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Huawei Working Hard for Rural Success

Huawei's plan to aggressively court rural telcos who want to deliver fiber-to-the-home is beginning to pay off in contracts, even in the headwinds of continued US government advisories about potential spying by the Chinese manufacturer.

A handful of smaller Tier 3 carriers have signed on with Huawei Technologies Co. Ltd. for its GPON technology and several more are on the immediate horizon, says Bill Gerski, VP-sales for Huawei USA and a well-known figure in the rural US telco community from his days at the National Rural Telecommunications Cooperative (NRTC) and Dish Network LLC (Nasdaq: DISH). (See Huawei Aggressively Courts Rural US Telcos.)

Perhaps more importantly, Gerski is enabling Huawei to build up a base of support for both its technology and the company's dedication to this smaller telco market, through creation of an advisory board of rural telco executives and sponsored trips both to Huawei's Plano headquarters and its manufacturing facilities in China. Multiple members of that group are willing to sing Huawei's praises, not just for the aggressive pricing for which the company is known but also for its interest in the smaller telco markets and its responsiveness.

Joseph Franell, CEO of Eastern Oregon Telecom , is one of those who made the trips to meet with Huawei executives in Texas and to visit its manufacturing plants. He came away significantly impressed by the way the manufacturer's executive team spent two days asking questions and listening to the answers, to get a better understanding of the needs of a rural telco, and by Huawei's willingness to adapt to those needs. (See Gigabit Trend Grows in Eastern Oregon.)

"I am working in a Tier 3 market by choice, because this is a market where you can make a difference," he says. "But the rural market is challenging. One of the things I have struggled with is that equipment manufacturers may pay attention to you when you have a big ticket item, like swapping out your access equipment, but otherwise it can be hard to get their attention."

Making an impression
Franell was impressed that Huawei's executives took the time to listen and ask questions to learn more about this market, and says the answers they got from Gerski's advisory group were frank: Small companies don't buy in the same large quantities as Tier 1 or Tier 2 players but they need quick turnaround on what they do order, and they need equipment -- especially in the access networks -- that has flexibility and scalability for a future in which they are competing against bigger incumbents and cable companies.

"I don't like to do business with people who treat me as a customer, I like to do business with people who treat me as a business partner," Franell says. "That's what Huawei did, they took the time to ask the questions and listen to the answers and really understand what we were saying about our markets."

As important for him, Huawei's GPON gear had the power and ability to scale that he needs to get started today in initial FTTH deployments and expand for the future, plus Huawei had a wider range of technology options that solved other specific problems, including wireless local loops.

Eastern Oregon, a competitive carrier formed 16 years ago by two rural electric co-ops and some independent telcos, is doing business with Huawei, using not only its GPON technology for its FTTH buildouts -- starting with 500 homes but ultimately passing 8,000 -- but also its distributed CMTS system for a near-term solution for some abandoned cable plant it is taking over in response to an RFP from a municipality in its service area. And Eastern Oregon is looking at small cell technology from Huawei that addresses one of its pain points in deploying broadband -- the time and aggravation of having to trench fiber under major roads.

"They actually asked me what my biggest pain point was and I told them it was street cuts," Franell says. Huawei is considering using small cells to avoid having to dig up streets and disrupt traffic and Eastern Oregon is now exploring that option, he says. The CMTS purchase was similarly a direct Huawei response to a request he made on his China trip. Eastern Oregon had responded to an RFP from a local municipality that needed someone to either rip up or use some hybrid fiber-coax plant that had been abandoned by a former operator, who stripped out the electronics first.

"I happened to see the distributed CMTS when we were touring the plant in China and asked about it -- they wound up getting it certified for this market, in response to my question," Franell says. "That's the kind of responsiveness we're getting from them."


Read more about Gigabit Cities and the expansion of gig services in our Gigabit Cities section here on Light Reading.

The rural courtship
Rick Peterson is president and CEO of Casco Communications , the retail networking arm owned by three Oregon electric co-ops. His company isn't yet a paying customer of Huawei's but he is on Gerski's advisory board and made the trips to Texas and China. Like Franell, he is impressed by Huawei's willingness to ask questions, listen to the answers and concerns raised and then adapt its technology accordingly.

Casco is considering Huawei's GPON system for possible greenfield FTTH networks in new housing subdivisions it is competing to serve. Peterson says the price flexibility Huawei is demonstrating could be what allows his company to make the business case for gigabit services.

"Our business case is right on the edge," he says. As a competitive carrier, Casco doesn't get any kind of federal subsidy money and needs to have a clear return on investment in order to build the networks.

"They are willing to help us get very creative and have open minds about what allows us to be successful," Peterson says. He admits, however, that Huawei's approach to the US rural market is "a courtship -- it's going to take time." In many cases, what little the rural operators know of Huawei can be negative and those initial perceptions have to be overcome. Both he and Franell think that's possible, given Huawei's efforts to tailor its technology to this market.

Gerski's personal connections to the rural community and his deep understanding of this market mean he's well aware of the challenges Huawei faces. That's why one of the things he encourages companies to do is just let the company bid on projects -- even if they primarily serve as the stick with which rural telcos beat other companies to compete more on price.

"If I can get this in front of the CEO, who's the guy worried about capex and opex, then I think we can make the business case," he says. "If I can show them that the largest GPON manufacturer in the world, with 77,000 R&D people at work, is willing to tackle their problems, and we can deliver it cheaper, then I think I have a shot at their business."

His real goal, Gerski says, is to make the decision to use Huawei "a no-brainer" for CEOs pressured by profit margin woes and the need to be the first guy to deliver gigabit services in areas where cable providers or others may be lining up to do that.

The second round of Connect America Fund money will help stimulate some of those buildouts, Gerski says, but companies such as Eastern Oregon are funding FTTH on their own, and Huawei thinks it can compete even more favorably there.

There are smaller telcos that view themselves as dedicated to any one of a number of US-based technology companies, led by Calix Inc. (NYSE: CALX) and Adtran Inc. (Nasdaq: ADTN), Gerski admits. He is quick to point out that some of what is sold as American-made technology is actually manufactured in China, often at the component level, and sometimes even assembled there. And Huawei vigorously denies any allegations of spying and points to the fact it is employee owned, not government funded, as one proof point. But ultimately, Gerski is trying to prove that Huawei's technology and its dedication to what it sees as a large market made up of many small players is what rural telcos should want.

— Carol Wilson, Editor-at-Large, Light Reading

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Truthseeker 7/23/2015 | 7:53:52 PM
Re: Amazing I can assure you Huawei deployments in the rural market have met the two year mark. The Rural Communities and Customers are the best ambassadors for Huawei. They love the product, the price and the end to end coverage. They also loved the way they are treated as a customer.
cnwedit 7/23/2015 | 12:12:46 PM
Re: Buyers' market Seven,

Certainly Huawei is willing to play stalking horse. Bill Gerski believes that may be how telcos initially see his company's willingness to bid on rural telco projects, but that they'll be won over by the technology and the price. Huawei's competition has always claimed it's mostly price that wins the day for them and drives down everyone else's margins. 

It's an interesting bet Huawei is making, and I'm sure it's causing some sleepless nights in Petaluma and Huntsville.

Carol
brooks7 7/23/2015 | 12:10:28 PM
Re: Amazing In truth, you can help yourself.  Carol's article named some customers.  My experience in the IOC world is that folks are generally pretty friendly.  I might start with the customers named in this article, google their companies, and call them.

seven

 
cnwedit 7/23/2015 | 12:09:34 PM
Re: Amazing I suspect you'll hear directly from them, but I'm not certain any of the US deployments has hit the two-year mark yet. 
Presiden75674 7/23/2015 | 12:06:58 PM
Amazing Is it possible to get a testimony from any of Huawei's customers after the two year mark?

Can anyone help me with this?
brooks7 7/22/2015 | 4:46:00 PM
Re: Buyers' market Carol,

Big difference for Calix more than Adtran.  They picked up the old C&W business that AFC left behind and tried to expand by buying the FTTH business from Ericsson, but that has clearly not worked as International has been flat to down over time at.  But if Huawei can put significant margin pressure on the Tier 3 IOC market, then Calix won't have that nicely profitable base to hold down.  They have a quartley cc next week and I will see what they have to say about growth initiatives.  They are spending WAY too much R&D for a flat revenue company.

Adtran has a lot more diversity of business, but would want to expand even more into Calix's base for the margin gain.  Huawei could become a great stalking horse for Tier 3 telcos, if nothing else.

seven

 
cnwedit 7/22/2015 | 2:11:24 PM
Re: Buyers' market Dennis,

If by ideology, you mean choosing an American company versus a Chinese one, that might be an issue for some operators. But much of the gear the Americans sell is made in China, at the component level at least. Anyone walking around with an iPhone in their pocket has already made that ideological leap, anyway. 

I think what Huawei believes is that rural operators will make the choice that fits their business models best and those business models are built on finding the cheapeat, fastest, most future-proof way to push fiber as close to the customer as they can afford, and hopefully all the way. 

Given the precarious state of federal funding for rural broadband right now, the business choices are looking more crucial all the time. So ideology, if it is even an issue, may take a back seat to survival. 
mendyk 7/22/2015 | 1:58:59 PM
Re: Buyers' market Carol -- Do you see this as a case of ideology vs. business considerations?
cnwedit 7/22/2015 | 12:36:08 PM
Re: Buyers' market They already compete with Huawei in other markets, but yes, this is a competitive threat to the entrenched players. It will be interesting to see how other rural telcos respond to this kind of appeal. Huawei's level of engagement - they also provide fiber and anything else needed, pretty much - has to have its attractions, in addition to price. But getting folks to change their mindsets isn't always easy. 
brooks7 7/22/2015 | 12:02:46 PM
Re: Buyers' market So, Calix and Adtran have a competitor coming in from their unprotected flank. seven
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