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Supercomm Shocker

ATLANTA – Supercomm 2003 – Get this: Supercomm wasn't thoroughly depressing. If fact, following the funereal feel of OFC, it was downright upbeat.

Peek inside some of the booths of Passive Optical Networking (PON) companies at Supercomm 2003 and you were likely to see a gaggle of shocked and overwhelmed marketeers. Suddenly, their booth was buzzing with activity. Bell operating company engineers were hovering. The folks in the booths were glassy eyed.

You mean somebody may now actually want to buy the stuff? What do we do? What do we do!?

Yes, after getting some marketing play for the RBOCs, the PON folks were suddenly hot again (see RBOCs Hungry for Fiber and Fiber Access Plans Proliferate). They didn’t know how to handle it. After three years of plummeting confidence, the companies looked like awkward 16-year-old boys being propositioned by Heidi Klum.

This raises question about what’s happened to the technology cycle, and particularly, the startup cycle. Pre-bubble, if you were a startup, you raised a bunch of money, then hunkered down to develop product. If the product development went well and potential customers emerged after a few years, you raised some more money and looked to close the deals.

In the bubble years, the old rules got tossed out. Investors gave you gobs of money in the beginning with the expectation that within two years you’d develop the product, get customers, then be sold or IPO. Companies spent the money too fast. When the market suddenly dried up, investors panicked and either headed for the hills or hacked their companies into tiny life-rafts.

Now that the customers are finally perking up, it’s not clear which startups are prepared to respond, or what's even left of the last generation.

Let's take a company that's had its share of twists and turns, yet looks like it might survive: Quantum Bridge Communications Inc., a prominent PON supplier that once had triple-digit millions in cash, an army of hundreds of employees, and even an IPO filing. Years later, Quantum Bridge is a leaner and meaner company in the running for one of those big RBOC deals. Does it have enough people and enough money left for the end game? It might. But here is a company that was able to raise more than $100 million during the bubble years and still went through many rounds of layoffs (see Boston Area Startups Slash Jobs).

Not everybody was well positioned for the sudden PON perk-up. Some, like Optical Solutions Inc., didn’t even have a booth at Supercomm. Bad move. Try telling an RBOC you’re a legit equipment vendor when you can’t even pony up for a measly 10x10 on the show floow. Do BellSouth executives take meetings at the Super 8?

Such are the perils of “hibernation” mode, which strives to pare back staff, quiet down the marketing, and save every last penny. These days, it’s not uncommon to call a startup's switchboard and get nothing more than an automated directory and a general voicemail box that nobody answers. Some of these recumbent companies don’t even employ a dedicated marketing person.

Hibernation just doesn't work. Message to VCs with half-assed hibernating companies: Pay to play. If you’re not gonna play and the startup’s not a leader, take your company out behind the woodshed. We need to thin the herd anyway.

The remarkable thing about Supercomm 2003 is that we are only now beginning to see the fruits of the last startup cycle, which revved up in 1999 and 2000. Game-changing technology is becoming available after billions of dollars was pumped into hundreds of venture startups.

So what's to like? Access gear is yielding more bandwidth, combining voice, broadband, and video technologies (see Telcos Tackle Triple Play ). Chips are integrating multiple functions of the network, bringing down the costs of line cards (see PMC, TranSwitch Get Edgy, Agere Launches Line-Card Kits). There are new flavors of DSL that yield up to 70 Mbit/s of bandwidth. The plummeting price of optical components is bringing them to the brink of mass production. Multiservice edge gear is hot, as the largest carriers in the world telegraph big plans to migrate to packetized cores (see TiMetra Shoots for Service Edge, Tellabs Builds on 5500 Legacy), Research: Metro Optical Peps Up). Ethernet services are gaining the attention of the big carriers (see Carriers Converge on Ethernet, Metro Ethernet Showcased in Demo, and Masergy Launches VPLS Service). Even VOIP, the Black Sheep of carrier technology, is beginning to go mainstream (see MCI Vouches for Nortel's VOIP and Cisco Gets Fat on Proprietary VOIP).

While the Nasdaq was plummeting and Worldcom imploded, everybody was focused on the plight of their stock options. Meanwhile, technology developments were still marching forward. So now the market is coming back. Can the startups come back?

— R. Scott Raynovich, US Editor, Light Reading

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bonnyman 12/4/2012 | 11:57:17 PM
re: Supercomm Shocker Contrary to the impression left by this article, Optical Solutions seems to be alive and well; we talk to them every week or so. The marketing people we deal with seem pretty busy.

Their absence may say more about SuperComm than about Optical Solutions. I know OSI had a very large booth last year -- they probably thought they got a poor return on it.

A quick look at the SuperComm exhibitor list
(http://www.supercommnews.com/t... shows most other FTTH vendors sitting it out also: Alloptic, Wave7, Worldwide Packets, etc.

My sense is that all of these companies are very active in a focused way with key decision-makers at independent telcos, municipals and greenfield developers, as well as the key people for FTTH at the Bells. I know we hear a lot from most of them.

Maybe they were all too busy with Heidi Klum ...
Scott Raynovich 12/4/2012 | 11:57:16 PM
re: Supercomm Shocker So you reckon that in retrospect, they're happy they didn't buy that booth?
strands555 12/4/2012 | 11:57:16 PM
re: Supercomm Shocker re: So you reckon that in retrospect, they're happy they didn't buy that booth?

yeah, they have to save up a few million for OSMINE certification of their PON product.
bonnyman 12/4/2012 | 11:57:16 PM
re: Supercomm Shocker Scott, my guess is that they probably don't care, especially since most of their toughest competitors weren't there either.

I also suspect that most of the Bells' FTTH subject matter experts probably didn't care either and probably didn't go to the show (except for the locally-based BellSouth people). Bell attendance at this type of show has dropped significantly over the last decade.

I'm sure Alcatel was there -- did they devote much booth space or personnel to their FTTH product line?

A.B.
Accelerated Photon 12/4/2012 | 11:57:12 PM
re: Supercomm Shocker Optical Solutions did have a presence at the show there was a FiberPoint in the NextLevel booth. With all the action in preparation for the RBOC RFP and which has caused a chain reaction of increased interest in the rural and independent markets which is also affected by the release of the Rural Utilities Service (RUS) funds which I believe will happen this summer.
billy_fold 12/4/2012 | 11:57:06 PM
re: Supercomm Shocker Scott Raynovich wrote:

"So you reckon that in retrospect, they're happy they didn't buy that booth?"

A booth at Supercomm is almost a total waste of money these days. If a carrier decision maker is interested in a product, he picks up the phone and calls. The called company sends someone out to talk to him the next day.

-billy
dbriere 12/4/2012 | 11:56:57 PM
re: Supercomm Shocker I met with just about every single PON vendor at the show. I did not see one inkling of the "I don't know what to do attitude." Most were in heavy partnering efforts for the upcoming RFP, something those in the PON industry have known about for months now, particularly since the RFI came out in April (something I notice did not receive reporting attention in Light Reading). I think the only people who are saying, "What do I do now?" are those who have been saying, repeatedly, on the record, that PON has no business case, has no market, and will never take off -- hmmmm, who comes to mind there? In fact, most of those people, who shall remain nameless, are now the ones saying, "Now what do I say since I've been badmouthing this technology for years and the major customers are actually going to buy this stuff?"

Well even that shows they are out of touch, because the Asian companies, who were first into DSL in a big way, and then VDSL, are also buying a lot of PON. Asian deployments have been going on for a while, albeit on a small scale which happens with any technology in the early days.

In fact, if anything, most of those in the booths at SuperComm were saying, "Told you so" and most of those in the hotels, quite the haul from the press room I would add, were saying the same thing these other commenters here have said, "Our clients know who we are." And they do. There were telecom firms (non-PON) who were spending a lot of money at SuperComm and I must say that while I support a showing of the flag, I wonder how they can justify those expenses in this market. As someone pointed out, money spent on OSMINE is a much better benefit in that respect, as one commenter here has said.

Anyone who says that companies like Wave7 and Alcatel are having problems have got to be kidding me. And this bid will have multiple winners I think, after talking to the various bidding players. This bid will indeed end up dropping the cost economics for everyone in the industry by driving down the costs of the components for everyone.

In the end, it is the economics of PON that will dictate how much gets rolled out. If the price is right, they'll buy a lot; if not, they won't. Someone will probably step forward and lowball the bid.

In any case, were these people shocked and deers caught in headlights? Not that I saw, anywhere.

In fact, so little so, you have to wonder the motivation for an article such as this which is clearly non-fact based (no quotes in it anywhere), haphazardly talks about the Innovation Cycle, and asks, "Will the startups come back?" What on earth does that mean? No, they are out now, never will startups come back, won't happen, forever it's just the large guys. Might as well go home now.

There will certainly be a lot of failures in PON startups -- despite the deals that have ALREADY been done with the vendors mentioned in this story. Every industry weeds out startups. There's been a whole lot of M&A/partnering activity on this topic, so many firms will find themselves bolstered by simply being in the right place at the right time. Gee, can you say Cisco? Ascend?

The sign of a true market is when people move from "These guys are nuts" to "These guys might have something". And yes, they might have something (and at least they know it).
opto 12/4/2012 | 11:56:55 PM
re: Supercomm Shocker Boy, what a bunch of puffery going on here.

What kind of moron gloats because he/she has an RFP? When PO's are flowing, you'll have your due. Until then, kindly shut up. We have had enough of bubble-creating marketing morons.

optical Mike 12/4/2012 | 11:56:55 PM
re: Supercomm Shocker "Not everybody was well positioned for the sudden PON perk-up. Some, like Optical Solutions Inc., didnG«÷t even have a booth at Supercomm. Bad move. Try telling an RBOC youG«÷re a legit equipment vendor when you canG«÷t even pony up for a measly 10x10 on the show floow. Do BellSouth executives take meetings at the Super 8?"

As an employee of Optical Solutions Inc. I can tell you that we are very busy and excited about the "PON perk-up" and if youG«÷re a company that is trying to sell a PON product to the RBOC's and you believe Supercomm is where the sales are going to happen. Good Luck!!!
We don't need a show to display our product/system. We have deployed systems in 23 states and over 45 communities around the U.S. Korea and China. The RBOS's have been watching and losing lines to our customers and others for years and they know exactly who the leader in FTTH is today.
Mike
Scott Raynovich 12/4/2012 | 11:56:53 PM
re: Supercomm Shocker The Optical Solutions folks are taking this a bit too personally... I was using the booth as a illustrative example of mood, pointing out the irony of them not having a booth while they were suddenly "hot". Geddit?

But back to the topic. Does anybody want to focus on the topic in a more general sense, i.e. what the bubble did to the startup cycle, and whether it can get back in sync with reality?

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