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Recovery Act: Tier 2 Says 'No Thanks'

Craig Matsumoto
8/26/2009
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It's well known that Tier 1 carriers weren't interested in money from the American Recovery and Reinvestment Act (ARRA), but some of the Tier 2 camp turned down the offer as well.

Of course, there were still plenty of names -- some recognizable -- that put in for their share of the $4 billion being handed out in the first round of grants and loans. (See Recovery Act: The Stimulus Index.) But they may be in the minority.

"Most Tier 1 and Tier 2 broadband service providers have decided against applying for broadband stimulus funding," writes analyst Michael Genovese of Elevate Research Inc.

CenturyLink Inc. (NYSE: CTL), which had been on the fence about applying for funds, ended up in the "No" category, Genovese writes. (See Recovery Act: The Undecided Remain.)

Others on Genovese's list of nos include Consolidated Communications Inc. , Frontier Communications Corp. (NYSE: FTR), and Windstream Communications Inc. (Nasdaq: WIN).

In some cases, the reluctance comes from the same concerns big carriers have: network neutrality verbiage in the ARRA and the whole idea of the government keeping watch over a project.

For those reasons, many small carriers probably didn't even consider applying, says Russ Sharer, vice president of marketing for equipment vendor Occam Networks Inc. (Nasdaq: OCNW). "They see the evolution of the government's involvement in, say, the financial industry," he tells Light Reading. "Independent operating companies didn't get their name by accident. They like being independent."

Sources have also been citing the cost, as carriers would have to pony up 20 percent of the project financial outlay.

Sharer offers one more reason: Not every carrier wants to delve into unserved territory. It's not always profitable, once you compare the costs of managing the network against the slow takeup of customers (given that a lot of U.S. households don't care about broadband).

"Some people say it's not worth the business risk," he says.

— Craig Matsumoto, West Coast Editor, Light Reading

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paolo.franzoi
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paolo.franzoi,
User Rank: Light Sabre
12/5/2012 | 3:57:54 PM
re: Recovery Act: Tier 2 Says 'No Thanks'


 


You certainly shouldn't consider Occam an expert on what is going on in the head's at Century, Frontier, and Windstream.  They have 0 business with those guys and they are very different than the Mom and Pops that dominate the bulk of Occam's business.  Now Russ is a smart guy, but there are much better folks to talk to (Calix and Adtran for example).


 


seven


 

nextinning
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nextinning,
User Rank: Moderator
12/5/2012 | 3:57:53 PM
re: Recovery Act: Tier 2 Says 'No Thanks'
Nothing has slowed broadband investment in the U.S. more than the ill-conceived network neutrality legislation Markey has tried to shovel our way - well, his latest brainchild, cap and trade might be worse come to think of it. What Markey and his nutcase followers would like us to believe is the network operators want to limit our access. Here is a list of what every single major U.S. carrier supports:

1. Access and post any lawful content of the subscriberG«÷s choosing;
2. Access any web page of the subscriberG«÷s choosing;
3. Access and run any voice application of the subscriberG«÷s choosing;
4. Access and run any video application of the subscriberG«÷s choosing;
5. Access and run any email application of the subscriberG«÷s choosing;
6. Access and run any search engine of the subscriberG«÷s choosing;
7. Access and run any other application, software, or services of the
subscriberG«÷s choosing;
8. Connect any legal device of the subscriberG«÷s choosing to the Internet access equipment of the subscriber, if such device does not harm the network of the Internet service provider; and
9. Receive clear and conspicuous information, in plain language, about the estimated speeds, capabilities, limitations, and pricing of any Internet service offered to the public without interference from Internet service providers or Federal, state, or local governments.

The one thing they don't support is restricting the consumer's ability to buy QoS. Google, Skype, Vonage, etc. want to preclude our right to buy QoS because it doesn't fit their business model.
Toad680
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Toad680,
User Rank: Light Beer
12/5/2012 | 3:57:51 PM
re: Recovery Act: Tier 2 Says 'No Thanks'


In all fairness Brook, Calix started serving the mom and pops of this world just the way Occam has.  It wasn't all that many years ago that I remember the rumours of Calix breaking the $100 million a year in revenue mark and there was pretty wild speculation about cisco being a bidder, or the eternal IPO (which I understand is back on now and likely to go though with the stimulus as a backdrop).


Occam has now also taken the company to roughly a $100 million run rate, albeit some years later.  But they clearly have a product that is selling in a market that in theory should be dominated by Calix.  Some would argue that Occam's BLC 6000 being pure IP from inception gave them an advantage as the market shifted and has allowed them to compete effectively against Calix.


Indeed Calix has a good number of much larger customers.  But the fact that Occam landed the Fairpoint business should not be overlooked as Occam is moving up in customer size over time, just as Calix has in the past. 


It is a shame that Calix is private because it would be interesting to compare growth rates.  Obviously from early product introduction, Occam would have grown faster because of such a small base.  But I would be willing to wager that Occam continues to outpace Calix in growth today.  And that would speak to a certain knowledge about what customers want and need.


In any case, the fact that Occam is several years behind Calix in product introduction may wind up being the best thing that ever happened to them.  Because of the necessity to build from the smaller carriers up, Occam is currently running at roughly 21% of the RUS access market.  With $7 billion (unleveraged) being directed largely in that direction, Occam is going to wind up being a great deal larger in a couple of years than it is today.  In fact, there aren't too many companies with that type of exposure to the stimulus funds, expecially compared to their current base of business.


So I wouldn't be completely dismissive of Occam.  They have landed Fairpoint (and I don't want to debate the financial standing of their customer), have gained a lot of insight from the relationship with TLAB (although no RBOC sales) and have continued to perform quite well on their own.  I don't think they are quit as clueless as you imply.  And I dare say they will make for a better investment over the next several years versus ADTN or Calix (if they can ever finally sell shares to investors).

paolo.franzoi
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paolo.franzoi,
User Rank: Light Sabre
12/5/2012 | 3:57:51 PM
re: Recovery Act: Tier 2 Says 'No Thanks'
Logistics.....

seven
Toad680
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Toad680,
User Rank: Light Beer
12/5/2012 | 3:57:51 PM
re: Recovery Act: Tier 2 Says 'No Thanks'


Look at that.  Windstream is an Occam customer.  I didn't even know. 

Tesla_x
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Tesla_x,
User Rank: Light Beer
12/5/2012 | 3:57:51 PM
re: Recovery Act: Tier 2 Says 'No Thanks'


About your statement @ OCNW...


"Century, Frontier, and Windstream. They have 0 business with those guys"


See this:


http://www.occamnetworks.com/d...


See slide 6/16


Please explain your statement and why it is correct with a reference to your source.


 


Tesla

Toad680
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Toad680,
User Rank: Light Beer
12/5/2012 | 3:57:44 PM
re: Recovery Act: Tier 2 Says 'No Thanks'


Very snappy...

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