Ka-Ching for Catena Networks

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News Analysis
Light Reading

Catena Networks scooped up $75 million in venture funding yesterday, promising a pragmatic fix for the access bandwidth bottleneck.

Big deal? Certainly. Interesting technology? Very much so.

The company is developing a single chip and related systems, which, if successful, could dramatically change carrier economics for deploying broadband digital subscriber line (DSL) systems.

DSL deployments have been limited by many economic and political factors, among them the cost of deploying technicians and providing support for the services (see Last Mile Political Battle Heats Up and Whatever Happened to Sprint’s ION?). But another factor has been the distance limitations of DSLAM (DSL access multiplexer) devices, the equipment that enables DSL services and sits in a telecom central office. In many cases, DSL services remain out of reach for many customers if their homes or businesses are too far from the central office.

Catena is building a set of products that would combine the DSLAM function with that of the digital loop carrier (DLC) -- a smaller device that concentrates plain-old telephone service (POTS) lines and sits at curbsides in residential areas. The Catena products concentrate both POTS lines and DSL services in one line card, which would allow carriers to upgrade the DLC boxes and deploy DSL in one move.

The promise of a game-changing technology in the access space drew the interest of a whole gang of VCs, including J&W Seligman & Co., Munder Capital Management, and WestAM, and previous investors Morgenthaler Ventures, Menlo Ventures, Berkeley International Capital, WorldView Technology Partners, Goldman Sachs & Co., Bessemer Venture Partners, BCE Capital, and Silicon Valley BancVentures.

James Wei, a partner at Worldview who was involved in the deal, said the technology could solve several problems at once for telcos, and thus speed up the deployment of DSL. The technology is especially appealing in suburban areas where many homes are spaced farther apart and would rely on access to DSL through a DLC box.

”Catena allows you to build a card that can upgrade most of the DLCs and offer DSL with increased POTS density,” says Wei. “There are 17 million phone lines [in the United States] sitting out there that are hanging off of remote terminals, and most of them are in wealthy areas that are too far away from the central office to get DSL.” The company has 375 employees and is already shipping product in limited quantity for revenue, according to Wei.

Competitors include existing public players such as ADC Telecommunications Inc. (Nasdaq: ADCT) and Alcatel SA (NYSE: ALA; Paris: CGEP:PA), as well as startups such as Calix Networks and Zhone Technologies Inc.

— R. Scott Raynovich, US Editor, Light Reading

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