The cutting edge

If you disregard the fact that it's become a hideous cliche, “cutting edge” is really an apt description for a place where new ideas can take seed and maybe even root.

For the last few years, telecom's cutting edge had money. For some reason, those with the bread were willing to share it with others hoping to develop a new strata of services that would make consumers flee the old-line telephone companies.

Voice over IP (VoIP), the many iterations of video over DSL, and broadband fixed wireless all evolved from theories on some engineer's computer to funded business plans. A cottage industry sprang up intent on helping these businesses spend that money.

Then the moneylenders noticed that their dimes weren't turning to dollars so they shut off the spigot.

The avant-garde companies and their CEOs faded, leaving a cadre of vendors at this year's Supercomm looking at empty floor spaces and hoping that things would turn around. Or hoping they could find a new niche to pay for their ideas.

“Obviously there are a lot of the competitive carriers who are no longer in business. That makes the market soft,” said Scott Wharton, marketing vice president of VoIP provider Broadsoft.

Soft? It's more like the aftermath of a bloody battle with the vendors picking among the bones and looking for anything useful that's been left on the battlefield.

“There's been a lot of carnage,” agreed Nate Kalowski, marketing vice president for Kenetec. “There will be some survivors.”

It's the job of these vendors to find, attract and attach themselves to those survivors before they, too, become part of the vast vacant expanse at Supercomm 2002. That's not going to be as easy as it might sound — and it probably doesn't sound easy.

“Even for the people who had ambitious plans — not just the [competitive local exchange carriers (CLECs)] — we're seeing a somewhat more focused approach to capital spending,” said Amit Chawla, marketing vice president for ipVerse.

What to do with VoIP

Possibly nothing in the telecommunications space has changed as much as VoIP. The promise of using fast computers for menial tasks seemed awesome. Now it seems awesomely difficult to imagine who will use all the neat technology developed around that notion. The new target audience already has the infrastructure and doesn't need to step onto the cutting edge.

“A lot of carriers, when they're looking at funding projects, are being a lot more discriminating,” said Broadsoft's Wharton. “We can go in with a story of talking about how we reduce [capital expenditure] costs and [operating expenses] and help them generate new revenue.”

It's a place to hang a hat. Steve Collins, Sonus Networks' marketing vice president, is eyeing the upgrade business. “There's a limited set of things they can do with the existing investment,” he insisted, noting Web-based IP applications take advantage of fast-to-market computer capabilities and open platforms. “You can leverage open platforms, and — most importantly — you can just leverage this whole army of trained programmers who know how to use these tools and technologies,” he said.

But that wasn't a focus at this show where tire kickers — and dreamers — outweighed those with pens, contracts and money.

“Right now we're in the phase of evaluating the technology,” said Jeff Cortley, director of E-Services Group marketing and business strategies for Lucent Technologies. “I think people are very intrigued by it.”

Intrigued, but tight-fisted. That is why the show's surviving vendors had to be careful about who approached them with ideas about buying their gear.

“We're a little bit wary about who we send a switch out to,” said Carl Baptiste, managing director of product management for Convergent Networks. “There are carriers that we may not want to do business with.”

On the other hand, Baptiste exhibited the vendors' typically sunny outlook because “there are enough out there that we get the right answer when we ask if they can pay.”

Dan Mangelsdorf, Nortel Networks' vice president of Internet telephony marketing, insists there are pluses in a minus-plagued network — although not necessarily in the U.S.

“We're seeing that native IP is actually being demanded and employed more readily outside North America. In North America what we're seeing is the initial deployment of ATM because ATM has the necessary quality-of-service features, and a lot of the large carriers have significant ATM infrastructures,” Mangelsdorf said.

Of course, there are a few surviving competitive service providers for the cutting-edge vendors to fight over.

“There's still a market for [CLECs] and we will help them in providing them with solutions that will get them to the market faster in reducing their operational costs,” said Johanne Mayer, director of NSM product marketing for Alcatel's Carrier InterNetworking Division. “There has to be competition for things to move forward.”

Video finds a voice

Competition is where the DSL vendors' hopes rest — but with a twist. They see their technologies being used to cut at the heart of the cable industry via video, as well as voice and high-speed data services.

Arguably the grandfather of video-over-DSL is Next Level Communications, which, even through rocky times, has managed to support itself. The company is delivering video products to Qwest Communications and is in the good graces of Motorola, its apparent parent, which continues to supply money. Nevertheless, an air of caution drifted through Next Level's Supercomm booth.

‘A few years ago we were all infatuated with the data CLECs. We've seen an implosion of that market.’
— Don Skipwith, Symmetricom

“People are being careful,” said Jeff Barnell, senior vice president of marketing and product line management for Next Level. “They're not launching into new services as rapidly as they might have in the past and taking the risk.

Next Level, he said, builds its business on risk-takers. While Qwest is the biggest among these, independent operating companies (IOCs) that “have the ability to roll out service much faster, don't have all the back office issues… and are able to make a few more mistakes within their customer base” are starting to take a bigger share, Barnell said.

IOCs make an attractive target for VideoTele.com as well, although President and CEO Doug Shafer sees his customer base eventually migrating to the large service providers. “It just takes them a while,” he said.

Shafer wasn't ready to dismiss the CLECs out-of-hand, although he admitted that market “is not what it was a year ago. There's still some funding for the CLEC market,” he said. “The CLECs are interested in video.”

More so than data where things looked pretty bleak to Don Skipwith, Symmetricom's vice president of business development.

“A few years ago we were all infatuated with the data CLECs,” he said. “We've seen an implosion of that market.”

To avoid being sucked into that implosion, Symmetricom was emphasizing a different DSL direction — g.shdsl — that ups the data speed ante by providing 2.3 Mb/s of symmetrical data.

“That's where we're going to have to play,” Skipwith said. “We see the whole business access market changing from the data CLECs' SDSL to the more traditional companies, Sprint, AT&T, WorldCom, Qwest and g.shdsl.”

ViaGate Technologies is also seeking a new product niche for its advanced multimedia and video applications. Still, pitching to the incumbents is not as much fun as it was a year ago when the competitive providers had money, said Dan Orefice, vice president of sales and marketing for ViaGate.

“The ILECs are slower to move because of the traditional way they do business,” he said. Orefice conceded that there is a future for his company's 26 Mb/s video service that could offer high definition TV if that was available, but it will more likely to concentrate on delivering high-quality pictures to multi-dwelling units.

“There certainly is a market there or we wouldn't be here,” Orefice said.

What, us worry?

Interestingly, while the DSL players try to squeeze video into copper, the industry that started as a video player — fixed broadband wireless — now wants little to do with that.

Supercomm segregated the wireless players into a section of show floor that some jokingly called a ghetto — up against the restrooms with freight trains barreling past outside. Even so, the wireless guys were upbeat.

“WCA is still the central show to the broadband wireless industry,” said Michael Greenbaum, president and CEO of Hybrid Networks. “Hybrid's displaying at Supercomm because of the size and vibrancy that the wireless sector has had at this show.”

It was also a last-ditch effort to show that wireless has not gone down the drain, despite economic woes that have body-slammed Hybrid and competitor Adaptive Broadband. In fact, there was more talk about finances than signals among the fixed-wireless crowd at Supercomm.

“We have cash in the bank and we have refocused the company,” said Franchesca Walker, Adaptive's marketing vice president. “We are getting the word out.”

Even so, they may be preaching to a receptive but paralyzed choir, she conceded. “Here in the States things are slow, but there's an uptake in the international arena.”

Robert Gemmell, chairman and CEO of Cirronet, said Supercomm's international audience helped his company's decision to exhibit. “We're targeting small business and residential and, internationally, some larger business,” Gemmell said, adding Cirronet's 921 kb/s download speeds “would be a nice middle-sized business-type of offering.”

The international market is the potential stopgap savior, but the U.S. market has not withered, said Cristian Parrino, vice president of marketing for Spike Broadband Systems. That market right now is dominated by Sprint's very public fixed-wireless launch, but “it's also BellSouth. We're doing a lot of talking to BellSouth,” which is using wireless as a way to augment DSL service with high-speed wireless data, Parrino said.

The whole DSL thing is rippling into the broadband wireless space. “We're helped and hurt,” said Reza Ahy, president and CEO of Aperto Networks. “We're hurt in the first peel of the onion because the whole industry thinks broadband access stinks.”

The second peel shows DSL's proven speeds are worthwhile but, “just like any technology” it has its limitations, he said. “The user demand has actually increased even in these bad market conditions.”

All about the end user

User demand could be what keeps the cutting-edge vendors from falling over the cliff. While the money may have dried up and the incumbents are slow to move, the public has had a taste of things that are usually kept under wraps in laboratories. It's unlikely they'll want to go back to the way things were.

“The 8 million businesses are there, and they are going to be served by various service providers who are really seeing an opportunity to deliver voice and data and utilizing new technologies like voice over IP and even voice over ATM,” Kenetec's Kalowski said.

“The market is huge,” said Robert Manne, president, CEO and director of IP video specialist Myrio. “We're seeing a lot of people demanding IP now as the solution. It's pretty exciting for us, and we're getting a lot of attention at Supercomm.”

Attention was about all these people could expect this year.