding.

However Alcatel won't have an easy time pulling this off. They have not done well integrating acquired companies or working with technology partners in this area. In any case though Alcatel does seem to be outdoing LU and NT.
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