Nortel Nabs $65M Cable Deal

While traditional telephone companies are spending slowly and with great deliberation, equipment vendors are turning to cable MSOs for a ray of sunshine. Case in point: Nortel Networks Corp.'s (NYSE/Toronto: NT) announcement this week that Cox Communications Inc. (NYSE: COX) has awarded it a three-year, $65 million contract to provide next-generation Sonet equipment and other telecom gear (see Nortel Wins at Cox).

Cox has been buying Nortel gear for several years now. In 1996, Nortel announced a $65 million deal to supply Cox with its DMS-500 switches so Cox could provide local telephony services. Cox has more than 650,000 residential telephony customers to date, served by 15 Nortel DMS boxes, according to Elaine Smiles, director of cable marketing for Nortel.

Last month, Nortel announced that Cox was using its OPTera Metro 3500 box to provide high-speed Internet access, virtual LANs, and other services to Cox's enterprise customers (see Cox Picks Nortel for Metro). The deployments announced then included gear for four metro rings in San Diego.

The additional supply agreement announced Tuesday includes Nortel's OPTera Metro line, which will be used to aggregate traffic, transport traffic, and provide Ethernet services. "Cox saw the value in converging their traffic onto a metro optical backbone," says Smiles.

Cox did not respond to requests for comment.

Nortel's OPTera Metro products compete with similar offerings from Cisco Systems Inc. (Nasdaq: CSCO), Ciena Corp. (Nasdaq: CIEN), Lucent Technologies Inc. (NYSE: LU), and Fujitsu Network Communications Inc. (FNC).

Nortel says its gear provides service to more than four million cable telephony lines globally, though most of that is TDM telephony, not voice-over-IP. The number is still significant, since there are only a little more than eight million cable telephony lines in service, according to market research firm In-Stat/MDR.

In-Stat/MDR predicts the line count will reach 11 million by the end of this year, but it did not provide a per-vendor breakout.

With this in mind, cable spending may serve as at least a short-term haven for cash-starved equipment providers. Citing a September report from RHK Inc., Smiles says that capex for cable MSOs declined by 12 percent last year, versus the 43 percent to 53 percent capex decline for wireline service providers, such as RBOCs.

— Phil Harvey, Senior Editor, Light Reading
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capolite 12/4/2012 | 9:22:03 PM
re: Nortel Nabs $65M Cable Deal Cisco has been targeting all the cable companies and now Nortel beats them. Nortel has a real advantage competing against Cisco with Carlos Dominguez and his merry band of neutered brown nosers. And maybe the Nortel technology and value proposition might be superior to Cisco. Chambers needs to do some work to get SP sales back up to 40-50% from 20%.
dwdmguy 12/4/2012 | 9:22:02 PM
re: Nortel Nabs $65M Cable Deal It is easy to beat Cisco when you give away your gear for cost if not free. Cisco likes to have its margins at 69%, I wonder what Nortel's margin is for this deal?
Packet Man 12/4/2012 | 9:22:02 PM
re: Nortel Nabs $65M Cable Deal Nortel Beats Cisco ! Ha.....you wish.

Philosoptical 12/4/2012 | 9:22:00 PM
re: Nortel Nabs $65M Cable Deal You win some, you lose some - I don't think Cisco's metro optical margins are anywhere near 69% ... unless you're not counting previously written off inventory in your costs. Those fat margins come from their dominance in enterprise solutions where their strength rests. They must be under margin pressures from intense competition in optical systems, especially in the service provider segment where they remain a relatively small player.

The OPTera Metro 3500 Next-Gen Sonet platform is on a roll ... at least have the grace to accept that there must be some value to customers of NN's portfolio to enable it so consistently lead the optical networks systems market across multiple segments quarter after quarter. You can fool some of your customers some of the time but not all of your customers all of the time.

The amount of NN bashing at this site is sad to see - sure Nortel's made some big mistakes and is paying the price for its hubris and excess during the sweet ride up on the bubble. Well that was then and this is now and we're all living in this big glass house with these gaping holes in most of the windows so let's stop throwing these sharp rocks at each other and start celebrating all good news that at least some customers are buying some of the next-gen optical gear on the market these days.

Take Care,
Litewave 12/4/2012 | 9:21:58 PM
re: Nortel Nabs $65M Cable Deal Cisco still hasn't won any major carriers with their Cerent box.

You obviously don't have a clue (unless of course you believe that AT&T isn't a major carrier).

jgh 12/4/2012 | 9:21:58 PM
re: Nortel Nabs $65M Cable Deal As an ex Norteler now working in the MSO space, Nortel has it all over Cisco in the Optical arena. Cisco still hasn't won any major carriers with their Cerent box.
I don't know any MSO that would trust their backbone network to the Cisco solution. They have along way to go before they can compete against any of the incumbent optical vendors.
Belzebutt 12/4/2012 | 9:21:54 PM
re: Nortel Nabs $65M Cable Deal Which Cisco box competes directly with Nortel OM3500 + OPE (RPR)?
wirespeed1010 12/4/2012 | 9:21:50 PM
re: Nortel Nabs $65M Cable Deal ...and Alcatel rules them all!!
mangel an wissen 12/4/2012 | 9:21:29 PM
re: Nortel Nabs $65M Cable Deal The 3500 is a SONET multiplexer, basically a bunch of SONET mappers/interfaces plus an STS/VT switching fabric. The data capabilites have been shoe horn into it. The 'RPR like' cards consist of a two WAN interfaces that simply map Ethernet into SONET STS's, and small packet fabric that manages the add/drop plus any other VPN features. These mappers need to connected to other OPE cards, not an ideal solution. I would not call it "the standard" or even "next generation", just because it does spacial reuse on a packet ring or it is new.

The Cisco (Cerent) does a simple mapping of ethernet into a number of STS's. Very good for pt-pt solutions. The initial cerent was design for dual switching, packet and STS.

Other have done similiar mapper cards on SONET using virtual concatenation.

A next generation transport solution should consist of the following;
1) flexible mapper cards( anything -> SONET -> FEC)
2) transparency.
3) cheapest cost/bit ratio.
4) enhance OAM capabilities (especially for DWDM management, and data i/f)
5) A fabric to mux the mappers into the cheapest optical i/f (ie OC48 or OC192).

The addition of data multiplexing capabilities is questionable. The transport is about pipes. Big and cheap.

optical Mike 12/4/2012 | 9:21:29 PM
re: Nortel Nabs $65M Cable Deal Will they get a good return on all this spending?
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