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Salira Gets Another China Deal

Light Reading
News Analysis
Light Reading
9/25/2003

Salira Optical Network Systems Inc., a maker of Ethernet PON (passive optical network) equipment, has scored a multiyear contract with GuangZhou Pantong Information Broadband Network Ltd., or Panyu Cable for short (no English Website), a cable operator in a densely populated district called Panyu, which is part of the city of GuangZhou in China's southern GuangDong province.

While Salira won't give financials, spokespeople say it's a big job, involving "dozens" of Salira's Ethernet-based 2000 Platform systems, each of which can extend connectivity to a maximum of 5,376 users. Panyu Cable is using the gear to deliver triple-play voice, data, and video services to cable subscribers. Salira says it's already gotten a check for equipment.

It's a good deal on several counts. First, it's Salira's biggest win yet: Compare the scope of the project to the five PON systems the vendor sold to China Netcom Corp. Ltd. earlier this year (see Salira Scores in China; Flexlight Funded). The deal also validates Salira's ongoing focus on China, where the vendor's starting to score some noticeable business through its subsidiary, Salira Shanghai Ltd.

The market in China is well suited to Salira's particular brand of PON gear, which uses Ethernet and passive optical splitters to divvy up to 2.5 Gbit/s among multiple users. Incumbent LECs in the U.S. initially resisted Ethernet PONs, claiming they weren't standardized by the International Telecommunication Union (ITU), as are slower ones based on ATM.

Indeed, China, like other parts of the Asia/Pacific region, seems to be a key PON market -- a large one. China's ripe for PON deployment because carriers there don't have the huge installed base of copper that has been a hindrance to fiber-to-the-home (FTTH) projects in North America. While the industry argues over whether RBOCs are really serious about a ten-year rollout of FTTH via PON (see SBC Ratchets Up PON Politics), carriers in China are actually using the gear.

And the scale of rollouts is compelling. "Why we have gone to China is evident in the size of the deal," says Jim Diestel, VP of product management at Salira. Panyu Cable serves 260,000 customers, he notes. The scale compares more than favorably with what's considered a sizeable access win stateside.

China won't be a PON paradise. The challenges of doing business there are significant, requiring a solid local presence and sizeable commitment to the carriers involved. Salira, which has bet its business on the country, seems to have a headstart. But vendors like Alcatel SA (NYSE: ALA; Paris: CGEP:PA) and Nortel Networks Corp. (NYSE/Toronto: NT), which also have significant investments in China, want their share of the access action (see China Is Red Hot). And other young PON companies such as Alloptic Inc., FlexLight Networks Inc., and Wave7 Optics Inc. won't likely sit by without giving the market a go.

Diestel won't be deterred, though. Instead, he sides with those who say there's room for plenty who think the road to riches lies East.

China has 1.2 billion people, Diestel notes; 213 million have landline phones; 200 million have mobile phones; 2 million have DSL. "There's still a long way to go," he observes, before the market's saturated.

— Mary Jander, Senior Editor, Light Reading

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atmguy
atmguy
12/4/2012 | 11:23:32 PM
re: Salira Gets Another China Deal

I won't call it maturity, but built in redundancy and survivability that is built in traditional PSTN that seems to be lacking in current APON/EPON systems. Further, there is no killer app for the hundreds of Mbits they claim to offer, and even if there is a killer app, probably the common user hasn't found a need for it.

Just my opinion.
materialgirl
materialgirl
12/4/2012 | 11:23:32 PM
re: Salira Gets Another China Deal
In their "come to Jesus" Q3 pre-announcement call, VZ management implied that they were not being more aggressive on their much rumored fiber buildout due to the immaturity of the "electronics" and management systems of optical networks. They stated specifically that they "know how to lay fiber". How can VZ be stymied by these issues and a Chinese cable provider be ready to move ahead? Will we be sending delegations to China in 10 years to learn how to run our data networks?
DoTheMath
DoTheMath
12/4/2012 | 11:23:32 PM
re: Salira Gets Another China Deal
atmguy> I won't call it maturity, but built in redundancy and survivability that is built in traditional PSTN that seems to be lacking in current APON/EPON systems.
-----------------------------------------------
I agree with materialgirl. RBOCs are simply giving excuses. Their bloated cost structures will never permit them to embrace any upcoming technology, without smothering the companies trying to sell it to them.

Korea is already far out ahead in broadband, Japan is moving fast, China will be there before US, and RBOCs will still whine that there is no money in it.

Reminds me of the hilarious prouncement by GM CEO that hybrid cars are not a viable business proposition (they still won't do it), and within a few months, Toyota announced they are turning a profit on their hybrids. Detroit and RBOCs are both headed to oblivion. I just hope they don't take the US economy with them.
bonnyman
bonnyman
12/4/2012 | 11:23:31 PM
re: Salira Gets Another China Deal
I won't call it maturity, but built in redundancy and survivability that is built in traditional PSTN that seems to be lacking in current APON/EPON systems. Further, there is no killer app for the hundreds of Mbits they claim to offer, and even if there is a killer app, probably the common user hasn't found a need for it.

1. There's no fiber diversity downstream of the CO for PON networks, so for cable cuts, there is no redundancy ... but then there is no redundancy for copper pairs, etiher, is there?

2. It's much quicker to restore a broken fiber cable feeding 96 1X16 splitters than it is to restore a broken copper cable with over 1000 pairs, so a PON system is more rapidly restored than a copper system in the event of a cable cut. (If the cut occurs downstream of the splitters, this advantage goes away).

4. Fiber cable has been in use for going on two decades. The cable itself has proven itself more reliable than copper cable. The same is true of fusion splices vs. copper splices.

5. As I see it, the only reliability disadvantage with PON systems is that they need batteries for backup power. But then an increasing number of new phones (cordless base stations, etc.) need 120 volt AC power anyway.

5. Cable TV is a killer app. Billions are spent on it every year. Competition is limited to satellite dishes.

Unless you already have 1000s of miles of new high performance coax in place, fiber is the best way to terrestrially deliver modern cable TV services -- twisted pairs can't. If you're a telco, PONs cost the same or less than a new hybrid fiber coax system.

40% penetration of homes passed is the breakeven point for the average municipal cable system. Most achieve it handily within 3 years or less. If the Bells have the desire to take on the cable operators, this is the way for them to do it.

Well, actually, maybe the Bells could take on cable TV with satellites but they don't appear to be very serious about that either. FTTH makes a lot more sense and they have more experience with more of the bits and pieces of PON than they do with satellites.
materialgirl
materialgirl
12/4/2012 | 11:23:13 PM
re: Salira Gets Another China Deal
Dear atmguy: The move to the broadband network implies that the "service provider" becomes a "transport provider". The "services" are really "applications", owned and operated by the user. All the network does is "deliver the bits stupid" (ala David Isenberg's Stupid Network).

In this scenario, the transport provider has no more business deciding how to use, or charge for, bits than your electric utility does for your use of their amperage. And yes, prices collapse.
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