Why newcomer Enablence targets hostile access market

Having added FTTP to its portfolio, Enablence’s next step was to add DSL to the story by acquiring Pannaway. Pannaway gives Enablence a base of about 300 customers, mostly in North America, including mid-tier carriers like Fairpoint Communications and smaller independent operating companies (IOCs). That North American base complements Enablence’s existing base of 120, which is mostly overseas, giving the company a more even mix of domestic and overseas client base. But perhaps more importantly, it allows Enablence to migrate Pannaway’s customers from the latter’s ADSL2+ equipment to Wave7’s fiber access gear.

By integrating Pannaway’s and Wave7’s technology (as Enablence and Pannaway began doing months before the acquisition was announced) and using a common management system, Enablence aims to offer those ADSL2+ customers a smooth, gradual transition to FTTP on a card-by-card basis, using the same network management system, so that carriers don’t have to deploy entirely new platforms to migrate to FTTP.

“It’s a good fit and allows Enablence to potentially convert existing Pannaway customers to FTTP, be it GPON or active Ethernet, in addition to building on the few IOCs that had purchased Pannaway’s MAGNM platform,” said Jeff Heynen, directing analyst at Infonetics Research. “With the acquisition, Enablence can supply GPON and EPON OLTs and ONTs, Ethernet switching and [customer premises equipment] and ADSL/ADSL2+/VDSL infrastructure and CPE. That basically covers it for broadband access.”

To Chhatbar, whose background is more in banking than technology, the current economic environment works in his favor, since the Pannaway/Wave7 combination allows for a low-capex gradual migration to FTTP. And growing via acquisition – which reduces the number of players in the access space rather than further crowding it – also helps Enablence’s chances.

“[The Pannaway acquisition] is a necessary move, as there are too many vendors chasing a limited amount of IOC fiber access business,” Heynen said. “You’ve got Calix, Occam, Alloptic, Tellabs, Motorola, Alcatel-Lucent (to a certain extent) all going after an access business that is clearly going to decrease in 2009, thanks to the current economic conditions. Also, these vendors have to prepare for more service provider consolidation, a la Embarq-CenturyTel. With a shrinking customer base, there’s even less room for all these vendors.”