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Zhone Details Product Strategy

Light Reading
News Analysis
Light Reading
9/22/2000
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Zhone Technologies Inc., the audacious networking startup that has raised $500 million in venture capital and leveraged buyout money, is ready to tell the world what it's doing with all that cash.

The company is building a box designed as the be-all, end-all of telecommunications access equipment, according to Zhone officials. They say their flagship edge switch/router called the Broadband Access Node 100 (BAN 100), which is in customer trials now, will incorporate a DSLAM, access switch/router, and a broadband subscriber management system (SMS) into a single box.

As if that weren't enough, the company also claims the BAN will have the features of a Class 5 voice switch and frame relay access device.

In other words, they'll need the $500 million.

A number of competitors are selling these features in separate products, while Zhone aims to consolidate such equipment into its BAN. The most obvious competitors are Redback Networks Inc. (Nasdaq: RBAK) and Cisco Systems Inc. (Nasdaq: CSCO), which are competing in the SMS market; Lucent Technologies Inc. (NYSE: LU) and Nortel Networks Corp. (NYSE/TSE: NT), which compete in both the data and voice switching market; and several access switch/router vendors, including Cisco and a raft of startups. Zhone hopes to compensate for its relatively late entry into the edge access space by integrating the various technologies.

Zhone will also announce a series of access devices for office buildings and homes, as well as a provisioning software platform, the Zhone Management System (ZMS), designed to enable telcos to quickly provision integrated broadband services.

"We're looking at the entire local loop for voice, video, and data," says Eric Presworsky, a marketing official with Zhone.

Up to this point, Zhone has succeeded in keeping its plans quiet, despite having a high-profile launch last year. The company was founded by networking heavyweights Mory Ejabat and Jeanette Symons. Ejabat, Chairman and CEO of Zhone, was formerly president and CEO of Ascend Communications Inc., which Lucent Technologies purchased in 1999 for $24 billion. Symons, CTO and vice president of engineering for Zhone, was Ascend's CTO. After raising $500 million, the company made several acquisitions, including that of Premisys Communications.

Experts say solving broadband local-loop access is ambitious and costly, because telecom operators have not yet been able to justify new equipment expenditures with services revenue. Zhone so far has announced only two trial customers: Focal Communications Corp. (Nasdaq: FCOM), a CLEC in Chicago, and PSInet Inc. (Nasdaq: PSIX), an Internet service provider.

"The key to access is economics," said one venture capitalist funding companies in the space, asking not to be named. "They have to prove to the carriers that this is economical."

-- R. Scott Raynovich, Light Reading http://www.lightreading.com

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