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Ultra-Broadband

Ericsson Spells Defense G-P-O-N

Ericsson AB (Nasdaq: ERIC)'s acquisition of Entrisphere Inc. was as much a defensive play in the GPON (gigabit passive optical network) market as it was an offensive strategy to gain more favor with carriers, according to one executive who spoke with Light Reading from the 3GSM World Congress in Barcelona on Monday evening. (See Ericsson Buys Entrisphere.)

"With this acquisition we're sending a very strong signal to customers that we're serious about this market and we also make sure that the technology doesn't end up in someone else's hands," said Peter Linder, director of network strategy for Ericsson's Broadband Networks Business Unit.

With its 2005 purchase of Marconi Corp. plc , Ericsson landed some key broadband access pieces, especially its softswitches and IP DSLAMs. (See Ericsson Buys Bulk of Marconi.) In 2006, Ericsson announced it was buying Redback Networks Inc. , giving it instant credibility in worldwide IPTV deployments where it was often reselling Redback routers anyway. Now the Entrisphere deal gives Ericsson another piece to sell to carriers looking to make the leap from being phone companies to real competitors to cable.

Entrisphere, which has been in business since 2000, has a fully-built product and a real customer or two. But the startup needed much more in order to be taken seriously on the world GPON stage.

"In the overall consolidation that's taking place, customers are being more careful that the equipment vendor they select is a viable player," Linder says. That's especially true with fiber access deployments, he notes, where a carrier needs to know a vendor will still be around for the five to seven years an access network upgrade is happening.

Linder also notes Entrisphere wasn't just a chance for Ericsson to buy into the North American fiber access market. Entrisphere's products were being built to international standards, and that's going to be important later on.

Carriers in North America are using BPON (broadband PON). Carriers in Europe are using point-to-point Ethernet. And carriers in Japan are using EPON (Ethernet PON). But most carriers are looking to GPON as the next step up in fiber access bandwidth. "GPON, we expect, will be a truly global play," Linder says. "There will be three, possibly four players addressing GPON in the worldwide market, and that's definitely favoring larger companies over smaller companies."

In the past several months, other international companies have made strides in GPON, including Fujitsu Network Communications Inc. and Hitachi Telecom (USA) Inc. , but Linder says Ericsson is still better positioned, thanks to its other broadband access acquisitions.

"Regarding the competitors... I think that there are primarily niche players addressing niches of the market," Linder says. But, he adds, carriers "don't only have a GPON challenge" -- they need other broadband access problems solved as well.

— Phil Harvey, Managing Editor, Light Reading

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