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Optical/IP

Cedar Point Hits a Triple

Cedar Point Communications Inc. is on a roll. The voice-over-IP switch maker this week announced two new customers -- Charter Communications (Nasdaq: CHTR) and TVCable Group -- and next week will unveil a third, Cable Pacifico. With $45 million in funding raised in the past six months and a plan to reach profitability by year’s end, the four-year-old private company is looking a lot like it’s on a path to an IPO (see Cedar Point Raises $20M).

Cedar Point has distinguished itself by offering an all-in-one device designed specifically for cable telephony. It combines a call management server, media gateway, signaling gateway, and other VOIP components in one PacketCable-qualified box that can handle up to 100,000 subscribers. The device can interface with a cable modem termination system or replace a Class 5 switch.

For Charter, Cedar Point’s all-in-one architecture makes a nice complement to the distributed VOIP components from Nortel Networks Ltd. (NYSE/Toronto: NT), which is Charter’s other VOIP gear supplier. “Nortel’s distributed architecture has a little more complexity in terms of communication streams and mean time to repair, but it gives you greater capacity in calls per second because it distributes the processing,” says Mark Barber, VP of telephony at Charter. “On the flip side, Cedar Point’s single-solution approach is an easier interface to deal with and easier to troubleshoot because you don’t have multiple boxes.”

In 2002, Charter deployed Nortel’s call server in Wisconsin and its gateway in Missouri. Since then, the cable operator has used the distributed components to provide VOIP service to fewer than 5,000 customers in both states. This week, Charter said it will expand its agreement with Nortel to supply VOIP equipment in those regions and test Nortel’s Multimedia Communication Server.

Charter plans to install Cedar Point’s switch in Massachusetts and roll out VOIP in that state during the third or fourth quarter of this year (see Charter Picks Cedar Point for VOIP). The company will study both vendors’ products to see how they perform in production. “We always like to have two vendors in the mix to give us options,” Barber says.

Cedar Point has stated publicly that it has sold gear to four of the largest cable operators in the U.S., though it has identified only one by name: Comcast Corp. (Nasdaq: CMCSA, CMCSK). Last month, Comcast began a VOIP trial with 75 residential customers in suburban Philadelphia, and industry sources say the trial is running on Cedar Point’s switch.

Cedar Point has also developed a healthy international business, as shown by this week’s deal with TVCable Group, the largest cable system operator in Ecuador. The carrier will use Cedar Point’s switch to launch VOIP service in two cities in July and throughout its subscriber base by year’s end. Next Monday, Cable Pacifico, a cable operator serving 38 cities in Colombia, will announce it has selected Cedar Point to launch VOIP service initially in the city of Medellin.

Despite Cedar Point’s recent wins, the company’s sales are on a par with other small VOIP switch vendors like Syndeo Corp. and Gallery IP Telephony Inc., says Kevin Mitchell, an analyst at Infonetics Research Inc. “They’re all pretty similar -- small deployments associated with market trials and pilots,” he says. “In the overall voice-over-IP industry, there are still too many companies, and there will be consolidation as winners start to emerge over the next 12 to 18 months.”

Cedar Point positioned itself to survive independently by raising a $25 million series B round last December and then rapidly closing a $20 million series C led by J.P. Morgan Chase & Co. four months later. “I wanted to take the whole issue off the table of us being a startup and whether we would run out of money,” says Andy Paff, who joined Cedar Point as CEO in December (see Cedar Point Names President and CEO). The cash infusion gave Cedar Point a healthy balance sheet and helped ensure prospective customers that the company is here to stay.

“You don’t see a lot of startups in the cable industry that have long-term futures without getting snatched up,” Paff says. “We have now structured the company in a way that we really have to be a big company to satisfy everybody.”

Is the company headed for an IPO? Says Paff, “We won’t do anything at this stage that will be related to the need for cash, but we’ll look at things opportunistically as we move on.”

— Justin Hibbard, Senior Editor, Light Reading

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