[eci/dt]
Hi Pat,
don't know if you've been following (or heard anything about) eci's run at the dt adsl contract, but it's beginning to feel like they might get a piece... at first i didn't take eci all that seriously as a contender as they don't seem to have much of a track record (that i have found) in trials.. but they are very good technologically and expect are pushing very hard for all the reasons outlined below and expect we will hear more from them in the year (s) ahead.. altho i am (still) cautiously optimistic about orctf's adsl dt chances, you never know, this one seems like something of a plum (strategically) and the big boys just might be able to shut orctf out... my current guess: "split" (not sure of ratio/ prefer orctf+ with ecilf-.. ;) between orctf/lu and ecilf and maybe siemens or alcatel...in any case we should be hearing pretty soon now...
heard third or fourth hand that eci might be using amtx's "old" lsi chip... have you heard anything along these lines? (if true, that must be somewhat convoluted story line)
best wishes
s
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Tuesday , Aug 18, 1998 Sun-Thu at 18:00 (GMT+3)
Communications Features
ADSL: Orckit, ECI Bid to Change the World
By Michael Eilan
The next big game in the ongoing tournament to change the communication world's plumbing system is taking place now in Germany. The outcome could be decided by the time you read this, and will have major consequences for two Israeli companies, ECI Telecom and Orckit.
This round of the tournament is a tender for 70,000 ASDL modems that promise lightening speed broadband communications over existing copper wire infrastructure. The going price for these modems is anywhere between $300 and $400, which means that the winner will get all, or most likely, part of a deal worth anywhere between $20 to $30 million. But the cash is not really important, especially since it's quite likely that the winner will actually lose money on the deal.
The real game is to get the upper hand a while -- until the next major tender -- in the race to supply the world's telephone companies with the most potent tool they have right now to fend off the powerful attack of cable television companies to supply broadband communications to the world. The tender is being held by Deutsche Telekom, which has been shopping heavily in Israel for the technologies its needs for the brave new world of telecommunications. It is part owner of VocalTec, did some very interesting trials with Orckit and has a long history of buying equipment from ECI to enhance the capabilities of its copper wire infrastructure.
But history will be less important than the future in this round of the tournament. All the usual suspects of the XDSL world are taking part in the race because Deutsche Telekom is in a hurry, the German market is huge and it's also a key element in penetrating other European markets.
Why is it so important? The traffic over the world fiber optic, satellite, radio and copper infrastructure is changing from voice to data, which includes anything from software updates to - some time in the not too distant future -- a home video of your aunt belching at your son's bar mitzvah. XDSL is the name of generic Digital Subscriber Lines, and the flavor of the day is ADSL or Asynchronous Digital Subscriber Lines. This is a fiendishly complicated technology that can allow up to eight megabits per second on download speeds. That's over 100 times the speed of the current 56K modems, which never really crank up to their advertised speed. A popular version being pushed heavily in the US is ADSL Lite, which will ramp speeds up to 2 megabits per second. That works out at over 25 times the speed of a modem connection.
The rush is on because in the key U.S. market at least, the competing technology, cable modems, has a strong lead. Analysts quoted by MSNBC said recently they expect 500,000 cable modems to be installed by the end of this year compared to just 25,000 ADSL modems. Cable modems at their very best download at speeds even higher than the top ADSL modems, but they slow down once many people in the same neighborhood use the connection. The main advantage of cable modems, however, is their cost and above all their availability.
ADSL vendors, including Orckit and ECI, see this problem as the advantage. Says Danny Arazi, VP at Orckit: "The fact that the cable companies are competing with the telcos is great news for ADSL vendors, because it helps stimulate the market. It is true that, traditionally, telcos have moved very slowly, and with huge bureaucracy; however once they decide on a certain direction, they have all the necessary elements to enter a market quickly and successfully. For example, the telecom operators' internal infrastructure - billing, network management, customer care, etc. - is much more highly developed than cable companies'. In our view, within a very short time, the telcos will close the gap with the cable companies since they have access to an excellent enabling technology (ADSL), and a very thirsty market."
Most leading XDSL vendors are now offering equipment that handles the faster data transaction both at the customers home or business and within the telephone companies' various junctions and bases. ADSL Lite is being promoted heavily in the US by the vendors of computer equipment who believe they will eventually ship computers with built-in modems. Chen Amit, the ECI vice president in charge of XDSL, believe that the client or home side is more likely to remain in the telecos' hands in Europe.
The two Israeli contenders in this race each come with a separate set of advantages which they will try to promote against offerings from industry leaders like the American Pairgain, one of the technology's pioneers and most successful companies, or Alcatel, the French giant which has a strong and so far very successful XDSL strategy.
Orckit's main advantage is in the depths of its technology and its experience in testing and installing the equipment in several parts of the world. Orckit actually designs the chips used for ADSL and has a strategic agreement with Fujitsu Microelectronics to manufacture them. Technology-wise, this means that Orckit can tailor products to be ready for future changes that are fairly likely, since the final standards for ADSL have not been finalized yet. Another technology advantage is the deep intimate knowledge of what works and what doesn't. In business terms, the vertical integration will be a great benefit once the market really takes off since Orckit, unlike may other vendors who buy their chipsets, will stand to profit more from the margins of economy of scale.
Orckit's second main advantage is its experience: ADSL is a new technology and its real life performance varies tremendously over different kinds of copper telephone infrastructure, much of which was installed many years ago. Since so many networks are different, the most experienced company has an advantage because of the pool of knowledge it acquires about ways to overcome specific problems.
So far, Orckit's big claim to fame is in winning a contract to supply ADSL equipment to GTE in partnership with Fujitsu USA. Sources close to the company say the contract is larger than many analysts believed. The prices, however, are probably not high enough to break out the champagne at Orckit, since this technology has suffered from a price war since its inception, with vendors cutting their prices just to get a slice of the market.
ECI, on the other hand, comes to the fray as a much larger company with sales of over $800 million and vast experience in selling equipment to telephone companies all over the world. It is a bit of the odd man out in the XDSL tournament, because it is much larger than leading technology start-ups such as Pairgain or Orckit and much smaller than giants like Alcatel, Siemens or Lucent. XDSL is critical to ECI because the company's core competency is in enhancing the capabilities of existing copper infrastructure, and the DSL technologies look as if they might become the hottest market in this field.
Amit of ECI says the company's main advantage is its profound expertise in both systems and technologies. He would not reveal how much DSL accounted for the companies sales, but the various contracts signed by the company add up to something close to $100 million -- even though many of these sales were in HDSL, the predecessor to ADSL.
ECI has four advantages, according to Amit. First, it is offering equipment at higher density. This means that the system's ECI offers will have 120 modems per package compared to a maximum of 48 for most vendors. This, he said, is a space saving feature that the telecos will applaud. The second advantage is that ECI equipment offers built-in Quality of Service, a feature that classifies and prioritizes traffic, and will eventually allow the telecos to make money by offering high bandwidth priority to people who pay more. The third advantage is in service management, a feature that will allow users to chose who they buy their bandwidth from, the local telephone company or some other vendor turning up in the newly deregulated world. The last advantage ECI is offering is that it allows billing according to the Quality of Service each customers gets.
The tournament now held being in Germany is important for both companies for different reasons. Orckit has much more to lose since XDSL is its only game and it desperately needs those large contracts so it can start enjoying the economies of scale that will allow it to make some money. ECI, on the other hand, is vastly profitable, but cannot afford not to be in a central position in a market developing within its core competency.
If either or both of them do not win they will, of course, say that it wasn't that important anyway and start gearing up for the next round in the game.
Published by Israel's Business Arena August 16, 1998
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