Changing with the industry: Westell to focus on ISPs

It was challenging for Westell Communications to become one of the first-to-market with asymmetrical DSL equipment long before deployment was in sight. However, the company has pulled out of its tailspin and is rallying back. Now, Westell is altering its plan of attack to focus heavily on the sale of customer premises equipment to ISPs rather than go head-to-head with much larger telecom equipment vendors.

In Westell's original strategy, the company competed with Nortel Networks, Lucent Technologies, Alcatel, Cisco Systems and others. Instead of battling the stalwarts for space on the central office (CO) floor, Westell now seeks to work alongside and partner with its long-time rivals.

It plans to concentrate on CPE sales, an area to which the larger players typically don't devote much energy.

In a recent agreement with Fujitsu Telecommunications Europe Ltd., Westell brought its new business model to life. Under that agreement, Fujitsu and Westell will work together on ADSL and high bit-rate DSL developments, which FTEL will fund. FTEL then will sell the product, in this case to BT, and pay royalties to Westell.

"The royalties are a real sweet spot in the market," said J. Nelson, president and chief operating officer of Westell.

"A company like Alcatel, for example, makes a lot more money working in conjunction with Westell by focusing [its] efforts on the higher margin dollars that are in the central office equipment," said Reginal King, an analyst with Hambrecht and Quist.

To further develop distribution and sales, Westell is looking for multiple channels through which to provide product, Nelson said. As DSL deployments increase, Nelson sees more avenues for CPE distribution. Rather than simply flowing through retail outlets, CPE will be offered by carriers through e-commerce and by ISPs, he said.

Westell announced last week another agreement that fits with the company's plan for alternative product distribution channels. Under that deal, Westell will work with Potomac Networks, a Washington-based ISP to offer ADSL service to customers.

Potomac customers will receive Westell's WireSpeed ADSL modems for free. In turn, as more relationships such as the Potomac and FTEL agreement develop, the Westell name gradually will sink into consumers' minds, King said.

"The [agreements] with RBOCs and service providers will give [Westell] the reach to end users to build awareness of their products," said King. "They will be familiar with the Westell name."

Although Westell will devote more attention to the service provider market, Nelson also was quick to point out the company's agreements with RBOCs such as Bell Atlantic and global player BT remain in place.