Nortel Mothballs Shasta
The report, "Mobile Packet Core Networks & the Future of Wireless Data Services," notes that Nortel, which currently holds a 15 percent share of the $750 million-a-year GGSN market, has turned to its partner, Starent, to source a successor to the Shasta, a very mature platform.
“It’s my understanding from several industry sources that Nortel will resell the Starent ST16 as its next-generation GGSN into its GPRS and W-CDMA account base worldwide. As I understand it, Nortel is cancelling GGSN development on the internally developed MPE [Multiservice Provider Edge] platform,” says the report's author, Heavy Reading senior analyst Patrick Donegan.
His sources are good. Scott Wickware, VP of strategy and marketing at Nortel's mobility and converged core networks division, confirmed today that Nortel has decided to invest its R&D dollars in developing a new wireless data node platform for 4G wireless networks, such as mobile Wimax and LTE (long-term evolution). (See Zafirovski: We'll Get 4G Right.)
As a result, it will put the current products being used by mobile operators, the Shasta GGSN and the Passport SGSN (serving GPRS support node), which collects data traffic from mobile RNCs (radio network controllers) and passes it on to the GGSN, "into sustain mode, and continue to support existing customers."
That support will include the addition of new features and functionality for existing customers, but the Shasta platform will not be developed into the 4G gateway that Nortel needs to fulfil its next generation wireless ambitions.
So while the new platform -- which will be built using Advanced TCA (ATCA) hardware from Motorola Inc. (NYSE: MOT) and Nortel's VSE (Versatile Service Engine) -- is in development, during the next few years, Nortel will resell Starent's ST16 as a higher-capacity successor, or replacement, for the Shasta as mobile operators' data traffic volumes increase. (See Nortel Preaches ATCA.)
But Nortel will also be competing with Starent. Wickware notes that the specialist vendor is "active in the market -– they're going for the same customers," adding that Nortel is ready to act as supplier and integrator when a carrier "wants to be dealing with a Tier 1 vendor supplier."
And Starent, which has just filed for a $115 million IPO, is proving a worthy competitor already. (See Starent Aims for $115M IPO.)
Donegan notes in his report that "the Starent ST16 is understood to be undergoing trials in Vodafone UK ," a long-term Shasta customer. Wickware notes that Starent has "gone direct on that… We may be involved in the integration efforts, but the sale has been direct."
Starent said it couldn't comment on that situation, while Vodafone didn't return our calls.
The Vodafone situation is just one example of the changing relationship between Nortel and Starent. Under one OEM deal, Nortel has been reselling the ST16 to CDMA operators, and very successfully. In 2006, Nortel accounted for more than 40 percent of Starent's $94.4 million revenues.
But now Starent wants more of the action itself. In its IPO filing with the Securities and Exchange Commission (SEC) , Starent notes that it "terminated the agreement relating to the CDMA market effective March 2007 because we were no longer strategically aligned with Nortel Networks on future packet core solutions for mobile operators and to allow specific major mobile operators to purchase directly from us... Although Nortel Networks has acknowledged our right to terminate the CDMA agreement, under the terms of the agreement Nortel Networks has a right to continue to purchase our CDMA products for delivery through December 2009."
And that's not the end of the bad news for Nortel. The two companies had a separate agreement for Nortel to OEM the ST16 to GSM/UMTS operators, such as Vodafone, but now Starent wants out of that arrangement, too, especially as Nortel's relationships with UMTS/WCDMA 3G carriers have been weakened by the sale of its 3G access business to Alcatel-Lucent (NYSE: ALU). (See Alcatel Snags Nortel 3G Unit.)
Starent notes that "we also terminated the agreement relating to the GSM/UMTS market effective December 2006 because there was a lack of strategic alignment on future packet core solutions for mobile operators between us and Nortel Networks and because there had been no sales of our products under that agreement."
But Nortel isn't ready to accept that situation so readily. "Although we believe we had valid grounds to terminate the GSM/UMTS agreement, Nortel Networks has disputed our right to terminate that agreement. The agreement contains provisions granting Nortel Networks the exclusive rights to sell our products to specified GSM/UMTS operators until May 2009," notes Starent, adding that it is "currently exploring a new reseller relationship with Nortel Networks to service GSM/UMTS operators."
In addition, the GGSN is emerging as an important element in the planned IMS networks of large carriers, many of which are believed to have IMS RFPs issued to vendors. Donegan notes in his report that the GGSN is "a strategically important node for evolving the mobile network to support fixed/mobile convergence architectures and ultimately IP Multimedia Subsystem."
Starent no doubt fancies its chances of direct sales here, as the company participated in a recent IMS trial, positioning its ST16 as the CSCF (call session control function) element in a test network that was put together by five major carriers, including Vodafone. (See Starent in IMS Plugfest.)
— Ray Le Maistre, International News Editor, Light Reading