Nortel Pulls Plug on DSL
By Evan Blackwell
from the May 21, 2001 issue of Broadband Week
If broadband equipment behemoth Nortel Networks can't make it in DSL, what does that say for the rest of the industry? That's a question many were asking after the telecom gear maker confirmed earlier this month that it was pulling the plug on its slumping digital subscriber line business.
Nortel, still the biggest maker of telecom equipment for the U.S. market, is shuttering the business as part of a corporate overhaul announced earlier, which includes layoffs of about 20,000 people.
The margins for DSL simply never showed up for the company, even after its $778 million stock-swap acquisition of DSL technology maker Promatory Communications last year. The problem was that most of Promatory's products, including its well-regarded DSL access multiplexer, never seemed to make much traction outside of the CLEC market. That became a recipe for failure as the CLEC/DLEC space has eroded and competitive service providers have either scaled back significantly or gone belly up.
"There's just a great deal of uncertainty out there in the market right now," Nortel spokesman David Chamberlain says. "There have been difficulties for the entire industry, not just Nortel. These are very difficult decisions that have been made, but one that we're confident is the right thing to do."
Even though its market share placed Nortel well behind the likes of Alcatel and Cisco Systems in DSL, its decision to exit the business garnered plenty of attention. It also may have changed the landscape enough to help such smaller DSL equipment companies as Copper Mountain Networks, Net to Net Technologies, Access Lan and Polycom, makers of such gear as DSLAMs and integrated access devices.
"Copper-based DSL is still a viable product, because there's still tremendous demand for it," says Bryan Long, Copper Mountain's vice president of marketing. "Nortel getting out of the field is good for us, because that's one less player for us to compete with. It's an opportunity for us."
Copper Mountain, which essentially had molded its DSL business around serving DLECs, has shifted its focus to the ILECs with two of its newer products. Copper Mountain recently announced development of the VantEdge 3000, a broadband services concentrator that will sit in the central office and add IP intelligence to ATM DSLAMs, and the VicinityVoice 100, a small-scale media gateway for VoIP softswitching that also sits in the CO. In the case of VantEdge, Copper Mountain has designed the product as a solution for service providers with extensive ATM switching infrastructure that want to begin a smooth migration to Internet Protocol.
Due to the longer sales cycle that normally accompanies business with RBOCs, Copper Mountain says VantEdge and VicinityVoice should be in trials with customers by the fourth quarter, then commercially available early in 2002.
"We still have a CLEC base. Some of them will continue to be good customers of ours, they just won't have the same footprint anymore," says Long. "Turning to the ILECs was something we had to do."
Whether or not the VantEdge product, or any other ILEC solution Copper Mountain deploys in the future, gains any ground in the market remains to be seen. Matt Davis, an analyst who covers DSL for The Yankee Group, says equipment companies forced to abandon their CLEC strategy in midstream will continue facing a tough future.
"Guys like Copper Mountain and Turnstone have been forced to re-adjust," Davis says. "(VantEdge) may be a good box, but we don't know if service providers are going to use it. It's still going to be tough for them."
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