Tellabs partners with Occam for IP FTTN

Access equipment vendor Occam Networks has entered into a partnership with Tellabs wherein Tellabs can manufacture and sell Occam's broadband loop carrier products to a specific set of customers, including independent operating companies and three RBOCs.

Tellabs is also investing $2 million cash in Occam, purchasing 200,000 shares of the publicly held company amid a larger offering of 545,979 shares of preferred stock to existing investors, including affiliates of Alta Partners, U.S. Venture Partners, Norwest Venture Partners and New Enterprise Associates.

Tellabs (through its subsidiary, Tellabs Petaluma, formerly known as Advanced Fibre Communications or AFC before it was acquired by Tellabs) can manufacture, sell and distribute Occam's BLC products exclusively to BellSouth, SBC, Verizon, five independent operating companies in the U.S., some regional service providers in Canada and some Verizon subsidiaries in Latin America.

However, Tellabs has no intention of taking Occam's products to the RBOCs just yet, said Stuart Benington, Tellabs' director of global portfolio marketing. "It's not a focus for us at this point. It's an option down the road that was part of the agreement but not an emphasis."

Under the terms of the agreement, Occam will be prohibited from selling certain BLC products to the above-mentioned customers for two to three years (with specifics depending on each individual customer), for which Tellabs will pay royalties.

To maintain its exclusive rights to each customer, Tellabs must conduct a successful lab trial with each customer within 18 months to two years (depending on the customer) and obtain a "definitive written agreement" to sell a BLC product to the customer within two to three years (also depending on the customer and when the lab trial is completed), according to Occam. Tellabs can also pay Occam extension fees to give itself more time to meet those requirements.

Tellabs will also pay licensing fees to integrate Occam's gigabit Ethernet switching and transport technology into its fiber-to-the-curb cards.

According to Tellabs, although the access gear inherited from AFC has some IP capabilities, it can't do IP-based fiber-to-the-node (FTTN) today. The Occam alliance targets "the specific application of FTTN where [the customer] want[s] an IP-only type platform," Benington said. "We didn't see a lot of market demand for [this], but we did have some customers that were looking for it, and this partnership seemed to be the best way to go about doing that."

"If it was a major opportunity across major customers and segments, we probably would have just undertaken [developing] it ourselves," Benington added. "It's more [that] we need something in short order and there's a couple customers that this looks like it would fit the bill pretty specifically for, so we engaged in this agreement because it looked like the most attractive alternative."