aware.com
The Digital Loop Carrier & Switch Upgrade
Opportunity for ADSL
November 21, 2000
Yesterday, Legerity issued a press release announcing that it is leveraging
technology licensed from Aware to develop an integrated data + voice chipset
solution. The forthcoming Legerity chipset solution is designed to revolutionize
deployment of multi-port, voice-enabled, full-rate ADSL linecards in central
offices (COs), digital loop carriers (DLCs), and digital subscriber line access
multiplexors (DSLAMs). The chip is planned for introduction in 2001.
To date, phone companies have deployed ADSL by installing DSLAMs in their
central offices. New ADSL chipsets, such as the one announced by Legerity,
will enable telephone companies to offer services by upgrading DLCs and
existing switch equipment. The significance of these new chipset solutions is:
DLC upgrades will enable phone companies to offer ADSL service to
customers who were previously unable to receive it. Today,
approximately 20–25% of telephone customers in the United States are
served by DLCs. DLCs are used to offer voice services to remote
telephone customers by placing equipment in neighborhoods and
connecting back to a central office using a high-speed link (T1 or fiber).
Under the current DSLAM-only central office architecture, DLC
customers are unable to receive ADSL services, because ADSL signals
can not pass through a DLC.
With the advent of ADSL chipsets designed to upgrade DLCs from
voice-only service to voice-plus-data service, many customers will now
be able to receive ADSL services for the first time. Phone companies will
be able to upgrade linecards located in existing DLCs in order to make
ADSL available to these customers. Also, phone companies will be able to
install new DLCs into their networks to reach customers who were not
previously connected to a DLC, but were too far away from a central
office to receive ADSL service through a DSLAM connection. These new
chipset solutions open up an enormous and previously untapped market
opportunity for telephone companies.
Switch upgrades are a more cost-effective way of offering ADSL
services at the central office. Switch upgrades reuse the existing switch
equipment that phone companies currently use to handle traditional analog
phone calls. ADSL switch upgrades are more cost effective than
DSLAMs, because they lower service providers’ upfront capital spending
and on-going maintenance costs by eliminating the need for a separate
DSLAM in the central office.
The idea of upgrading DLC and central office switches has gained momentum
recently. Earlier this year, SBC announced Project Pronto, which is its $6 billion
initiative to deploy DSL services. At about the same time, SBC also petitioned the
Federal Communications Commission (FCC) to allow it to offer ADSL services
through "neighborhood broadband gateways" (i.e. DLCs). In September 2000,
the FCC ruled that SBC would be allowed to install ADSL-enabled linecards in
DLCs so that it could offer ADSL services. SBC reported that the ruling would
allow it to increase the percentage of customers it could reach with ADSL
services from 45% to 80% by the end of year 2002.
Recently, we have also seen DLC and switch equipment companies become
more interested and focused on this upgrade opportunity. As the ADSL industry
continues to grow, we believe that service providers will become increasingly
more interested in deploying ADSL services in ways that allow them to do so
cost effectively and that let them reach more customers.
Aware recognized the potential of the DLC and switch upgrade opportunity
several years ago. We partnered with two leading semiconductor companies to
combine their expertise in voice technology with our ADSL technology expertise.
In addition to Legerity (formerly the Communications Division of AMD), we are
also working on development projects with Infineon (formerly Siemens
Semiconductor) to offer chipsets aimed at the DLC and switch upgrade market.
We believe that the combination of our joint voice and data technologies, as well
as our customers’ relationships with their customers, puts Aware an excellent
position to capitalize on this growing and large market.
This commentary contains certain statements of a forward-looking nature relating to future events or the future financial
performance of Aware. Important factors that could cause actual results to differ materially from those indicated by such
forward-looking statements include the risks that Aware has a new and unproven business model, that Aware depends
on a limited number of licensees, that Aware depends on equipment companies to incorporate its technology, and that
DSL technology competes with other technologies for broadband access. These and other risks are described in various
filings that Aware has made with the Securities and Exchange Commission, which risks are incorporated herein by
reference. |
