Adtran Muscles Into Copper Ethernet
Adtran Inc. (Nasdaq: ADTN)'s entrance was noted in February, when it reportedly won an AT&T Inc. (NYSE: T) deal. While it hasn't 'fessed up to that deal, Adtran did announce its Ethernet-over-copper strategy here this week. (See Adtran Scores at AT&T and Adtran Taps Outside Plant.)
That could mean tougher competition for Actelis Networks Inc. and Hatteras Networks Inc. , the two startups that have been seeding this market for years, and Aktino Inc. , which joined the race in 2003. They've got the years of customer relationships, but Adtran brings a huge installed base of access gear.
"Adtran can bring that footprint. In some aspects, it's their business to lose," says one financial analyst who requested anonymity.
Other familiar names in the mix include Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) and Zhone Technologies Inc. (Nasdaq: ZHNE), both of which say they do Ethernet-over-copper, too.
And companies like Alcatel-Lucent (NYSE: ALU) and Ericsson AB (Nasdaq: ERIC) could be joining next, says Current Analysis analyst Ron Westfall.
"We'll see more interest and more competition coming to the Ethernet-over-copper proposition," he says.
That means acquisitions could come up, but probably not at the hands of acquisition junkie Cisco Systems Inc. (Nasdaq: CSCO). The company gives referrals to Hatteras whenever Ethernet-over-copper comes up, and it is not likely to work its way any deeper into the market, Westfall says.
"Cisco, because of the John Chambers-mandated margin model, probably won't be the buyer in any of these deals," Westfall says.
But Westfall doesn't expect any sudden shakeout. Enough business is out there to sustain a couple of the smaller companies for at least a year or two, he says.
Even so, the smaller companies might have to find shelter with big partners, as in the reseller deal Aktino announced with Calix Inc. (NYSE: CALX) this week. (See Aktino Lands Calix Partnership.)
Adtran's biggest advantage is its customer base, as the company for years has been deploying access gear that links into carriers' Sonet networks. With Ethernet-over-copper, Adtran's plan is to lean on that installed base.
Here's the argument. One problem with Ethernet-over-copper is its reach. Carriers can't afford to deploy the gear to their entire networks at once, so only patches of customers can get the service at first.
Adtran is suggesting a hybrid architecture, where the customers who aren't reached by proper Ethernet-over-copper services -- the type defined by the Institute of Electrical and Electronics Engineers Inc. (IEEE) Ethernet in the First Mile (EFM) standard -- get fed Ethernet over whatever access they're using now, be it Sonet, HDSL, or T1/E1.
The advantage is that the carrier can immediately offer Ethernet to all copper-fed customers. The plan includes using an Adtran Total Access 5000 to collect both the EFM traffic and the Ethernet-over-TDM traffic. Over time, TA 5000 cards could be swapped out as the carrier deploys enough equipment to connect more customers via EFM.
"A large carrier needs to deploy the service ubiquitously. Otherwise, it's a non-starter," says Eric Vallone, Adtran's director of product marketing.
Naturally, the competition doesn't see it that way.
"It's quite the opposite. They have problem points in the network today, and they want to fix them as fast as they can," says Kevin Sheehan, CEO of Hatteras.
Still, the "ubiquity" factor might come into play at some carriers. It's possible Adtran's combo approach helped win the Ethernet-over-copper business at AT&T, analyst Simon Leopold of Morgan Keegan & Company Inc. wrote in a note issued yesterday.
— Craig Matsumoto, West Coast Editor, Light Reading