Analyzing Adtran's Latest Move Into Cable
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Adtran is expanding its footprint in the cable industry through a new EPON deal with Sumitomo Electric. The transaction has Adtran acquiring Sumitomo's North American EPON business including: its access network products; expertise in DOCSIS provisioning over EPON (DPoE) technology; and Sumito employees across sales and support, product management and engineering.
The deal also gives Adtran Inc. (Nasdaq: ADTN) significant new business with the two largest cable operators on the continent, i.e. Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Charter Communications Inc. Previously, most of Adtran's work with cable companies was in the business CPE space, but by acquiring the Sumitomo Electric Industries Ltd. assets, Adtran is further embedding itself in the cable ecosystem as an access network solution provider.
Despite the characterization of Sumitomo's EPON operations as "North American," the Japanese company is actually handing over business to Adtran in South America, EMEA, Australia and New Zealand as well. On the other side of the world, the vendor agreement also has Adtran lending its SD-Access portfolio to Sumitomo for Japan and other Asian markets. (See Adtran Picks Up Sumitomo EPON Business.)
This isn't the first time Adtran has made a major investment in the cable industry. Eighteen months ago the company acquired CommScope Inc. 's EPON and 10G-EPON products as a way of targeting the suddenly-hot cable access sector. (See Adtran Seeks Cable Stardom With EPON Deal.)
Jay Wilson, SVP of technology and strategy for Adtran, says cable operators are now deploying EPON primarily in three ways -- at greenfield sites, in multi-dwelling units and for commercial services. He views the business at least partially as a bridging mechanism for getting Adtran engaged with cable companies in their transition to next-generation, software-defined networks. The vendor can support EPON rollouts today, but also work with cable operators on newer distributed access architectures and the software components that will be necessary to manage EPON and hybrid networks of the future.
Ultimately, says Wilson, operators "want to really have a single DAA architecture ... regardless of whether they're doing DOCSIS 3.1 or EPON." And Adtran can help them get there.
"We can offer and are offering everything that they need to manage the EPON network," comments Wilson, explaining that some operators may take Adtran's entire software management platform, while others may choose bits and pieces.
"Some of those decisions are still out in front of us," he adds.
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Meanwhile, Adtran isn't the only company trying to generate new revenue in the cable industry. Vendor rival Calix Inc. (NYSE: CALX) also introduced new EPON products last year, joining vendors such as Nokia Corp. (NYSE: NOK) and Huawei Technologies Co. Ltd. in trying to gain a foothold in the North American cable access market. (See Calix Crafts 10G EPON Backing for Cable.)
Results for these vendors in the cable space have been mixed, but Julie Kunstler, principal analyst at Ovum Ltd. , is optimistic at least about Adtran's prospects.
"The global alliance between Adtran and Sumitomo Electric will greatly benefit MSOs and service providers around the world," Kunstler said. "It is a win-win. Adtran is obtaining the most widely deployed 10G EPON equipment solution in North America and aligning itself with a leading global 10G EPON supplier, while Sumitomo Electric has the opportunity to leverage the Adtran SD-Access portfolio in its home market."
That's high praise from Kunstler and a good indication of why Adtran is riding high on its new EPON deal. |
