Huawei targets NA fixed line market

OvumHuawei is changing its fixed broadband access strategy in North America. Huawei dominates market share in all major regions, except North America. Long accustomed to dealing with large operators like China Telecom and British Telecom, Huawei initially set its sights on large US operators. But with little success after 10 years, Huawei will now consider all opportunities, big and small.
 
Recent conversations reveal a humbled company still determined to be in North America for the long haul. In addition to smaller telcos, Huawei is launching new products for the US MSO market, and it shipped FTTx EPON equipment to a cable customer in the US for the first time in 3Q11. Huawei still has many challenges ahead, including political obstacles. It may succeed with smaller carriers and MSOs, but Huawei will need to show compelling value over vendors like Adtran, Calix, and Alcatel-Lucent.
 
Products showcased or highlighted at the FTTH North American Council show in Orlando in September 2011 ranged across DSL, PON, outside plant management, and DOCSIS provisioning over EPON (DPoE) for MSOs.
 
Huawei’s product strategy for North America will be the same as its global strategy. The intention is to offer a broader range of products, but still centered around its flagship product, the MA 5600T. This is a multiservice access platform (MSAP) which supports EPON, GPON, Active Ethernet P2P, different flavors of DSL, and now DOCSIS EPON. Huawei’s MSAP-centric strategy is smart, as many carriers and certainly even tier-2/3 operators here in the US are hedging their bets when it comes to technology.
 
Local US vendors Calix, Adtran, and Zhone are all seeing success with their MSAPs that support various combinations of DSL, GPON, and Active Ethernet P2P. This flexibility allows customers to, for instance, migrate from DSL to GPON to Active Ethernet P2P as bandwidth demands increase, or serve a variety of customers from the same platform. For more details on Huawei’s product and market strategy, please see Huawei: King of the Hill in Fixed Access.
 
Huawei has also custom-built equipment for potential US customers. Huawei has shipped small volumes of a sealed DSLAM product called the MA 5662. Once generally available, the MA 5662 will be Huawei’s first DSLAM in North America with vectoring capability. Tier-2/3 customers in the US have expressed interest in vectoring and many are using bonding already. Huawei has also shipped a small number of the MA 5603U. This product supports 48 ports of Active Ethernet P2P, demand for which has spiked in the US, especially among stimulus money recipients. Among FTTx products, Huawei will be offering:
 
- its newly launched HG 8240 GPON ONT, which can be deployed indoors
 
- 10G GPON equipment, which has been trialed by Verizon, and
 
- its iODN product, which identifies and manages fiber connections and splitters in the outside plant remotely.
 
 
Huawei’s trial with Verizon was a breakthrough, but we believe 10G GPON deployments are still some years away. Further, government-funded rural networks will be difficult for Huawei to penetrate. So tier-2/3 operators are Huawei’s best bet at the moment. Established competitors like Adtran, Zhone, and Calix are also expanding their access portfolios though, and Alcatel-Lucent is making inroads in the tier-2/3 market as well.
 
MSOs may well be a more receptive market than telcos
Huawei will be targeting MSOs with its new Ethernet-over-coax and DPoE products. Huawei introduced Ethernet-over-coax for the China market, but recently made it available to global customers. Both products will use Huawei’s flagship MA 5600T OLT (optical line terminal), but will also use adapted ONTs (CPE) for MSOs. After years of upgrading their HFC networks to DOCSIS 3.0, US MSOs, as they enter new business markets, are expected to roll out EPON to support the higher bandwidth and service requirements. ZTE has already been shipping small amounts of EPON for several quarters.
 
Huawei will take the MSO opportunity seriously and should consider the acquisition of a CMTS vendor in order to offer a more complete portfolio for MSOs. Arris, with its large US installed base, is the obvious candidate as Cisco and Google-Motorola are too big and the smallest CMTS vendor Casa has had more success overseas. However, the CMTS business for both Cisco and Google-Motorola is small in comparison to their core businesses and divestment at the right price cannot be ruled out. In practice, such an acquisition for Huawei will be difficult due to the political obstacles, lack of significant acquisition experience, and its status as a privately held company.
 
Huawei is continuing to expand its presence in North America, with eight R&D centers and 13 regional offices currently. It has a presence in Silicon Valley with its newest R&D center in Santa Clara, and is working to expand its involvement with local universities. Huawei now has 1,500 employees in the region, of which 75% are local residents, rather than having been brought in from China. Huawei has also seen better traction in Canada compared to the US. It will still be hard for Huawei to translate its US investments into sales but competitors should not take Huawei’s new approach lightly.

Kamalini Ganguly is a network infrastructure telecom analyst at Ovum. For more information go to www.ovum.com/

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