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Alloptic, Salira Close to New Funds

Two vendors of Ethernet-based passive optical network (EPON) gear say 2003 is looking good -- if you know where to look.

Alloptic Inc. and Salira Optical Network Systems Inc., the only remaining players with significant "mindshare" in the EPON market, both anticipate new funding, based on solid prospects.

While neither firm has made an announcement, Alloptic CEO Michael Moone says the company expects to close a Series D round of funding for "north of $20 million" by the end of February. Salira spokesman Steve Elich says his company expects to close on about $15 million in Series C funding by mid-March.

In both cases, it's not so much the amount that impresses as the fact that VCs are willing to back Ethernet-based PON technology at a time when PON prospects look to be underwater.

EPONs are an offshoot of PON access, a technique in which passive splitters are used to divvy optical bandwidth among multiple endpoints, reducing the need for extra fiber links (see Optical Access Startups: Roll Call, page 3). So far, the use of PONs in general, most of which are based on Asynchronous Transfer Mode (ATM) technology, has been minimal compared with, say, DSL access. Ethernet PONs, which purport to exceed the 622-Mbit/s limits of ATM-based PONs, seemed to be suffering the same fate.

The vendors, however, insist things are looking up. "This year the tide will turn," says Elich. He contends Salira sees lots of activity worldwide, particularly in China -- enough to be confident about the company's future.

Indeed, Salira's made a big investment in the Chinese market, opening an office there and throwing considerable publicity behind its efforts in the country (see Chinese Ministry OKs Salira). While there are no customers yet -- so far, Salira's announced just one customer (see Salira Ships EPON Platform) -- one of Salira's backers sees the China connection as a winning factor.

Eric Buatois, managing director at Sofinnova Ventures Inc., writes in an email that 50 percent of telecom spending in China goes to access, and the majority of access money goes to fiber. The Chinese carriers have decided to go EPON, he says, and Salira has won several pilots that are rapidly becoming commercial applications. To a query on the strength of the China market for EPONs, he writes: "You must be kidding."

Alloptic also sees a rosy future, despite the telecom downturn. "Things are definitely picking up," says CEO Moone. The company has won business in China through a partnership with Pirelli Cables and Systems. Stateside, it continues to see traction among rural and alternative LECs (see Alloptic Wins FTTx Deal).

Moone says Alloptic should double its revenues this quarter over last, and for 2004 he expects to see revenue growth as high as "a factor of five."

Of course, that's starting from a very small base. Moone concedes the market for PONs of any kind won't make anyone rich just yet. "It's no secret that none of us are profitable," he says.

What's missing from the picture are the U.S. regional Bells, a huge access market that's not buying any PONs in bulk right now -- although that too is said to be changing (see Giga-PON Ships Quietly). "There's not much deployment of PONs right now," says Jason Marcheck, principal analyst at the Confluence Research Group. "No large carriers are doing this."

Without the RBOC market, without volume rollouts, there will be growth, but nothing will really take off, Marcheck says. Further, until the pending regulatory issues are straightened out (see Hanging Fire With the FCC), most PON vendors are holding tight.

In the meantime, Alloptic and Salira seem confident there's just enough opportunity internationally and among alternative North American carriers to support them. Interestingly, another early EPON player, OnePath Networks, has vanished back into satellite equipment maker Foxcom, a company with which it was formerly affiliated.

For both EPON vendors' upcoming funding, existing investors will play leading roles. For Alloptic, that means GMS Capital Partners and Athenian Venture Partners, formerly the Ohio Valley Venture Fund (that's Athens, Ohio). Salira's existing backers include Mobius Venture Capital and Sofinnova.

It's not clear yet how much funding Alloptic has raised, because the company won't say. The last publicly announced round was a puny $3.7 million, raised in January 2000. Salira's total funding will top about $44 million if the deal closes.

— Mary Jander, Senior Editor, Light Reading
ohub 12/5/2012 | 12:38:24 AM
re: Alloptic, Salira Close to New Funds Wireless access is another important access technique. Compared with PON/EPON, wireless it shows the important advantages of low cost and fast installation. It is still very difficult to predict if PON/EPON will finally become dominant in the access market in future even when the economy comes back.

Optical Hub
http://www.ohub.net
rjmcmahon 12/5/2012 | 12:38:19 AM
re: Alloptic, Salira Close to New Funds Wireless access is another important access technique.

Wireless solutions for fixed access needs will fail us miserably. The FCC does a poor job of allocating the spectrum. It costs way too much. Coordinators of spectrum make money by over allocatinging the spectrum and they have no liabilities for interference. "Spectrum rights" are self enforced. (See what's going on w/Nextel and the 800Mhz bands for some examples of those problems). Wireless is very low bandwidth and does not scale.

The wireless play is in low bw, mobility, solutions. It can serve things like telemetry and poor quality audio or in areas where nobody really needs to communicate much.
BobbyMax 12/5/2012 | 12:37:50 AM
re: Alloptic, Salira Close to New Funds PON technology has been known for the last 10-15 years. This technology never impressed RBOCs because of the cost of infrastructure. I do not think this situation has changed. But the PON technology can be deployed profitably in high density areas in China and Japan.
optical Mike 12/5/2012 | 12:37:47 AM
re: Alloptic, Salira Close to New Funds I believe we should at least wait until the FCC releases it's finding in the 20th before making and predictions. If the RBOC's are given assurances that they will not be required to share the new fiber infrastructure with their competition that should set in motion some FTTH deployments, mainly in Greenfield but also in network rebuilds where the present copper network is not adequate to provide any type of advanced services (DSL/Cable Modem)
rjmcmahon 12/5/2012 | 12:37:46 AM
re: Alloptic, Salira Close to New Funds If the RBOC's are given assurances that they will not be required to share the new fiber infrastructure.
___________

The path we choose on this issue will have direct impacts on the futures of our children and their children. Deferring the issue to the FCC and the RBOCs will yield a poor policy as neither have served the public interest in a long, long time.

Look to your children and to your peers and ask them to discusss what are the societal impacts of our information utility infrastructure under a deregulated and monopoly control? Should we give up on the concepts of common carrier that previous generations realized was so important to the value of the network at society at large?

PS. We are all going to pay for it one way or another, so don't be fooled by the "who pays for it?" propaganda.
strands555 12/5/2012 | 12:37:45 AM
re: Alloptic, Salira Close to New Funds re: "If the RBOC's are given assurances that they will not be required to share the new fiber infrastructure with their competition that should set in motion some FTTH deployments..."


I don't believe there is any such automatic activity trigger but that is a different story...

If they build these new infrastructures using profits from their captive monopoly voice ratepayers and/or make use of any existing, operational network equipment that was funded from same, they SHOULD be required to share it. No one else has access to this "public trust fund" that was built up over decades, so granting them exclusive use of it is anticompetitive and bad for the consumer.

If, on the other hand, they get virgin financing for it, and all elements of it are kept physically distinct and auditable (i.e. exactly the same as any other new-entrant facilities-based competitor would have to do), then I'm all for it.

1. FCC should NOT lay the financial burden of the success or failure of the RBOCs foray into FTTH on the shoulders of captive voice ratepayers.

2. FCC should not grant RBOCs a unique and significant advantage in their foray into FTTH, by allowing them to leverage their captive voice ratepayers and infrastructure thereof.

3. RBOCs should have to structurally separate with fully distinct accounting if they do deploy FTTH, just as municipal and private utilities have had to do when they entered telecom markets.
----
Why would RBOCs be afraid of this structural separation? After all, this is alleged to be their new growth business. Why dilute its results with the slow-growth legacy business? The answer is: they want the unfair "monopoly advantage" of both leveraging their captive voice ratepayers and existing infrastructure, as well as having the abiltiy to go back and raise captive voice rates when their foray fails (i.e. loss protection on the shoulders of voice ratepayers, not on the shoulders of RBOC investors and management--which is where the risk of loss should be).

If--in the remote chance their foray is successful--the shareholders and management get all the rewards. The captive ratepayers get none of the rewards, but shoulder the risk. Seems pretty clear what the right answer is here. The trouble is we have a negatively biased process in arriving at that answer.
optical Mike 12/5/2012 | 12:37:43 AM
re: Alloptic, Salira Close to New Funds We can see there is activity in this market and it maybe that the RBOC's won't lead the way but the fiber is getting deployed and is getting connected to homes.

http://lw.pennnet.com/Articles...
strands555 12/5/2012 | 12:37:42 AM
re: Alloptic, Salira Close to New Funds A reasonably good presentation and complementary whitepaper on FTTH deployments around the world (from Corning) can be downloaded here:

Presentation:
http://www.ftthconference.com/...
whitepaper:
http://www.ftthconference.com/...

Or if you want to browse other presentations:
http://www.ftthconference.com/...
(scroll down to "Oct 16, Case Studies, An Overview of International Fiber To The Home
and Broadband Deployment"
for the two above docs)
eewhiz 12/5/2012 | 12:37:05 AM
re: Alloptic, Salira Close to New Funds Most of the FTTH solutions are promising fraction gigabit data rates, I do not see wireless being able to compete with these bandwidths, many users have ~1Mbit access via cable modem, xDSL and two way satellite...Wireless access is in the same realm, but FTTH allows 870MHz analog or cable BW and usually 2 to 4 POTS service plus the 10-1250Mbit service. This kind of service can kill cable apps and DSL implementations...cost of FTTH is soon to approach what HFC costs per home...
Leave wireless apps to mobile applications...
eewhiz
DKP 12/5/2012 | 12:36:56 AM
re: Alloptic, Salira Close to New Funds
Wireless is a good very short last drop, and 802.11 flavors can support this well. But it will take fiber to get to the home/building if it is to support broadband (voice, data, video).

There are many flavors of PON:

APON - OC-3 ATM PON
BPON - OC-12 ATM PON
GPON - Gigabit Generic Frame PON
EPON - Gigabit Ethernet PON 802.3ah *

APON and BPON "expired" already, never reaching price targets or vendor interoperability. Alloptic and Salira are focused right, but suffer market timing.

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