Genband Plots Funding of TDM Death March
NATIONAL HARBOR, Md. -- TIA 2013: The Future of the Network -- Genband has launched what it believes is a unique way of encouraging telecom network operators to replace their TDM networks faster. The gear maker is working with an energy audit firm and Wall Street financiers to help operators finance the total cost of a TDM replacement, based on the money saved on power and water and the potential benefits to the environment.
The one catch: Network operators have to use Genband Inc. as their general contractor and agree to exclusively deploy its next-gen network gear, including softswitch, gateways, and session border controllers, as well as a 10-year maintenance and support deal.
Genband Chairman and new CEO David Walsh unveiled the new strategy in a keynote speech at the TIA event, for which his company is the major sponsor and an inescapable presence. It differs greatly from vendor financing deals of the past, he insisted to Light Reading in an interview, because Genband is taking no financial risk -- that lies with the banks it has enlisted. But Genband is helping its operator customers prove that they can pay off the financing of their next-gen networks based on the money they save on energy and water costs. (See Pulling the Strings At Genband.)
To do that, Genband is working with TelEfficient, a unit of CoEfficient, a company which can come in, do an energy audit of a telecom operator, and prove their operating cost savings. Those energy cost savings -- which according to Walsh are as high as 70 percent -- are then used to insure the financing of the new network purchase.
"We have been building the technical infrastructure to allow telcos to migrate from TDM to IP multimedia," he said. "The obstacle here is how do you finance it? What we have come up with is a no-money-down operating expense, paid from avoided cost."
There are other potential financial benefits to telcos -- real-estate requirements are cut by up to 90 percent and in some cases the freed-up real estate can be sold, reducing property tax liability as well. Tax credits, utility company rebates, and government incentives for adopting green technology may also be available. But those are seen as additional perks and aren't factored into the basic equation.
Genband installs and maintains all of the equipment and those costs are part of the financing process. At the end of 10 years, telcos can decide how to proceed -- whether they want further upgrades or replacements, Walsh says.
"This approach is new in this industry but it's not new in other industries," he insists. "This is how GE and Siemens finance CAT scans and MRI machines for hospitals, it's how Boeing and Airbus help finance airplanes."
Walsh also stresses the inherent risks in simply allowing TDM switches, which are anywhere from 10 to 35 years old, to die a slow death. He said they waste power and water and generate carbon dioxide emissions, while in some cases they are beyond maintenance windows and potentially become unreliable.
One reason that GenBand chose to go public with the strategy now is that the company is "well down the road" with a number of telcos in lining up financing deals and expects to begin to announce customers soon. The TIA event was a chance to bring the plan to a broader audience.
GenBand says the math works for any telco with a substantial installed base of TDM switches. As part of his keynote, Walsh presented a case study of a telco with 86 Central Offices and 104 switches that could be consolidated into one switch and 39 gateways. The replacement could be done in three years and would then generate $8 million a year in savings by cutting the power usage for the entire network in half, while also reducing real estate costs and taxes.
If interested customers have competitors' equipment in their networks today, say a Metaswitch Networks softswitch or an Acme Packet Inc. (Nasdaq: APKT) SBC, GenBand is willing to work around that and incorporate it into the long-term plans. Walsh, though, quickly adds that there is also a business case to be made for "rip and replace" strategies. But the financing assistance is otherwise based on going end-to-end GenBand.
"We aren't in the business of helping finance our competitors' products," Walsh says.
— Carol Wilson, Editor-at-Large, Light Reading