AlcaLu Lands GPON Role in Australia's NBN

Despite past associations, AlcaLu's involvement in national FTTx broadband access initiative is all above-board, says governing company

June 24, 2010

4 Min Read
AlcaLu Lands GPON Role in Australia's NBN

Alcatel-Lucent (NYSE: ALU) has landed a key role as a supplier of access equipment and support services for Australia's National Broadband Network (NBN).

The vendor has been named as a "strategic supplier," and will supply GPON equipment (OLTs and ONTs) and Ethernet aggregation boxes in an initial deal valued at A$70 million (US$61 million). (See AlcaLu Lands Big Aussie Gig.)

But the decision, announced today by NBN Co. (the company established by the Australian government to design, build, and operate the network), will immediately raise questions about the A$43 billion (US$37.4 billion) initiative's procurement processes. (See Australia Unveils $31B FTTP Plan and Report Endorses NBN Vision.)

That's because the CEO of NBN Co. is Mike Quigley, a highly respected former senior executive at Alcatel-Lucent. Quigley, who left AlcaLu in 2007, was named NBN Co.'s head honcho in July 2009. (See Quigley Lands Major FTTP Role, Former AlcaLu Exec Quigley Resurfaces, and Quigley, D'Amelio out at AlcaLu.)

In addition, the CFO at NBN is Jean-Pascal Beaufret, the former head of finance at AlcaLu who was ousted by Pat Russo in October 2007. He joined Quigley in Australia in September 2009. (See AsiaWatch: FTTH, Huawei, 3G & M&A and Russo Shakes Up AlcaLu's Top Team.)

So even though Alcatel-Lucent is one of the world's leading developers and suppliers of telecom access equipment, and involved in many major FTTx deployments around the world, any business awarded by NBN to the Franco/American vendor was always likely to result in suggestions of favoritism, because of the past associations of the two senior men.

NBN, though, had anticipated accusations of preferential treatment, and was ready with a defensive statement as AlcaLu's engagement was announced.

"To avoid any perception of conflicts of interest from previous employment both the CEO, Mr Mike Quigley, and the Chief Financial Officer, Mr Jean-Pascal Beaufret, did not participate in the decision by the Executive Committee to select Alcatel-Lucent, or negotiate any price arrangement within this agreement, nor did they participate in the Board approval to select Alcatel-Lucent for any of these contracts," stated the company on its Website.

It's unlikely, though, that such a statement will mollify conspiracy theorists, who might find it hard to believe that such an important decision could be taken without the involvement of the most important individual involved in ensuring the NBN's success.

Quigley, though, is a robust character and unlikely to be fazed by any speculation. But both he and Beaufret will need thick skins, as questions regarding their associations with Alcatel-Lucent will likely linger, as the initial A$70 million equipment deal is almost certain to be the first of many NBN purchase orders heading that company's way.

That's because NBN Co. expects to spend up to A$1.5 billion (US$1.3 billion) on GPON and Ethernet aggregation gear in the coming years as it aims to make high-speed broadband connections available to 90 percent of Australia's population within eight years. The plan is to build an open access network that can be used by multiple service providers on equal terms.

But although AlcaLu is clearly well placed to land a sizeable chunk of that A$1.5 billion, it won't be the only supplier with its hardware in the project's fiber access nodes. NBN Co. says it "intends to engage other GPON equipment suppliers who will interoperate with Alcatel-Lucent’s GPON equipment" as the project progresses.

China's Huawei Technologies Co. Ltd. , which is already playing a significant role in Singapore's open-access FTTH project, is working hard to get involved, while other potential contenders include Ericsson AB (Nasdaq: ERIC), Motorola Inc. (NYSE: MOT), and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763). (See Singapore Slings for AlcaLu, Huawei.)

Alcatel-Lucent's equipment deal is accompanied by a A$15 million (US$13 million), 12-month professional services contract that includes "engineering and testing activities."

News of AlcaLu's involvement comes only days after Australia's national operator, Telstra Corp. Ltd. (ASX: TLS; NZK: TLS), struck a deal to participate in the NBN project, which is already in its initial rollout phase. (See Telstra Bags $10B Broadband Deal , NBN NOC Opens in Tasmania, IBM Lands NBN Deal, Australia Pumps $100M Into Tasmanian NBN, and Nextgen Lands NBN Deal.)

It also comes as Australia gets a new Prime Minister. Incumbent Kevin Rudd has stepped down and been replaced by Julia Gillard, who will lead the ruling Labor Party into a general election in October. That political change, and upcoming election, is significant, as the leader of the opposition, Liberal Tony Abbott, has suggested he would abandon the current NBN plan. Abbott and other politicians in the coalition opposition group believe NBN Co. should not be state-owned and that the rollout budget is too costly. (See Aussie Minister Thunders at NBN Critics.)

— Ray Le Maistre, International Managing Editor, Light Reading

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