WESTELL CLIMBS UP CPE FOOD CHAIN

Westell Technologies' announcement last week that it was moving deeper into the DSL customer premises equipment market is the company's first attempt to move out of its traditional role as a high-speed modem provider and become a central player in the emerging triple play arena.

The company, which has primary CPE supplier relationships with BellSouth and Verizon, unveiled a combination router/DSL modem (dubbed UltraLine), a router/modem geared specifically for FTTP deployments (VersaLink) and a new management platform (EnVoy) for both.

UltraLine, which can support ADSL 2 and 2Plus, also is being positioned as a major enhancement for telco video deployments. As part of the units' software, Westell included some patented technology that passes through video in a way that eliminates both pixelization and dropouts.

“Going to ADSL 2Plus lets you run at least two high-definition channels and one regular definition,” said Gordon Reichart, vice president of marketing for Westell. “But what you do with it when it's in the box is key.”

The move is the first from Westell to get into the hot telco video market, but it likely won't be the last strategy swing. In early January the company said it had licensed intellectual property related to voice over IP from the shuttered DirecTV Broadband unit of Hughes Electronics. That technology eventually may lead the company to develop a residential gateway with voice, data and video capabilities.

“We do see ourselves moving up the value chain on the network edge side,” said Van Cullens, president and CEO of Westell. “EnVoy is clearly a move in that direction.”

At the same time, the company is facing some well-heeled competitors — including Cisco Systems and NEC — that have been moving in the same direction and have a cost advantage over Westell. Additionally, with the RBOCs ramping up DSL deployments, Westell could be challenged by DSLAM vendors that also carry the end-user equipment in their product lines, said Erik Keith, senior analyst of broadband infrastructure for Current Analysis.

“If you're selling a million ports of DSLAM, you can afford to give away the CPE,” he said.

The company may have an advantage though in selling strictly through telco channels and shunning the retail market, Keith said. The vast majority of DSL CPE is currently sold through telcos. That isn't likely to change anytime soon and will be further reinforced as new services, including voice, are rolled out over the DSL infrastructure, said Matt Davis, director of broadband access technologies at The Yankee Group.

“By being part of the network, that [CPE] element has a capability of disseminating a lot of information,” he said.

Westell is taking full advantage of that differentiation and even making some aggressive moves into areas it hasn't traditionally ventured. EnVoy, for example, is designed as a platform that not only can provide diagnostic functionality but also provides management for new services. The platform, though, is not designed to fit in with existing network management systems, a step that would have been strategic suicide a few years ago. However, according to Cullens, the decision to make EnVoy a stand-alone system was driven by shifting telco attitudes.

“They are actually trying to get away from that Death Star type system where gravitational pull brings everything into it,” he said.