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Adtran, Calix Add Alltel Wins

Light Reading
Supercomm News Analysis
Light Reading
5/27/2004

Calix Networks Inc. and Adtran Inc. (Nasdaq: ADTN) say they're splitting the duties on a new DSL equipment contract issued by Alltel Corp. (NYSE: AT), the nation's sixth largest independent carrier. While both vendors have some previous connection to Alltel and its subsidiaries, neither is a primary DSL gear supplier to the carrier, making this new contract a milestone for each (see Alltel Picks Calix DSLAMs and Alltel Picks Adtran DSLAMs).

Alltel operates as a CLEC in nine states, and it also acts as a reseller and distributor of telecom gear to other independent operators. It was among the first carriers to use Cisco Systems Inc.'s (Nasdaq: CSCO) ADSL gear, announcing a rollout to 12 markets in 1999.

Alltel is also a big customer of Advanced Fibre Communications Inc. (AFC) (Nasdaq: AFCI) and one of the largest distributors of its UMC1000 DLC. In 2000, the company signed a deal valued at $105 million to supply and deploy AFC's DSL gear through its Alltel Communications Products Inc. subsidiary.

But Adtran and Calix appear to be the beneficiaries of some new growth at Alltel. In the first quarter of this year, Alltel says, it expanded its DSL availability to nearly 70 percent of its 3.2 million access lines, while improving data speeds for all its customers. That indicates that there are some 960,000 lines without DSL access at all, not to mention those needing additional upgrades.

Alltel already used Calix as an outside-plant digital loop carrier. But now it has the same platform, the C7, slated for use as a central-office DSLAM. The C7, configured as a DSLAM, supports up to 480 DSL interfaces in an eight-rack-unit deployment. The box can support voice and video services on every line with its integrated POTS splitters and Internet Group Management Protocol (IGMP), the Internet's IP multicasting standard.

Because several services are available in the Calix C7 chassis, the company bristles at the assumption that it can't perform well as a single, focused device. "If all you want to use us for is a DSLAM… just fully populate the C7 with DSL ports and you've got a DSLAM," says Kevin Walsh, Calix's VP of marketing.

Walsh adds that one thing that helped Calix win the business is that its product supports multiple OC48 uplinks, a hint that Alltel is taking steps toward deploying triple-play services over its copper lines.

In Adtran's case, Alltel is using its Total Access HDX, Total Access 1200, and Total Access 1100 boxes in the central office. Its pizza-box Total Access 1200 DSLAMs will go in the smaller central offices, and its line-powered Total Access 1100 DSLAMs will go in the outside plant locations.

Jay Wilson, director of product management for Adtran's carrier networks division, says Adtran's slice of the DSLAM deal is a brand new contract for the vendor.

While Calix preaches integration -- all access services, one box -- Adtran takes a different tack. It typically enters equipment markets late and competes on price -- a characteristic that carriers like, as declining DSL prices and cable competition are forcing equipment costs down.

And the strategy is paying off. In a research note published Wednesday, Richard Church, an analyst for Wachovia Securities Inc., says he expects DSLAM revenue at Adtran to grow from $30 million in 2003 to $80 million in 2004 and $98 million in 2005.

"We see clear evidence Adtran is starting to make strong headway competing against Alcatel SA (NYSE: ALA; Paris: CGEP:PA) at SBC Communications Inc. (NYSE: SBC), and we also believe an additional contract for this technology at Verizon Communications Inc. (NYSE: VZ) will likely be forthcoming for the company," writes Pacific Growth Equities Inc. analyst Joe Noel in a May 11 research note.

Adtran will have its wares on display at Supercomm in booths 25223 and 25320. Calix will be in booth 11126 and a ballroom at the Omni Hotel nearby.

— Phil Harvey, News Editor, Light Reading

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