AOI amps up its cable biz

Applied Optoelectronics Inc. (AOI) has kicked off a plan to sell its own brand of amplifiers, node products and monitoring software directly to cable operators as they look to upgrade outside plant ahead of new distributed access architecture and potentially DOCSIS 4.0.

AOI, a company that has traditionally designed and built cable network products via vendor partnerships as an original design manufacturer (ODM), is backing the initiative with a new and growing team led by Todd McCrum, an industry veteran with almost 30 years of experience in the cable access business at companies such as Cisco Systems and Scientific Atlanta.

Hired in May, McCrum is building an organization that has added other industry vets to the mix recently. They include Director of Business Development Al Johnson, who held posts at Casa Systems, BroadLogic and Celeno; and two other execs who were once with Cisco: Senior Director of Marketing Michael Ballard and Assistant VP Steve Pederson. Also new to the AOI team is Eduardo Cabrera, an exec late of companies such as Espial (now part of Enghouse), Technetix, Cisco and Adelphia Communications.

Spectrum upgrades on tap

In addition to manufacturing and shipping its own 1.2GHz amplifiers in the near term at its plant in Sugar Land, Texas, AOI will be doing the same with a new lineup of 1.8GHz amps and node products under the company's new "Quantum Bandwidth" brand. AOI is starting to ship 1.2GHz products today and expects 1.8GHz gear to ramp up toward the second half of 2024. The 1.8GHz products will be sold as drop-in upgrades for legacy Cisco GainMaker and GS7000 node products.

AOI will also sell and potentially license a software platform, dubbed Quantum Link, which monitors upgraded amps and nodes outfitted with transponders that provide remote feedback on the performance and health of those products. That capability is also designed to help operators quickly pinpoint problems on the network when they surface.

AOI is evaluating whether to get into the remote PHY device (RPD) market, drawing on experience from a prior collaboration with Intel's cable silicon unit (now part of MaxLinear) and an Israel-based startup called Capacicom. AOI might pursue the RPD market on its own or with a partner. "We're looking at all the options," Stefan Murry, AOI's chief financial officer and chief strategy officer, told Light Reading.

Selling directly to cable ops

This marks the first time AOI will sell cable products directly to cable operators, McCrum said in an interview. However, it's not a foreign concept for the company, as AOI has been using a direct-to-customer model for its data center and fiber-to-the-premises equipment businesses for several years.

But the opportunity to launch that model in cable has seemingly opened up after Cisco, a long-time partner of AOI, exited the cable hardware business and licensed some of that technology to others like ATX Networks, a supplier of cable amps and other outside plant gear. AOI is making the move soon after ATX opened up its own manufacturing capability in Grand Blanc Township, Michigan.

While this puts both ATX and AOI in position to support the "Buy America" mandates of the $42.45 billion Broadband Equity, Access, and Deployment (BEAD) program, AOI's move will put it in a more competitive position with other companies that build nodes, node modules and amplifiers, including CommScope, Antronix, Teleste, Harmonic and Technetix.

Creating its own cable products and partnering directly with cable operators "gives us freedom of engineering and freedom of innovation," McCrum said.

It also positions AOI to work more closely with operators as they embed smarts into their amplifiers and nodes.

"We need to be in lock-step on what their requirements are and what our engineers are coming up with," Murry said. "It really necessitated a closer interaction with the MSO community."

Bracing for cable's upgrade push

From a broader perspective, AOI's new cable strategy is taking shape as the company looks to gain ground in the market as cable operators pursue outdoor plant upgrades. Dell'Oro Group expects spending in that category to exceed $9.9 billion through 2023.

For now, AOI's cable business is taking a backseat to its larger data center business. Q2 2023 sales from AOI's cable business were $9.8 million, well below the $23.71 million generated in the year-ago quarter.

AOI said the dip in cable sales came as operators worked through excess inventory. But the company expects better times ahead as cable ops move ahead with their network upgrades more earnestly in early-to-mid 2024.

"We expect that any inventory buildup will be transitory," Murry said on AOI's recent Q2 2023 earnings call. "We do expect our CATV [cable TV] revenue will rebound to more normal levels, although near term, it will be down compared to those historic highs as the MSOs transition to next-generation architecture."

Dell'Oro analyst Jeff Heynen agrees that there's upside on the cable horizon.

"There's no question that operators, especially in North America, will be upgrading their amplifiers… This is money that's going to get spent," he said. Operators will also be looking to replace nodes or prolong their lives with drop-in upgrades, Heynen added.

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— Jeff Baumgartner, Senior Editor, Light Reading