To accelerate its transition from an optical transport vendor to an Internet Protocol network equipment company, Tellabs is acquiring mobile packet core maker WiChorus for $165 million in net cash. Tellabs counts 43 of the top 50 service providers as customers, with their IP mobile backhaul products deployed by 120 network operators. The acquisition extends Tellabs wireless backhaul products to a fast growing adjacent market- gateways for mobile IP traffic (such as the ASN Gateway for mobile WiMAX). That market is expected to reach $2.6B in 2013, sporting a better than 22% compound annual growth rate. The transaction is expected to close no later than February 2010.

"We are very excited about this acquisition and believe that, together (the combined company), will revolutionize the mobile Internet," said Tellabs Marketing Communications Manager Ariana Nikitas. She further stated the acquisition would extend Tellabs mobile backhaul product portfolio (see CHART below) to a fast growing adjacent market. "The resulting products will enable service providers to deliver richer experiences to mobile end users," she said.

Analysis:

Tellabs recognizes the mobile Internet is taking off and WiChorus has a product their service provider customers very much need. Sales of smartphones are growing more than 30% a year while netbook sales have been very strong. People are spending more time surfing the Internet while on the move. As a result, Tellabs’ mobile customers expect mobile data traffic to grow 30% to 50% a year for the foreseeable future. AT&T recently indicated its mobile traffic has quadrupled over the past year.

Such high growth demands scalable, next-generation network architectures to deliver 3G and 4G multi-media and video services. This acquisition will enable the combined company to help facilitate delivery of those services, while providing richer experiences to mobile Internet users. It will enable Tellabs to compete with Ericsson, Alcatel-Lucent, and Cisco (which recently announced its acquisition of Starent Networks) in the 4G/3G mobile packet core market.

While Tellabs spends 17% of its revenues on R & D, they found it more expedient to acquire Wichorus’ mobile packet core technology than develop it internally. They believe this will make them more competitive in the mobile backhaul market. Independent of that, Tellabs has a very high opinion of WiChorus’ mobility management and routing technology.

On a conference call today, Tellabs CEO Robert W. Pullen said the Wichorus platform was a "purpose- built 4G (WiMAX, LTE) architecture that is backward compatible with 3G (GGSN, HSPA, HSPA+)." As a result, it can be sold to WiMAX operators now and 3G or LTE operators in the future. Tellabs stated there were two potential service provider customer types for the WiChorus platform:

– Those that are optimizing their 3G mobile networks and evolving to 4G (LTE).

– Those that have leapfrogged 3G to deploy 4G (Mobile WiMAX and LTE).

Wichorus’ "best in class" deep packet inspection capability and performance was particularly attractive to Tellabs. It was said to produce much less throughput degradation than competitor mobile packet core products. Tellabs claims that the WiChorus 4G packet core product offers eight times more throughput than competitive offerings.

The Wichorus SmartCore™ platform was said to address the unique requirements of the mobile Internet:

• Includes a full range of mobile IP products (from low entry price to highly scalable) for applications including GGSN, LTE and WiMax, plus new application enablement with superior DPI capability.
• Offers 8 times more throughput, 4 times more simultaneous Internet connections and active users, compared with competitive platforms in gateway applications.
• Uniquely combines world-class application analytics with a mobile core gateway for improved traffic engineering and network optimization.
• Enables customers to analyze and monetize more than 400 of the top mobile Internet applications.
• Makes mobile networks content-aware and context-aware, with personalized application-awareness.
• Outperforms other platforms in delivering mobile Internet capacity. For example, competitors’ capacity significantly degrades (as much as 30% to 50%) during deep-packet inspection (DPI).
• Delivers new and differentiated applications such as Internet offload and distributed LTE gateway. The SmartCore™ platform can offload as much as 70% of traffic at the network edge, increasing core network efficiency and improving user experiences. As a result, customers can save as much as 50% in capital expenses, compared with the present method of operation.

The WiChorus ASN Gateway is being sold to Clearwire and trialed by other mobile WiMAX network providers. Tellabs CEO Pullen said that the company’s next product will be for "business services delivery" using femtocells and picocells.

When asked to comment on future product plans, Ms. Nikitas declined, stating that the acquisition had not yet taken place and could not comment till the merger had actually been consumated.

Tellabs has a large portfolio of transport and network management products for wireless backhaul. These include:

• Tellabs® 6300 Managed Transport System
• Tellabs® 7100 Optical Transport Series
• Tellabs® 7300 Metro Ethernet Switching Series
• Tellabs® 8100 Managed Access System
• Tellabs® 8600 Managed Edge System
• Tellabs® 8800 Multiservice Router Series
• Tellabs® Intelligent Network Management

Opinion:

We think this is a very good move for both companies and we predict more acquistions and consolidation in the network equipment market.  In particular, watch Ciena which has optical backhaul products, but nothing for the "3G/4G mobile packet core."

Reference:    http://www.tellabs.com/news/2009/index.cfm/nr/79.cfm

In a keynote address at the CTIA Wireless IT & Entertainment convention in San Diego, FCC Chairman Julius Genachowski outlined steps the agency is taking to provide more spectrum and remove obstacles to help speed the development and expansion of next generation wireless networks. Will such measures be effective?

FCC Chairman’s Remarks at CTIA 2009

For several years, Wireless Internet Service Providers (WISPs), rural and independent telcos and MSOs have been urging the FCC and U.S.  government to free up licensed spectrum to enable them to build faster, more robust and reliable wireless access networks.  Both fixed and mobile WiMAX players would be major beneficiaries of this initiative as WiMAX technology would likely be used by network operators to provide much better wireless broadband service than is possible with unlicensed spectrum, which is prone to interference, coverage gaps and other problems. 

The CTIA – The Wireless Association® ("CTIA") has recently petitioning the FCC to reallocate 800 MHz of spectrum for wireless broadband providers by 2015 (see next section of this article).  At his October 7th CTIA Conference keynote address, FCC Chairman Julius Genachowski made reference to that petition by saying that a lack of licensed spectrum is "a looming crisis" as U.S.  consumers increasingly rely on mobile devices such as smart phones, netbooks, eReaders, etc. that require heavy wireless data usage. 

In his address, Genachowski said that the FCC would examine how to reallocate spectrum for wireless Internet services and look towards ways to promote secondary markets for airwaves, giving companies that hold spectrum licenses the right to lease those licenses to others.  "No sector of the communications industry holds greater potential to enhance America’s economic competitiveness, spur job creation, and improve the quality of our lives," Genachowski said.  "My goals with regard to mobile are the same that define and drive all our work: fostering innovation and investment, promoting competition, empowering and protecting consumers, all in an effort to help ensure the U.S.  has a world-leading communications infrastructure for the 21st century.  As this audience knows, it takes years to reallocate spectrum and put it to use.  And there are no easy pickings on the spectrum chart."

Genachowski went on to say that the FCC would also try to clear obstacles for wireless network operators trying to install new 4G networks, including speeding up approvals for new cellphone tower construction, which often are met with local community resistance.  In this regard, the FCC will propose a federal "shot-clock" on tower-siting, while still being sensitive to local jurisdictions.  The siting of towers has long been an obstacle for wireless carriers and tower companies as subscribers embrace mobile services, but city and local governments often don’t want the accompanying infrastructure needed for those services.  Genachowski said he understands that Internet providers and wireless network operators need to manage their networks.  "We recognize there are differences between wired and wireline network technologies," said Genachowski.  "They are different networks and because they are different, I have said the rules that are adopted need to allow for reasonable network management.  But we need to have clear rules of the road for everyone regardless of how they access the Internet."

In a press release issued shortly after Genachowski made his keynote remarks, AT&T Wireless Division CEO Ralph de la Vega called for a fact-based discussion with the FCC.  "Before we begin ‘fixing’ what isn’t broken, we need to be thoughtful about the consequences," said de la Vega. 

In reaction to the Commissioner’s speech, Sprint issued a press release that supports Mr. Genachowski’s recognition of the importance of mobile broadband networks.  "Sprint Nextel shares with FCC Chairman Julius Genachowski the view that American business and consumers benefit from the deployment of 4G mobile broadband networks.  At Sprint, we are proud to be the first and only nationwide wireless carrier to offer 4G (i.e.  mobile WiMAX) in the United States.  For Sprint customers, 4G isn’t the future, 4G is here now.  Sprint 4G is available in 16 markets today and we expect to offer Sprint 4G service to 120 million people in 80 markets by the end of 2010."

To read the entire article, including my editorial comment, please see:

http://www.wimax.com/commentary/blog/blog-2009/october-2009/ctia-wireless-it-e-2009-fcc-plans-to-free-spectrum-remove-barriers-1009