Sources say Sprint is moving ahead with testing Calix and Entrisphere for its triple-play RFP

February 24, 2005

3 Min Read
Calix, Entrisphere Sprint Forward

Sprint Corp. (NYSE: FON) has gone farther down the road of picking its new fiber access gear supplier, and its latest decision could be upsetting to Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA).

Sources close to the situation say that Sprint has selected Calix Networks Inc. and Entrisphere Inc. for first office applications (FOA) in fulfillment of its triple-play request for proposal (RFP). That RFP, sources say, covers several access scenarios for its network and calls for some combination of a broadband loop carrier and a fiber-to-the-node (FTTN) device.

What does this have to do with Tellabs? Two weeks ago, Light Reading reported that Sprint had narrowed its shortlist for that RFP to three vendors: Calix, Entrisphere, and Tellabs, the incumbent access gear supplier. This latest development is a "big bite on the backside" of Tellabs, one source says, as it seems to show that the carrier is favoring the two upstarts over the longtime supplier (see Sources: Sprint Readies Triple-Play Pick).

Of course, Calix and Entrisphere aren't going it alone. As previously reported, both vendors have partners that are fronting for them inside Sprint: Nortel Networks Ltd. (NYSE/Toronto: NT) is reselling Calix; and Lucent Technologies Inc. (NYSE: LU) is working closely with Entrisphere.

Though the financial impact of the deal is still unknown, it is assumed to be worth tens of millions over several years, given the interest by Nortel and Lucent. The company has said publicly it will spend "approximately $900 million to expand DSL coverage, add new retail outlets, and continue its circuit-to-packet conversion" in 2005.

Indeed, Lucent and Nortel have been stepping up their efforts at Sprint of late. On Sprint's wireless side, Lucent and Nortel are two of the three vendors Sprint picked to build its EV-DO (Evolution, Data Only) wireless high-speed data network (see Sprint Invests in EV-DO).

But Tellabs enjoys a strong position in Sprint's wireline network and, as one source put it, "it would be hard for Sprint to cut them out entirely." Over the past few years, Sprint -- mostly through its equipment reseller subsidiary, Sprint North Supply -- has historically been a huge customer of Advanced Fibre Communications, which is now the access division of Tellabs. In the combined years of 2001 and 2002, Sprint alone represented $132 million in revenues for AFC -- nearly 20 percent of the vendor's overall revenues.

The final decision on Sprint's fiber access RFP isn't set in stone yet. Sources say that Sprint has kept this RFP open for more than a year and that, along with the impending spinoff of the carrier's local telecommunications division, could further delay contract awards.

Meanwhile, Sprint has shown that FTTN isn't its only path to triple-play services. The carrier has ongoing triple-play trials in Fayetteville, N.C.; it is experimenting with WiMax; and it already has more than 24,000 video customers through its satellite TV partnership with Echostar.

Sprint has stated publicly that it sees video as a $3.5 billion revenue opportunity and will conduct a switched video service trial this year in more than 5,000 homes. The carrier also expects to sign commercial agreements with Sprint Nextel to offer long-distance and wireless bundled services (see Sprint Tests Switched Video Service).

Sprint and Tellabs did not return calls for this article. Entrisphere and Calix declined to comment.

— Phil Harvey, News Editor, Light Reading

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