Netcomm moves to carrier service model

Following the recent announcement of its plans to acquire DSL carrier VGI, NetComm has fast-tracked its plans to branch into the telecommunications services market.

The company announced yesterday that it has formed a strategic alliance and signed a memorandum of understanding with Alcatel to build a broadband DSL (digital subscriber line) network.

The agreement stems from a memorandum of understanding signed between Alcatel and VGI in March, before NetComm announced its plans to acquire the startup.

Under the new agreement, Alcatel will provide a turnkey solution, including DSL technology and the initial rollout of the network in Sydney and Melbourne, and planned expansion to other capital cities and regional centres.

Alcatel will also provide customer premise equipment, the network operations and maintenance, Paul Fraley, managing director of Alcatel's carrier internetworking division, said.

David Stewart, managing director of NetComm, said the move into the telecommunications market fits well with NetComm's existing business model.

"We are moving from being a dedicated supplier of hardware and software to actually becoming a supplier of services," he said.

NetComm will be able to sell its services and hardware as package deals, he said. According to Stewart, NetComm already provides DSL customer equipment, including a number of modem devices, and has spent the last 12-18 months developing products for the emerging DSL market.

"Just being a hardware provider is an increasingly competitive area just to operate in . . . to ensure shareholder value you need to move from one-off sales to a recurring model," he said.

According to Stewart, deployment on the network is expected to begin towards the end of 2000 with services starting in the first quarter of next year. VGI, which will be absorbed into NetComm's business following shareholder approval of the acquisition, is currently applying for a carrier licence.

Additionally, Stewart suggested it would take some time for negotiations between Telstra and other carriers to get underway following the unbundling of Telstra's local loop in August.

NetComm shareholders are expected to vote on the purchase of VGI at an extraordinary general meeting held in August. NetComm signed a memorandum of understanding to purchase VGI around four weeks ago.

Meanwhile, according to Fraley, Alcatel is building several other DSL networks across the country, including a network for Telstra. Fraley also added that Alcatel's network service division will be working with subcontractors to build NetComm's network. The subcontractors will be named later.

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