Access Market Sings the Blues
BURLINGAME, Calif. -- The access equipment market, like some attendees at the NGN Ventures conference, could use a bit of a stimulant.
Specifically, there's a growing consensus here that if the telecom business is to recover, the access sector -- which arguably gives carriers the quickest return on their investment -- needs something to release it from its melancholy (see Optical Oracle: Access is Gold ). Be it regulatory help, some cheap, profitable way to deliver DSL, or an explosion of new markets altogether, the companies here are looking hard for answers.
Each potential stimulant, however, has its side effects. Take the regulatory environment. The gripe about regulators, panelists say, is that their increasingly pro-RBOC leanings (and, oh, yeah, the failure of deregulatory efforts such as the Telecom Act of 1996) doesn't give the incumbent carriers any competition to prompt them to roll out DSL any faster (see Tauzin-Dingell Takes Another Step).
"The state public utility commissions are more interested in your grandmother's POTS [plain old telephone service] line than they are in your DSL account," says Jim Sackman, CTO and VP at Advanced Fibre Communications Inc. (AFC) (Nasdaq: AFCI).
What about federal regulators? "[In the FCC], you historically have gotten a bunch of people who just don't have a clue," says Tench Coxe, Managing Director at Sutter Hill Ventures (see FCC Commissioner Weighs In). Indeed, broadband doesn't appear to be the national priority of regulators, according to John McQuillan, president of McQuillan Ventures.
Sure, new regulation is supposed to prompt carriers to launch broadband services faster, panelists said, since it makes it so they don't have to share their networks with competitors. Right now, however, they won't roll out new DSL service with Wall Street watching their every move.
"CEOs are focused completely on producing profits," says Coxe, who notes that service providers are not worrying about new services -- they're going back to their bread and butter in an attempt to get out of debt.
Another thing hampering the access space is that power consumption has kept DSL gear costs high, Sackman says. "Power and batteries and stuff like that are under the high-tech radar."
Indeed, for each broadband connectivity solution there are limitations on distance, cost, functionality, and performance. The constant trade-offs, however, have encouraged some startups to try and find untapped access markets.
Take Actelis Networks, which presented here (see Actelis Draws High-Profile Investors). That startup is building a solution -- with one box in the service provider's central office and one inside a customer's building -- that provides fiber-like bandwidth over the existing copper pair. This new set of gear will allow service providers to offer businesses outside of the denser metropolitan areas some kind of connection that's greater than a T1 (1.5 Mbit/s) line, according to Actelis CEO Yuval Baron.
The catch? To succeed, Actelis must convince service providers to attack a brand new market, which they're hesitant to do very soon. "Timing is the issue," says Coxe. "[Actelis] is clearly going after a niche where its needed, but I don't know if its market will develop in time."
Baron says he's not worried. The 110-employee company has raised $75 million to date and has about half of that still in the bank. Actelis's challenge will be to convince service providers to take a chance on a startup, something that draws sneers from larger equipment companies.
"Startups are not able to deliver innovation and products in a way that service providers can use," says Sackman.
— Phil Harvey, Senior Editor, Light Reading