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The Zeugma Dilemma

12:10 PM -- Was Zeugma Systems Inc. ahead of its time? Or is there such a thing as being too innovative in telecom? (See Zeugma Goes ZZZZZ...)

"A lot of people said we were ahead of our time, and it's certainly more self-satisfying to think that, because otherwise, you were just wrong," says Kevin Walsh, formerly VP of marketing for Zeugma, which closed its doors on Monday, putting its remaining 15 or so employees out of work. "We had a slightly different approach, and that did create some sales headwind."

What Zeugma tried to do was give wireline and wireless network operators an easy way to manage different types of traffic at the broadband edge, where that traffic had to find its way onto the Internet or content delivery networks. Given the growing tide of online video, it's safe to say demand for that kind of technology may soon be on the rise, and Zeugma certainly had its admirers. (See TelcoTV Announces Vision Award Winners.)

But Zeugma ran out of cash before its idea of using Deep Packet Inspection to do bandwidth management and create differentiated services at the edge of the broadband network caught on. The company had three independent telco customers but found that Calix Inc. (NYSE: CALX) and Occam Networks Inc. (Nasdaq: OCNW), both of which had been chasing the IOC broadband access market for much longer, were too entrenched, Walsh says.

Zeugma's investors declined to dig deeper to keep the company going, after pumping in about $50 million. (See Zeugma Gets $9M.)

"The reality of the IOC market is that those customers only need one [broadband access vendor], and building meaningful revenue volume in that space turned out to be a bigger challenge than we thought," Walsh told us.

CEO and founder Andrew Harries continues at the company to sell its intellectual property and assets, according to Walsh.

Walsh still believes that Zeugma's basic premise holds and that broadband network operators, both wireline and wireless, will be looking for intelligent traffic management solutions sooner rather than later -- just not soon enough to save Zeugma.

— Carol Wilson, Chief Editor, Events, Light Reading

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Pete Baldwin 12/5/2012 | 4:22:51 PM
re: The Zeugma Dilemma

Same reaction here. I liked the idea of Zeugma melding routers and computing -- turning the router into an applications machine too.


I'm at the Juniper analyst day hearing them talk about -- well, kind of the same idea, on a bigger scale, with a router platform that people have already invested in. Wonder if that had anything to do with Zeugma's change of direction and ultimate demise.

paolo.franzoi 12/5/2012 | 4:22:51 PM
re: The Zeugma Dilemma

 


Zeugma competing with Occam and Calix?


What?


They should position to be competing with Juniper, Cisco and what was Redback as a service edge router.


If they are going to say that they were doing their IPTV architecture or broadband access architecture in conflict with the broadband access vendors then that was a wrong headed thought.


When I was dealing with Zeugma they were talking about cooperation with broadband access vendors.  The issue was for such a player that these are separate worlds.  They wanted folks to write applications for the boxes.  That is not what the Calix's and Occam's do.


seven


 

kwalsh 12/5/2012 | 4:22:50 PM
re: The Zeugma Dilemma

&lt;!--/*fontdefinitions*/@font-face{font-family:"cambriamath";panose-1:2453546324;mso-font-charset:1;mso-generic-font-family:roman;mso-font-format:other;mso-font-pitch:variable;mso-font-signature:000000;}@font-face{font-family:calibri;panose-1:21552224324;mso-font-charset:0;mso-generic-font-family:swiss;mso-font-pitch:variable;mso-font-signature:-16106119851073750139001590;}@font-face{font-family:"helveticaneueltstd";panose-1:21164222224;mso-font-charset:0;mso-generic-font-family:swiss;mso-font-format:other;mso-font-pitch:variable;mso-font-signature:300010;}/*styledefinitions*/p.msonormal,li.msonormal,div.msonormal{mso-style-unhide:no;mso-style-qformat:yes;mso-style-parent:"";margin-top:6.0pt;margin-right:0in;margin-bottom:6.0pt;margin-left:0in;mso-pagination:widow-orphan;font-size:10.0pt;mso-bidi-font-size:11.0pt;font-family:"helveticaneueltstd","sans-serif";mso-fareast-font-family:calibri;mso-fareast-theme-font:minor-latin;mso-bidi-font-family:"timesnewroman";mso-bidi-theme-font:minor-bidi;}.msochpdefault{mso-style-type:export-only;mso-default-props:yes;mso-ascii-font-family:calibri;mso-ascii-theme-font:minor-latin;mso-fareast-font-family:calibri;mso-fareast-theme-font:minor-latin;mso-hansi-font-family:calibri;mso-hansi-theme-font:minor-latin;mso-bidi-font-family:"timesnewroman";mso-bidi-theme-font:minor-bidi;}.msopapdefault{mso-style-type:export-only;margin-left:1.0in;text-indent:-1.0in;}@pagesection1{size:8.5in11.0in;margin:1.0in1.0in1.0in1.0in;mso-header-margin:.5in;mso-footer-margin:.5in;mso-paper-source:0;}div.section1{page:section1;}--&gt;<pclass="msonormal">letmeseeificanhelpouthere.zeugmadidnotcompetewithcalixoroccam(oranyotheraccesssupplier),infacttheproductswerequitecomplimentary.</pclass="msonormal">
<pclass="msonormal">intheoryzeugmashouldhavecompetedwithciscoandjuniperbecausethezeugmaproductwas,amongotherthings,arouter.andlasttimeicheckedciscoandjunipermadeaboatloadofrouters.

<pclass="msonormal">butinpracticethecompetitionwasnotciscoorjuniper,itwasfearamongbroadbandprovidersofrunningafoulofregulatorsinwashington.thismadeitdifficultforbroadbandproviderstosellanythingotherthan&ldquo;besteffort&rdquo;(whichshouldreallybecalled&ldquo;noeffort&rdquo;)internetaccessservices.whatzeugmawasaboutwasenablingserviceslike&ldquo;topnotcheffort,&rdquo;&ldquo;prettygoodeffort,&rdquo;and&ldquo;i&rsquo;llgettoitlatereffort&rdquo;atdifferentiatedpricinginadditiontotypicalspeed-basedbroadbandpackages.

<pclass="msonormal">consumersseemtowantit.overthetopvideoproviderswantit.broadbandoperatorswantit.buttheirbettersinwashingtonseethingsdifferently.

<pclass="msonormal">&nbsp;

<pclass="msonormal">&nbsp;

<pclass="msonormal">&nbsp;

<pclass="msonormal">&nbsp;



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kwalsh 12/5/2012 | 4:22:50 PM
re: The Zeugma Dilemma

(sorry, I'll try that again)


&nbsp;


Let me see if I can help out here. Zeugma did not compete with Calix or Occam (or any other access supplier), in fact the products were quite complimentary.

In theory Zeugma should have competed with Cisco and Juniper because the Zeugma product was, among other things, a router. And last time I checked Cisco and Juniper made a boatload of routers.

But in practice the competition was not Cisco or Juniper, it was fear among broadband providers of running afoul of regulators in Washington. This made it difficult for broadband providers to sell anything other than &ldquo;best effort&rdquo; (which should really be called &ldquo;no effort&rdquo;) Internet access services. What Zeugma was about was enabling services like &ldquo;top notch effort,&rdquo; &ldquo;pretty good effort,&rdquo; and &ldquo;I&rsquo;ll get to it later effort&rdquo; at differentiated pricing in addition to typical speed-based broadband packages.

Consumers seem to want it. Over the top video providers want it. Broadband operators want it. But their betters in Washington see things differently.







paolo.franzoi 12/5/2012 | 4:22:50 PM
re: The Zeugma Dilemma

&nbsp;


Yeah, I have been looking at the Juniper stuff for my little SaaS company.&nbsp; I think Cisco has an equivalent, but you have to register to look at the docs.


seven


&nbsp;

paolo.franzoi 12/5/2012 | 4:22:49 PM
re: The Zeugma Dilemma

&nbsp;


Thanks Kevin,


I thought the article was wrong, but reasoned that either it or I should be corrected.


The only argument I would have with your statement is that consumers want it.&nbsp; Consumers want "My traffic is treated at the highest priority while your traffic is treated at the lowest priority."


I have never met anyone who has said, "Yeah, send my bits whenever you get around to it."&nbsp; Being an e-mail filtering supplier we just had to explain to a customer why an e-mail was delayed by 41 seconds.&nbsp; That's an e-mail.&nbsp; Nothing more "no effort" than e-mail right?


I think consumers are perfectly happy with infinite consumption, best effort services.&nbsp; I don't know about you guys but my Netflix works, so does my online gaming, my VoIP, even my Slingbox.&nbsp; So, I am trying to figure out why the consumer wants ANY change.


I get why service providers want it.


seven


&nbsp;

kwalsh 12/5/2012 | 4:22:49 PM
re: The Zeugma Dilemma

Good points.

We actually did a good deal of consumer survey work through IDC to try and gauge what consumers wanted (and were willing to pay for). We found that a pretty large set, sixty percent or so, were willing to pay extra for broadband service adjuncts that guaranteed quality of service for certain types of applications, streaming HD video for example. How much they&rsquo;re willing to pay obviously varies but sufficient demand seems to exist to build a business model.

My &ldquo;I&rsquo;ll get to it later&rdquo; service was a bit tongue-in-cheek but I do think a case can be made for very inexpensive services ("lifeline broadband"?) that buffer traffic and only deliver it when the network is idle. My grandmother would be an excellent customer, she&rsquo;s still amazed that it takes less than a day to deliver email.

kwalsh 12/5/2012 | 4:22:47 PM
re: The Zeugma Dilemma

I think you're confusing "broadband providers" with "cable operators." Cable operators, like Comcast, represent a subset of broadband operators, and on a global basis it's a pretty small subset.

But you're right, cable operators are inherently conflicted by the growth in OTT video, for obvious reasons. The rest of the broadband universe is not.

Also, I've dealt with a lot of telco execs and not very many of them feel that regulatory capture is rampant at the FCC.

rjmcmahon 12/5/2012 | 4:22:47 PM
re: The Zeugma Dilemma

re: "But in practice the competition was not Cisco or Juniper, it was fear among broadband providers of running afoul of regulators in Washington. This made it difficult for broadband providers to sell anything other than &ldquo;best effort&rdquo;


This seems like pure b.s.&nbsp; "Broadband providers" like comcast already sell HD packages, they just don't packetize it.&nbsp; And fundamentallly it's not in a broadband provider's economic interests to sell anything other than BE as they would lose pricing power during negotiations with copy right holders.&nbsp; Look to Blockbuster to see what would happen if the broadband providers shifted their their networks/biz models such that consumers could buy pure bw sufficient to bypass them for things like HD video.&nbsp; Regulators have been captured for decades to boot.


paolo.franzoi 12/5/2012 | 4:22:45 PM
re: The Zeugma Dilemma

&nbsp;


I guess I will tell my Netflix that it can't work over Comcast as I am watching it over Comcast.


&nbsp;


That is the problem with these arguments. &nbsp;They are theoretical. &nbsp;In the real world, I watch all the OTT video I want over my cable modem.


&nbsp;


seven


&nbsp;

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