X marks the spot

MXU equipment market is ready to blast off The MXU market (a.k.a. multiple dwelling, hospitality, commercial or tenant unit - MDU, MHU, MCU or MTU - market) is providing equipment vendors with a pool of opportunity that everyone can splash around in quite profitably for some time to come. That's a good thing because currently there is a cornucopia of access equipment vendors offering a variety of solutions to service providers, which are increasingly beginning to focus on the MXU market.

According to The Yankee Group, market demand for DSL- and Ethernet-based aggregation platforms and customer premises equipment (CPE) for lower-end, non-fiberized apartment buildings, hotels and office buildings will amount to $450 million this year and double to more than $900 million next year. The market will skyrocket to $1.4 billion by 2004.

Cahners In-Stat Group forecasts that combined MXU-based service and equipment revenues will total approximately $700 million this year and reach nearly $2 billion in 2004.

Because the MXU market is so new, providers are approaching it with various service strategies. Some are delivering only data services to customers, while others are buying equipment that allows them to offer their customers bundled voice, data and video services via a single platform.

Others such as OnSite Access are offering voice and data to their end user customers, but they are reselling voice services and only using their own facilities to provide data services. "It may be more economical to stay with that until we see what happens with voice over IP," says John Reese, executive vice president of engineering and operations for OnSite.

Many vendors have thrown their hats into the MXU ring during the past two years. As a result, MXU providers have many platforms from which to choose. DSL, DSL + voice over DSL, Ethernet, fast Ethernet, gigabit Ethernet and wireless-based solutions are all available.

In the low-end MXU market (buildings served by copper and wired with copper), which solution is best still depends on each service provider's individual strategy. The high-end market is migrating toward gigabit Ethernet-based solutions offered by Cisco Systems, Extreme Networks and Foundry Networks.

But until all buildings are served by fiber and wired with fiber or Category 5 wiring, however, there will be plenty of fish in the MXU sea.

Right now, cheap, easy-to-deploy, flexible solutions that provide high-bandwidth data access are dominating the low-end MDU, MHU and MTU markets, says Jason Marcheck, analyst for The Strategis Group.

"Service providers' game plan is to come in and turn up service as quickly as they can," Marcheck says. "They are looking for products that can operate in any kind of building with any kind of wiring."

Solutions are available that offer enhanced manageability and more advanced, value-added service and provisioning options, as well as those that support data combined with voice over voice over DSL or voice over IP, or centralized instead of decentralized architectures, but they have not begun grabbing the lion's share of the market, he adds.

MXU pioneer Tut Systems currently is king of the equipment suppliers targeting low-end copper-served and copper-wired buildings, according to Marcheck and Matt Davis, senior analyst for The Yankee Group.

Tut entered the market in 1998 with its Expresso MDU line of equipment, which allows Ethernet to run over 12,000-feet distances of any kind of copper wire. The company's initial target markets were apartment buildings and then hotels.

Tut, whose Expresso MDU "was able to serve 100 tenants at a time per truck roll," was "there at the beginning of the MDU market, helping service providers figure out their business models," says Mark Carpenter, vice president of marketing for Tut.

By mid-2000, Tut shipped 17,000 building systems and 200,000 lines to its customers and entered the MTU space with an MTU-specific platform called IntelliPOP. Unlike the Expresso MDU, which provides the same service level and amount of bandwidth to each user in a building, IntelliPOP enables MXU providers to offer different services and service levels to different customers from the same platform, Carpenter explains. The Ethernet over very high bit-rate DSL system provides each tenant up to 15 Mb/s of symmetrical bandwidth over existing copper in the building. IntelliPOP began shipping last month into what Tut sees as a wide open future for MXU equipment providers.

"Only 3% to 4% of the total MTU marketplace has been installed to date, so there's a long way to go," Carpenter says, adding that a lot of residential space remains to be claimed. "Thirty percent of the U.S. population resides in apartments. Add that to the 70% in Asia and 50% in Europe, and there is a huge market opportunity out there."

Whereas other vendors are avoiding the MHU market because of its lower margins, Elastic Networks has concentrated its efforts on the hospitality industry. Despite lower margins, there are benefits to focusing on MHUs.

Every site is about the same, so deployment goes fast, says Phil Griffith, vice president of marketing for Elastic, which makes the Storm System family of products, based on Elastic's proprietary EtherLoop "next generation DSL/Ethernet" technology.

"Ninety-nine percent of the hotels have PBXs and a nice copper demarcation point. That allows us to put a DSLAM in the basement and fan the data out to each room and shoot it back to the Internet on fiber or a T-1 without impacting the PBX," Griffith explains. "Buildings with nice, clean copper demarcs are the most attractive to us."

MDU's are tougher to serve, Griffith adds, noting that they don't all have PBXs or access to copper in the basement.

Many DSL vendors who have been suffering through the doldrums of central office-based DSL access multiplexer (DSLAM) deployment are making a bee-line into the MXU market, where end user distance from the DSLAM is not an issue. According to Davis and Marcheck, AccessLan and Copper Mountain are among the vendors most aggressively and successfully marketing voice-over-DSL-capable, symmetrical DSL (SDSL)-based MXU solutions. Both solutions also stand out because they feature IP intelligence at the DSLAM.

About a year-and-a-half ago, AccessLan brought Celeste DeMilt on board as director for STS marketing to lead the charge into the MXU space. AccessLan's PacketLoop IP-intelligent, in-building DSLAM (iSLAM) products are focused on the MDU, MHU, MTU and visitor-based network markets, which include airports, convention centers and sports facilities.

Late last year, AccessLan joined forces with Wave Wireless Networking to provide ISPs with a creative and cost saving end-to-end solution for serving the MXU market. ISPs purchase the Wave Wireless Speedlan 8000 broadband wireless Internet distribution platform for a one-time list price of $2500 for the base station and $1795 per building top. They can use the wireless connection to feed AccessLan PL-1000 stackable iSLAMs at the building, and each PL-1000 can provide 12 to 24 customers with 1.5 Mb/s SDSL connections.

The Speedlan 8000 system uses unlicensed RF spectrum to provide 11 Mb/s of bandwidth to each building via a line-of-sight connection that can be up to 25 miles away, says Patrick Pacifico, vice president of marketing for Wave Wireless. One base station can serve up to 48 buildings simultaneously. A system that uses licensed spectrum is available at a higher price.

Copper Mountain also has formed an MXU business unit, which is focused on the MDU and MTU markets only. The vendor has taken a "Goldilocks and the Three Bears approach" to the market by offering separate solutions for small, medium-sized and large buildings.

The company's OnPrem 2400 device supports eight, 16 or 24 SDSL ports that can provide each end customer from 64 kb/s to 2.3 Mb/s each, says Richard Sekar, director of product marketing for Copper Mountain. The CopperEdge 150 is designed for medium-sized buildings. It supports from 24 to 48 SDSL, asymmetrical DSL (ADSL) or G.Lite ports and supports voice over DSL using voice over IP or voice over ATM on a per port basis. The CopperEdge 200 supports 24 to 192 ports and provides the same features as the 150 and uses the same DSL link cards.

Copper Mountain's DSLAMs work with the vendor's own CopperRocket integrated access devices or those made by 30 third party vendors, Sekar adds.

Both AccessLan and Copper Mountain have programs in place - the 360 Program and FastStartDSL MTU marketing package, respectively - to help service providers launch themselves into the MXU market. The programs include ad campaigns; training tools; templates for contracts, logos and banners; network design and installation support; and site survey documentation.

While the aforementioned vendors are enjoying success and notoriety in the MXU market, they certainly are not the only ones. Vendors such as Accelerated Networks, Advanced Switching Communications, Interspeed and RC Networks are making waves, and more vendors are jumping into the pool every day. Legacy equipment suppliers, including Cisco, Lucent Technologies and 3Com also are offering MXU solutions and finding success.

Other vendors such as Atreus Systems and Ellacoya Networks deliver next generation subscriber management systems that work in tandem with existing MXU equipment providers' gear and enable providers to generate even more revenue from end customers as the MXU market matures and grows beyond the capabilities of today's subscriber management systems. Management concerns are just beginning to capture the attention of MXU providers looking to differentiate themselves and position their networks to scale to serve large numbers of end customers and buildings.

Although some vendors have a pretty good head start, in a market so young, it's impossible to say who will be leading the pack by this time next year.

AccessLan and Copper Mountain preach the benefits of providing network intelligence at the edge of decentralized networks to ease management issues such as IP addressing, traffic flow routing and the addition of service features and enhancements such as virtual LANs and security.

"The huge value add about the Copper Mountain box is all the IP intelligence is in the DSLAM, not the CPE," says Jeff Fisher, director of business development for building local exchange carrier Wired Business. "Otherwise, [by] serving 100 buildings, we could have 500 to 1000 DSL routers to manage."

According to analysts, however, most MXU providers are not yet focusing on management issues.

"Most service providers are more worried about what they are going to use to backhaul traffic and what their installation costs are going to be, than issues associated with subscriber management and [quality of service]," says Matt Davis, senior analyst at The Yankee Group. "Those things will become important in the future, but right now it still seems to be a pretty new market and I don't know if there's that much forward thinking taking place."

Start-up CoSine Communications is thinking ahead anyway. The vendor is urging MXU providers to save money and avoid network and equipment management nightmares by deploying dumb aggregation devices at each MXU property and backhauling all traffic to a centralized location where intelligence and service enhancements can be applied.

Deploying "lots of little boxes" at each building an MXU provider serves is not a profitable business model, according to Mark Showalter, vice president of marketing and product management for CoSine. Less equipment at the customer premises means fewer truck rolls, he notes.

Furthermore, MXU service providers looking to serve thousands of customers in hundreds of buildings in each market will be better positioned to grow their networks to scale if they use a centralized vs. a decentralized approach, he adds.

CoSine's solution is like Centrex for MTUs. Its IPSX 9000 service processing switch applies a set of features to a large number of users at the service provider's megaPOP instead of at the premises. Revenue-generating services and features include firewalls, IPSec, VPNs, anti-virus, intrusion detection, network access terminal, dial tunnel and bandwidth management, he adds.

CoSine's solution integrates with existing access solutions, including ATM, frame relay, DSL and IP. However, it is aimed at MXU providers serving high-end, Tier 1 customers, which are typically served by buildings connected to MXU providers networks via fiber, Showalter says. To that end, CoSine has teamed with Extreme Networks to provide switching and backhaul transport at the customer premises.