Cisco's broadband commitment hits $380M

Cisco has been digging into its wallet of late, rallying around carriers to boost broadband services and adoption. The investments have upped the ante on Internet bandwidth issues and stands to open the door for a raft of new opportunities for the channel.

Cisco has just signed with former modem company NetComm to finance its national broadband network slated to begin early next year. Cisco outbid networking rivals Lucent and Alcatel to back NetComm to the tune of (up to) $380 million in vendor financing for a host of IP, DSL and network management products.

NetComm was recently awarded a Carrier Licence and David Stewart, NetComm managing director, is looking to begin rolling out DSL LANs into exchanges in Sydney before moving to other capital cities around the country.

"The problem Telstra has, is it has to be everything to everybody. Fortunately for us, we can pick the most lucrative markets for our services," said Stewart.

Telstra has come under fire in recent months from the Australian Competit-ion and Consumer Commission (ACCC) for the pricing constraints imposed by its unbundling of the local loop. As a result, Stewart envisions the market that could cost-justify Net-Comm's broadband services will be the corporate or SME customer rather than the end user. NetComm, however, is offering an all-comers approach.

According to Stewart, once the network is in place, NetComm will be out to partner with ASPs and a number of emerging content providers. The opportunity for the channel will come in the integration of multiple line telephony, data and video services, Stewart believes.

Dr John Ellershaw, chief technology officer of broadband equipment distributor Quadtel, claims the current trend for a number of Australia's telcos is to align themselves with networking companies and vice versa.

Other carriers

"It's certainly happening with other [carriers] too. OneTel, I know, has been looking for vendor financing," affirms Ellershaw. And with the cost of setting up a broadband network across the country running into the hundreds of millions of dollars, "vendor financing is a good way to get into the game," he added.

While Telstra has the obvious jump on the broadband market, Ellershaw claims within six months there will be several competitors to Telstra's domination in broadband access.

The key for integrators, according to Ellershaw, is in scaling up their customers' infrastructure to service high-speed feeds involved in B2B e-commerce and ASP services.

"If you're using broadband access to service your customers then that has to be integrated into the back end system. No one wants high-speed access to a slow server," said Ellershaw. Peter Papaioannoun, Cisco regional manager of the New Entrant Carrier division, agrees. "[Reseller's] customers use their IT infrastructure differently with access to broadband services," Papaioannoun said. "The whole IT model is changing."

Papaioannoun claims companies can centralise applications and IT management for branch offices using broadband access. But integrators are going to have to wait a further 12 months for broadband services to become widespread before they can start migrating their customers to this type of environment, claims Papaioannoun.

Cisco and C&W Optus

In related news, Cisco has also formed an alliance with Cable & Wireless Optus that will see joint marketing, sales and product development initiatives to increase the companies' market penetration in IP products and services.

The pair are targeting what they have dubbed the "Business Data market" and such ventures include providing high-speed Internet access between buildings and the furthering of the Optus Private Network; a VPN service for Optus' corporate accounts. In effect, Optus becomes an integrator of Cisco products as it builds its ISP business.

The announcement, made last week, marks a distinct shift from the traditional vendor-carrier sale, claims David Stokes-McKeon, director of E-solutions at C&W Optus.

"Instead of the old model tender roll-up, we're moving towards more of an alliance," said Stokes-McKeon. "In place of an account manager who flogs you products, we have various levels of contact throughout each company - from management right down."

Cisco and Optus are singing the familiar "we share a similar vision" tune, but in the meantime Cisco will provide the products and technical consulting to revamp Optus around the Web, bypassing the channel on the request of the customer, a move Cisco has made in the past to its large telco clients.

Stokes-McKeon was unwilling to reveal the monetary value of the e-enablement project, or the size of each companies' investment in the alliance. But on the back of the e-enablement venture Cisco appears to be investing a lot up front in the partnership, so as to position itself as the default product supplier on which the Net is built.

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More about Alcatel-LucentAustralian Competition and Consumer CommissionCable & WirelessC&W OptusLucentNetCommOneTelOptusQuadtelTelstra Corporation

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