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DSL/vectoring/G.fast

Calix Goes to the Node

Calix Inc. (NYSE: CALX) this morning announced a new access product designed to help service providers extend IP-based broadband services in a fiber to the Node (FTTN) architecture. The move beefs up Calix's portfolio and represents a clear bid to compete more aggressively in the access market with large public competitors such as Alcatel (NYSE: ALA; Paris: CGEP:PA).

The E5, the first product in Calix's "E-Series," is described as a "service edge node" that can deploy a combination of POTS, DSL, and eventually PON-based broadband services to hundreds of customers. (See Wham! Bam! Calix Is Building a DSLAM.) Its primary focus is on adding longer-reach and higher bandwidth VDSL capabilities, and would serve as a hub for up to 384 combined DSL and POTS lines, with support for PON connections planned for the future.

The product would plug into the network at the service area interface (SAI), which has become crucial in new broadband installations because it's where service providers need to add longer-reach technology such as VDSL to reliably deliver video services.

Heavy Reading analyst Rick Thompson thinks the product expansion will indeed put Calix into direct competition with companies -- such as Alcatel -- for new IPTV deployments.

"Generally, the introduction of the E5, in addition to the newly acquired F-Series from Optical Solutions, gives Calix a broader access portfolio to compete with larger vendors in bigger accounts," says Thompson. "Specifically, the E5 provides another option to address the numerous service provider access architectures being built to deliver IPTV."

The E5's closest competitor is likely to be Alcatel's 7330 ISAM, regarded by several market research firms, including Infonetics Research Inc. , as the No. 1 box in the broadband services access space.

Calix CEO Carl Russo, in fact, hinted at more aggressive behavior as Calix expands its product line. According to Russo, Calix plans to compete with other boxes, not necessarily on price, but by introducing features that lower operational costs and providing better interoperability.

"Getting everything to work together seems to be a bit like the early modem business," says Russo. "We show up to all the plugfests, yet it seems like other folks are avoiding it."

Russo also says that rather than just building the cheapest box, Calix is trying to sell operational efficiencies which could lower installation costs. And this includes more than just offering technicians an integrated cup holder -- one of the famous features of Calix's C7 platform. (See Calix: First in Liquid Refreshment.)

For example, the E5 has the capability to use existing copper connections to the central office to supply remote power to each of its linecards. Providing remote power to the access node remains a big problem in broadband deployments, according to Calix officials.

The E5 makes a grander statement about where Calix wants to take the access network. The product is based purely on IP and Ethernet technology and includes an integrated crossconnect capability and VOIP features, so it would enable carriers to backhaul voice and data traffic as IP from the service node. This could lower operational costs by unifying the network, Calix claims.

The addition of VDSL technology is necessary to compete in the new broadband market because service providers employing an FTTN strategy shun fiber in the last hop to the customer, instead using the higher-bandwidth DSL technologies to supply enough firepower to offer video services, or IPTV. Using next-generation VDSL technology, an access box can deliver speeds as high as 26 Mbit/s at 3,000 feet. Most service providers will need between 22 Mbit/s and 26 Mbit/s to deliver IPTV services to consumers.

According to Heavy Reading's Thompson, the extension of the service length and capacity using VDSL is a natural, since it's the primary issue facing service providers rolling out IPTV. "The E5 helps to address that issue," says Thompson. He also believes Calix is right to focus on operational aspects. "Calix continues to prove their knowledge of the operational intricacies of these networks -- a good example is the distributed power management supported by the E5."

Calix officials say the long-term plan is to integrate the F-series PON products it acquired when it bought PON player Optical Solutions. The E5 will eventually include EPON and active Ethernet cards, although the company has yet to announce the timing. (See IBM Aims Security Software at SMBs.)

— R. Scott Raynovich, Editor in Chief, Light Reading

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paolo.franzoi 12/5/2012 | 4:03:38 AM
re: Calix Goes to the Node
Alcatel is strong in BellSouth and AT&T.

BellSouth had their RFP and is now looking to be consumed by AT&T. AT&T is in love with Alcatel. What does Calix bring that would cause AT&T to open a spot for them? A coffee cup holder?

seven
stephencooke 12/5/2012 | 4:03:37 AM
re: Calix Goes to the Node Seven,

An analyst recently told me that there are roughly 65M people in the US in population centers that number less than 10,000 who are served by tier 2 & 3 carriers.

Granted that to do a decent job on these sized accounts requires a large and geographically dispersed sales force (read: good channel selection, support and management) but that number was bigger than any RBOC until the latest merger announcement. ALA can't be everywhere at once, so the startup mantra goes...

Steve.
paolo.franzoi 12/5/2012 | 4:03:37 AM
re: Calix Goes to the Node
Stephen,

Yes, but Calix has already won the vast majority of the new business in that market. So, what is the point of winning business that you have already won?

seven
paolo.franzoi 12/5/2012 | 4:03:35 AM
re: Calix Goes to the Node
Stephen,

What you have stated is normal marketing theory, but is just not what is going on now. Alcatel is the prime contractor for the Lightspeed network and is choosing the 3rd party products that enter that network. Think Calix is on their list?

Did you see any RFPs for Lightspeed? No? Really. That is because there weren't any.

seven
stephencooke 12/5/2012 | 4:03:35 AM
re: Calix Goes to the Node Seven,

Business won is a transient thing (otherwise stated as "complacency is deadly"). That is why account managers have jobs. To maintain the relationships and to show the customer that progress is continuing.

Carriers can be very fickle with their suppliers, particularly the bigger carriers. Calix has to show their existing customers that they are moving forward and hope that, at some point, their offering becomes attractive to bigger fish; whether the attraction is a cup holder or a better business case.

You have said that AT&T/SBC is "in love with" ALA. It may appear this way at some level but I would bet that they (AT&T) are continuously testing ALA's competitor's products if for no other reason than to obtain pricing leverage at the purchasing table. If one of those competitors came up with a better business case ALA may have to scramble to maintain that "love".

I heard a major account manager, who happened to be well situated with the carrier in question, telling an underling who was struggling to keep up with the workload of apparently useless information and support requests: "Yes they are a*****es, but they are OUR a*****es".

Steve.
chengjinzhu 12/5/2012 | 4:03:33 AM
re: Calix Goes to the Node In my opinion this is not about Calix getting positioned to be a number two in an RBOC - that's a thankless job and a financial black hole.

This is about clearing the decks of any viable competitor in the NLECs and IOCs.

This product announcement is squarely aimed at Occam.

The OSI acquisition was designed to own the FTTP story in these same accounts.

Now if they execute the will keep these two markets to themselves and life will be OK. Of course, profits will remain elusive and the days of 60% gross margins in the AFC glory days are long gone.
stephencooke 12/5/2012 | 4:03:33 AM
re: Calix Goes to the Node Seven,

Interesting information, thank you. I have never heard of a major carrier allowing a supplier to decide what equipment gets deployed in their network. Is TRI Labs now a wholly-owned subsidiary of ALA? I am quite familiar with things like "If you don't interoperate with vendor X we aren't interested" (and vendor X's inability, due to logistical issues, to show up and support interoperability with anyone else. This is one of the reasons why carrier labs exist in the first place) but I haven't heard of anything beyond that until now. I have also heard of supplier deployment and installation contracting but never third party equipment selection.

How could ALA certify that any third party's product could interoperate with AT&T's OSS, etc.? Interesting...

Steve.
MorningWd 12/5/2012 | 4:03:32 AM
re: Calix Goes to the Node Perhpas LR can verify, but I believe that ALA is doing all of the OSS / BSS integration for AT&T at one of their facilities in Plano. I've also heard that they have the integration lab there where they do all of the end-to-end testing to which seven alluded.
RTL Rules 12/5/2012 | 4:03:32 AM
re: Calix Goes to the Node seven,

My (perhaps inaccurate) picture of ALA is that they have a complete access solution and they're selling it to SBC.

What third party vendors would ALA need?

I imagine they need middleware. Do they need hardware? (CPE?)

RTL
paolo.franzoi 12/5/2012 | 4:03:31 AM
re: Calix Goes to the Node
RTL,

I don't believe they need any 3rd party stuff outside of things like power, batteries, connectors, cable, and things like that. They are clearly working with other hardware vendors on the CPE (2wire) and transport side (Fujitsu).

As to winning all the Tier 2 and Tier 3 carrier business, they have the vast majority of it already. Now they have 3 platforms to support. We will have to see if they can turn this into a net margin profitable business.

seven
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