More Opportunities for ADI?
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Cisco, SBC sign ADSL accord -- Deal breaks Alcatel monopoly, opens door to chip suppliers
Apr. 21, 2000 (Electronic Buyers News - CMP via COMTEX) -- Silicon Valley- In a major shift, SBC Communications Inc. has struck a deal with Cisco Systems Inc. to acquire asymmetric digital subscriber line equipment and modems, thus breaking Alcatel's ADSL monopoly with the huge telecommunications carrier.
The Cisco/SBC alliance also opens the door for more competition-and possibly a price war in the near future-in the ADSL chip market, according to analysts.
Under the terms of the multimillion-dollar agreement, Cisco for the first time will supply its ADSL-based central-office equipment and modems to SBC, the parent company of Ameritech, Nevada Bell, Pacific Bell, Southwestern Bell, and
other RBOCs. SBC provides phone and other services for 36 million customers nationwide.
Cisco will ship to SBC its 6000 family. Cisco last week said it has added Internet Protocol capabilities to the 6000, enabling data- and voice-over-IP services.
Other winners in the deal include several ADSL chip makers, particularly Analog Devices Inc. and GlobeSpan Inc., whose chipsets are used in Cisco's central-office equipment. For its ADSL modems, Cisco uses chipsets from Alcatel, Analog Devices, and Globespan.
Cisco is evaluating other ADSL chip makers to meet what is expected to be huge demand from SBC, according to Tim Mcshane, senior marketing director of the DSL Business Unit at the San Jose-based communications-equipment company. "This isn't a final list of our chip vendors," Mcshane said. "We're keeping our options open."
And while Cisco does use Alcatel's ADSL chipsets in its modems, industry observers view the Cisco/SBC deal as a major setback for the Paris-based telecom company. Until now, SBC has exclusively used Alcatel's equipment and chipsets for its ADSL deployments.
In the mid-1990s, SBC signed a contract with Alcatel to equip its young ADSL network. But according to sources, the contract is about to expire and SBC has been evaluating several hardware vendors-reportedly including Alcatel, Cisco, and Lucent-with an eye toward upgrading its ADSL network.
A spokesman for SBC in San Antonio said the company will continue to use Alcatel's equipment in some of its ADSL deployments, while Cisco's hardware-at least in the initial stages of the deal-will be used for the region served by
Ameritech.
"We'll continue to use Alcatel's equipment in our DSL build-out," the SBC spokesman said. "Initially, we'll use Cisco's equipment in many of the upper Midwestern states."
Seemingly caught by surprise by the Cisco/SBC announcement, Alcatel Microelectronics, the DSL chip arm of parent Alcatel, declined to comment. "We're still trying to sort out the announcement," said Kevin Kohleriter, marketing manager at Alcatel Microelectronics' U.S. subsidiary in Richardson, Texas.
Executives at GlobeSpan also declined to comment, while Analog Devices could not be reached. Analysts suggested that the Cisco/SBC deal is significant for the entire ADSL industry.
For years, interoperability issues have forced carriers to rely on a single hardware and chip vendor for their ADSL deployments. Alcatel's equipment and chips, for example, are interoperable with each other, but are incompatible with
competitive products.
Unable to mix and match their networks with other solutions, carriers have been forced to pay a premium, according to Cisco's Mcshane.
Recently, however, many equipment and chip makers have moved to make their respective products interoperable-at least for the full-rate-ADSL standard. Vendors are still working on interoperability for the stripped-down version of ADSL, called G.Lite.
Despite the problems with G.Lite, the overall ADSL market is moving from a sole-source equipment/chip model to more of an open standard for a number of vendors to play in, Mcshane said.
"We believe that the industry is making a transition toward interoperability," he said. "The importance of interoperability is that it will enable carriers to have more and lower-cost choices."
What the Cisco/SBC alliance will do for ADSL chip prices is unclear for now. But, ultimately, increased deployments of ADSL services will drive down chip prices, according to Ernie Rapiere, an analyst at VisionQuest 2000 Inc.,Moorpark, Calif.
"There'll be some price erosion [for ADSL chips] this year," he said. "But I don't think you'll see a price war in that market until the volumes get much larger, possibly in 2001 or 2002."
The average selling price for an ADSL chip is expected to drop from between $30 and $40 this year to between $20 and $25 in 2001 and less than $20 in 2002, Rapiere said. |
