Huawei, ZTE Ramp Up IP Access

With China's incumbent carriers cutting back on capital spending (capex), the top Chinese equipment vendors are likely to make an even bigger play for the U.S. access market, according to data from a recent Heavy Reading analysis of the multiservice access platform (MSAP) market. (See Falling Chinese Capex Hits ZTE.)

In its latest report, "MSAPs: A Heavy Reading Competitive Analysis", Heavy Reading dissects the emergence of the access "God box" and makes an interesting tie-in to the Chinese equipment vendors -- especially Huawei Technologies Co. Ltd. and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763).

Both Huawei and ZTE are targeting North America with their IP DSLAMs, the report says, and both vendors have strong MSAP products, with ZTE's ZXDSL 9800 scoring especially well in Heavy Reading's analysis.

The North American carriers -- and their need to support legacy services and IP-based services -- are among those driving the evolution of MSAPs from more straight forward devices, such as IP DSLAMs. These design changes include "adding support for VOIP, POTS, legacy voice and data service handling, and FTTx OLTs," writes the report's author, Graham Beniston. "The U.S. regulatory position on unbundling is clearer, and incumbent operators are no longer talking of IPTV overlays with IP DSLAMs without voice or VOIP capability." (See Lucent Unveils Access God Box and HR: FCC Spurs MSAP.)

ZTE's 9800 comes to bat with a competitive feature set, as the 9 rack-unit chassis supports 960 ADSL2+ ports and 56-Gbit/s Layer 2 throughput. The product isn't for outside plant use, but it does include a VOIP media gateway, extensive legacy voice support, and EPON OLT.

Huawei, too, has experience in building both IP DSLAMs and more fully-featured MSAPs. Its IP DSLAM, the SmartAx MA5600, debuted in North America earlier this year and scored well in Heavy Reading's August IP DSLAM report. Huawei's MSAP, called the Honet, supports TDM, Gigabit Ethernet, and ATM, so "it allows carriers to continue providing legacy services, such as PSTN and leased line, while also allowing carriers to provide advanced broadband services, such as IPTV, interactive online gaming, and NGN," Beniston writes.

UTStarcom Inc. (Nasdaq: UTSI), too, has one of the AN-2000 B1000, one of the top performing central-office IP DSLAMs, according to Heavy Reading's August report on IP DSLAMs. But that vendor doesn't appear to be gunning for the North American market with that particular device.

Even with solid products and a depth of experience catering to large carriers worldwide, the Chinese equipment vendors may find the North American access market to be a tough battlefield. In fact, one of the primary advantages these vendors have enjoyed in the past -- competitive pricing -- may not be sustainable. In his October report on MSAPs, Graham Beniston says, "Evidence is mounting that those cost advantages will diminish over the next 18 months as other suppliers continue to 'offshore' their manufacturing sources to regions that offer cheaper labor."

What to do? ZTE, for one, is attempting to strike up partnerships with mid-sized equipment vendors that have big carrier relationships, at least one market-leading technology or product, and could use a stronger presence internationally.

Though the vendor hasn't announced a North American partnership as yet, it has been in talks with both Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) and Ciena Corp. (Nasdaq: CIEN), two companies that fit all three criteria listed above. (See ZTE Talking to Tellabs, Ciena and Ciena Backs Off BLCs.)

However, according to Beniston, they approach the market, the fact that ZTE and Huawei are marketing IP DSLAMs in North America "is a clear indication that both companies will move even more aggressively to build market share beyond Asia."

— Phil Harvey, News Editor, Light Reading

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