DT, Facebook Back German Startups to Disrupt Networks Biz

Three network startups will receive support from Deutsche Telekom and Facebook, and access to a funding pool of up to €100 million ($124 million), as they try to become viable alternatives to equipment giants like Ericsson and Nokia.

Airrays, BISDN and a currently nameless 60GHz company -- formerly based at a Berlin innovation hub called Imec -- are all developing technologies that could help to slash the cost of building radio networks and speed up infrastructure rollout by operators such as Deutsche Telekom AG (NYSE: DT), the German incumbent.

The companies have been asked to join a new TIP Ecosystem Acceleration Center (TEAC) in Germany after pitching their products to executives from Deutsche Telekom, Facebook and Telecom Infra Project (TIP) in Bonn last week.

TIP was set up by Facebook and other technology players in February 2016 amid signs of growing telco frustration with traditional network equipment suppliers.

In Europe, operators -- including Deutsche Telekom, France's Orange (NYSE: FTE) and Spain's Telefónica -- continue to complain about their dealings with established vendors like Ericsson AB (Nasdaq: ERIC), Huawei Technologies Co. Ltd. and Nokia Corp. (NYSE: NOK).

Bruno Jacobfeuerborn, the head of Deutsche Telekom's towers subsidiary, says equipment costs need to fall dramatically to facilitate the rollout of next-generation 5G networks. All three European operators are also still grumbling that products from different vendors are not interoperable, preventing them from easily replacing network suppliers.

In its statement on the move, Deutsche Telekom said there were hardly any startups targeting network infrastructure because of "high barriers to entry" and the dominance of established vendors.

Because of those constraints, "the venture capital community has been very hesitant to make infrastructure-related investments," said Arash Ashouriha, Deutsche Telekom's senior vice president of group technology innovation, in a company statement. "We want to change this situation."

For all the latest news from the wireless networking and services sector, check out our dedicated mobile content channel here on Light Reading.

The move by Deutsche Telekom comes several months after Orange and Facebook said they would provide similar support to four network startups in France -- Amarisoft, Athonet, Adipsys and Horizon Computing. (See Orange, VCs Commit $113M to Network Startups as 'Black Box' Frustration Mounts.)

In each case, venture capital firms, including the operator's own investment companies, are making €100 million ($124 million, at today's exchange rate) in funding available for startups.

However, this does not necessarily mean the startups already chosen will receive all or any of these funds.

Of the German startups, Airrays is developing so-called "smart antennas" that will support a 5G technique called beamforming. In today's networks, signals inefficiently blanket wide areas like a floodlight; with beamforming, they could be concentrated on specific devices like the beam of a torch.

BISDN says it is developing systems to help telcos expand their virtualization deployments more economically, while the Imec team aims to commercialize an open and interoperable antenna system based on 60GHz spectrum.

Despite hopes that startups could find their way into operators' production networks, there have been few signs of industry upheaval so far.

Franck Spinelli, the CEO of Amarisoft, tells Light Reading that inclusion on the Orange program has not yet made any difference for his company. "The telecom world is very slow moving," he says.

Spinelli also says it is difficult for smaller players to be active in groups like TIP because of their resource constraints. "We cannot participate in these groups. I have seven people in my company," he says. "Right now I prefer to invest into the product and into getting some customers."

— Iain Morris, News Editor, Light Reading