Enablence betting broadband backlog will insulate fibre deployments from economic crisis

Enablence Technologies Inc. is banking on the growing demand for rural broadband - combined with a looming bandwidth crunch among telecom carriers - to give the Ottawa-based company a solid foothold in the growing fibre to the premise (FTTP) market in the United States and Canada.In preparation for this growth, Enablence has established channel and sales force in the US, and acquired 300 new customers through its acquisition last month of Pannaway Technologies Inc. of Portsmouth NH."Originally we were thinking of an OEM agreement," Arvind Chhatbar, CEO of Enablence tells Network Letter. "This is complementary - Pannaway can now provide a migration path for its customers from DSL to fibre."This should help position Enablence for future growth: Screen Digest Ltd., a US based business intelligence firm, reports that consumer broadband connections in North America, Mexico and Western Europe reached 155 million at the end of 2007, and are expected to climb to 228 million by 2012. The war for broadband providers is all about speed and price, yet the research firm reports that price competition and traffic are putting pressure on bandwidth margins. Given that traffic is set to intensify with online platforms bringing video content into homes, it would seem FTTP is the place to be, even in a slowing economy.FTTP a bright spot for telecom investmentsThe purchase is only half the story. With increased price competition, surging traffic pushing up bandwidth costs and mass video consumption, FTTP will be a necessary DSL migration path for carriers losing ground to cable. And despite an economic slowdown, FTTP is a bright spot for telecommunications investments."In a slowdown, in every area there is an oasis or two," says Dev Bhangui, an analyst with Haywood Securities Inc. in Toronto. "In telecommunications there will be a slowdown in capital expenditures, but two areas will continue to get more than their fair share of CAPEX: wireless and fibre to the home."Chattbar agrees fibre deployments may be insulated somewhat from the financial crisis. "As far as the economic conditions are concerned, our view is that there will still be a push forward for broadband in rural areas, especially in the United States," he says. "This is the right thing to do to create jobs - you need a telecommunications optical infrastructure. We'll be ready for it."Enablence has been on something of a roll recently. On November 3 it announced that China's ZTE Corp. would be using its Planar Lightwave Circuit (PLC) based Reconfigurable Optical Add Drop Multiplexers (ROADM) and its PLC based Arrayed Waveguide Gratings (AWG) products. As well, at the end of September Enablence won a "Companies-to-Watch Award", one of four separate awards categories that make up the Deloitte's 2008 Technology Fast 50 Awards."I see them as being leaders from a technological sense," says Bhangui. "They started as a single product company, but now, after four or five acquisitions, they are cutting off the competition so they can't attack them on the flanks. These have been very logical steps."On the components side Enablence's competitors are California-headquartered NeoPhotonics Corp. and JDS Uniphase Corp. And as far as turnkey providers are concerned, competitors include Alcatel-Lucent's Bell Labs.DSL being squeezed by HDBhangui concurs with Screen Digest's estimation of the importance of video, as well as their assessment that carriers are in for a rude wake-up call."HD is chewing up bandwidth," he says. "Homes will have to have 30 to 40 megabits per second. DSL can't handle it - for the carriers fibre is the only way to go. The question is not if, but how. In the end the average revenue per user (ARPU) for fibre is two and a half times that of a traditional customer."The question is, will the likes of BCE Inc. be willing - or able - to spend the money? Monthly ARPU is eroding and is predicted to continue to fall to 2012, especially as competition intensifies. According to Screen Digest, the big losers will be the pure-play ISPs, because broadband access has become a "low cost bolt on". The ARPU boost can only come with content services such as IPTV. Once fibre is in the ground a provider will have a captive audience for years to come. The business case is clear - victory will go to the first movers.

Enablence betting broadband backlog will insulate fibre deployments from economic crisis

News | November 13, 2008

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