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DLCs Gain Foreign Currency

There may be a new wrinkle emerging in the digital loop carrier (DLC) landscape: Despite the talk of triple-play services and FTTP deployments in the United States, the Asian and European markets may be a hotter DLC market than North America.

First off, market research firm RHK Inc. recently released a report showing -- according to one source with the report in hand -- 53 percent of the US$516 million DLC market came from shipments made outside North America. The RHK data includes all DLCs out there, regardless of the generation of technology to which they belong (see DLC Vendors in Next-Gen Name Game). The study also suggests an interesting trend: Even though the phone systems in other countries tend to have shorter loop lengths, some serious deployments are happening in various locations in Asia as newly privatized carriers are trying to provide more than just basic phone service to their customers.

RHK did not respond to requests for comment.

Recent activity appears to bear such a finding out. Last week, for example, India's largest telecom carrier, Bharat Sanchar Nigam Ltd. (BSNL), said it had ordered more than 100 DLCs and it would add 100 more by the end of its fiscal year. The carrier told the Times of India that it had upgraded some 40 percent of the copper it controls around Bangalore. With carriers such as BSNL losing access lines to mobile phone operators, they've begun to upgrade their copper lines so as to offer extras such as short message service (SMS) on landline phones.

If copper plant upgrades continue in areas such as India and China, it could be good news for vendors such as Huawei Technologies Co. Ltd., UTStarcom Inc. (Nasdaq: UTSI), and ZTE Corp., which each held 3 percent of the worldwide DLC market in 2002, according to RHK's data. Those vendors are constantly scrapping with worldwide market leader Alcatel SA (NYSE: ALA; Paris: CGEP:PA), which held 36 percent of the market in 2002.

During the first quarter of 2003, RHK reports, Alcatel, Advanced Fibre Communications Inc. (AFC) (Nasdaq: AFCI), Marconi Corp. plc (Nasdaq/London: MONI), and Lucent Technologies Inc. (NYSE: LU) combine to represent 85 percent of the North American DLC market (see AFC Profits in Odd Times and DLC Shakeout Looms).

Slugging it out for the remaining $36.4 million slice of the pie are all other players in the space, including: How will the aspiring players survive on such paltry rations? Several possibilities exist. They might combine forces to win big deals with RBOCs (see Vendors Await FTTP Shortlist). They could also start taking share away from the incumbent equipment vendors, of which Lucent is probably the most vulnerable. Or there could be consolidation of sorts -- but such a scenario is unlikely unless one of the smaller parties is able to win a deal big enough to attract a suitor (see Ciena May Be Eyeing Catena).

— Phil Harvey, Senior Editor, Light Reading

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