Lucent Proxy Readies New Five-Nines FTTP Scheme
2004-06-09 17:18 (New York)
What's sure to be denigrated by at least some competitors as the
"odd couple" of the fiber-to-the-premises (FTTP) market has begun to
emerge from hiding - and it's the unlikely combination of Lucent [LU]
technology and a tiny, virtually unknown outfit that lost a fortune
trying to bring a CD copy-protection scheme to market. What's about to
emerge is a product line based on technology developed by the fabled
Bell Labs that promises 100 Mb/s switched Ethernet FTTP with five-nines
reliability. The stuff looks to be first headed straight to Japan, for
use in that country's massive FTTP build-out, although details of that
deployment won't be disclosed publicly for some weeks yet.
The tiny company in the odd couple is Amedia Networks [AANI].
The name is brand-spanking-new and, thus, unknown to the industry.
Amedia legally changed its name May 25, and its ticker symbol changed
three days later. Before that, it had been TTR Technologies, which had
been working on music copy protection since 1994. According to SEC
filings, the company burned through something like $35 million before
giving up on the technology and selling it off to Macrovision [MVSN]
for $5.5 million in cash a year ago. Macrovision also gave TTR/Amedia
almost two million shares in the company it had bought for $4 million
in January 2000. Reports are that the technology worked just fine, but
it required CD manufacturers to modify their hardware, a fact that made
it a tough sell. Little is known today as to what Macrovision's going
to do with the technology.
That left TTR/Amedia as a publicly traded shell with a fat bank
account and no products.
Rather than simply divvying up the cash among shareholders and
calling it quits, TTR/Amedia went out looking for a new reason to be in
business. Late last year, it hashed out a deal with Lucent - the deal
was signed in early January - under which the company bought a license
to develop and market a line of FTTP gear that had been in development
at Bell Labs for years. It also gets non-exclusive rights to 20 Lucent
patents covering the FTTP technology used in that hardware. Just how
and why Lucent decided to turn over a product line it had spent an
estimated tens of millions of dollars developing to TTR/Amedia remains
a mystery.
Terms Of The Deal
The deal Lucent cut with what was then TTR/Amedia, however, is
no mystery. Because TTR/Amedia is publicly traded, the details had to
be disclosed in SEC filings. Basically, TTR/Amedia is paying Lucent $3
million, in dribs and drabs, for rights to the FTTP line. Lucent, which
keeps rights to its technology in other markets but which has agreed
not to compete with TTR/Amedia, also gets patent royalties. Even more
lucrative for Amedia, the deal includes the right for the tiny company
to use the Lucent trademark. Lucent also has an option to OEM or resell
Amedia products, although it has not yet said if it will pick up on
that opportunity.
With the Lucent deal in hand, TTR/Amedia's top management, which
essentially was all that was left of the entire company, has departed,
and a new crew with hefty fiber-optics credentials is at the helm of
Amedia. Leading that group is Frank Galuppo, the former president of
Lucent's optical networking group, who thought that he had retired 15
months ago. Galuppo was lured out of retirement in March to take the
helm at Amedia after the legendary "friend of a friend" made the right
business connections.
Galuppo, who tells Fiber Optics Forecast that while he was aware
of the FTTP work going on at Bell Labs, he had no direct involvement in
it, is gearing up for Amedia's first big splash as a FTTP vendor at
this month's Supercomm in Chicago.
What he's can talk about, but he can't ship yet, is a trio of
products - those developed by Bell Labs - that when combined form a
high-capacity FTTP system. The product line has been named QoStream, a
name chosen "because we want to emphasize the quality of service,"
Galuppo says.
Massive Switch
The heart of the system is a massive gigabit Ethernet switch,
which Bell Labs was developing under the code name Jaguar but which
will go to market as the model CS1200. A fully configured version will
be able to handle 120 Gb/s of data, and it can serve 50,000 homes. The
switch won't actually be ready to go to market trials until sometime in
the fall, Galuppo says. Amedia's deal with Lucent sets Sept. 30 as the
target date for Lucent to have all development work on the CS1200 and
other pieces of the QoStream line finished.
The plan is, sometime in the late summer, to first finish up
work on an aggregator switch, which has been code-named Polecat but
slated for market as the AS5000. That widget will support 48 homes, and
it can be placed as far as 50 kilometers away from the CS1200. Also due
out in the late summer is a residential gateway that can be placed as
far as 10 kilometers away from the AS5000 and that will deliver 100
Mb/s service to the home. The device will have both wired and wireless
ports to reduce or eliminate the need for costly wiring in the home.
Amedia has no plans to build a plant and to make the devices
itself. Working prototypes were put together by the folks at Lucent.
Amedia is out scouring the market for contract manufacturers right now.
Initially, it is looking for contract manufacturers in the United
States, with plans to move manufacturing overseas to lower cost plants
sometime next year.
The Japanese Market
Some of those Bell Labs prototypes even seem to have made their
way to Japan for evaluation by suppliers providing equipment for
Japan's FTTH buildout. Galuppo says the formal announcement of a
contract win is imminent. Like Centillium [CTLM], which is a chip house
not a system house so the two companies don't compete head-on, he won't
yet identify Amedia's Japanese partner or the scope of the deal.
Galuppo is, of course, also hoping to sell the widgetry in the
United States and in other world markets as quickly as possible,
although he admits that 100 Mb/s FTTP in the United States is almost as
rare as hen's teeth. Most U.S. FTTP service - what little there is of
it - is in the 20 Mb/s range at best. In fact, there are only a few
known places in America where 100 Mb/s service is delivered - so few
that in just a couple of seconds Galuppo reeled off the locations from
memory.
What Amedia's counting on as its main sales pitch is an
architecture it calls "Ethernet Switched Optical Networks," or ESON - a
term it coined. The term is meant to contrast with industry-standard
passive optical networks (PON) as well as with other FTTP technology
choices like hybrid fiber-coax (HFC) and digital subscriber loop (DSL).
The way Galuppo explains it, ESON is a point-to-point system, so
the end user only gets the precise broadband content that he wants. In
contrast, he denigrates FTTP PON systems as broadcasting "everything to
everyone," and the end user filters out just the content he wants. The
ESON technology, he says, makes it possible "to manage each and every
flow, per user, per application, for thousands of flows for each card"
in the CS1200. That means that, for instance, a VoIP bitstream can be
given priority, which is a key consideration if VoIP telephony is to
have the same type of five-nines QoS as standard switched telephony.
Another touch is that the QoStream hardware is hardened for
outside plant use, chimes in Bill Zakowski, vice president of business
development. That eliminates the need for things like controlled
environmental cooling. Put another way, Polecat can sit on a telephone
pole. Amedia argues that, in competing systems, the aggregator needs
environmental control, an issue that causes carriers capex costs to
escalate.
The Competition
Basically, Galuppo says, he's out to eat the lunch of such PON
competitors as World Wide Packets and Allied Telesyn. (Editor's note:
World Wide Packets has told Fiber Optics Forecast it's going to have
more than a little to say about Amedia in return in another week or so.
Food fight!)
One advantage Amedia has over those competitors, he says, is
that Amedia jumped into the game with a product that's just about ready
for market. "We're not like many startups that built the team that
built the product. We're entering the selling cycle with very low
financial commitments to developing the product."
He estimates, "World Wide Packets is up to $115 million" spent
developing its products. "How much did Lucent spend?" he continues -
not naming a figure (although, as a former top Lucent executive, he
just might know the number). In contrast, Amedia's investment is only
the $3 million it's paying Lucent.
With that payment accounted for, Amedia is left with $1.5
million in the bank for marketing and, while it technically shows a
massive shareholder deficit on the books left over from its CD copy-
protection days, the company doesn't have massive debt. Amedia, in its
SEC filings, also revealed it is working on an offering to raise
another $3 million to fund marketing.
Amedia also doesn't have much of a payroll to worry about. Right
now, the company has only eight direct employees, Galuppo says, with
just about all corporate tasks outsourced. He calls the eight-man
figure "deceptive," however, because it doesn't include the 20-man
development staff at Bell Labs still working on the products. Indeed,
those folks are working down the hall from Galuppo. As part of the
deal, Lucent even is housing Amedia, albeit on a temporary basis, in a
Bell Labs facility in Holmdel, N.J. Eventually, Galuppo says, the
company will find a home of its own, and the jobs will start migrating
into Amedia. Whether any of the Bell Labs folks currently working on
the FTTP hardware will change employers is not clear. The plan is to
grow the company to between 40 and 50 people by this time next year, he
says.
>>Frank Galuppo, Bill Zakowski, Amedia Networks, 732/949.2350<<
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Forecast, June 9, 2004, please call PBI Media, LLC's Client Service
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