PacketFront - FTTH deployment out-of-the-box
May 24, 2010		Email this page

Q&A with Hubert Schanne, Chief Executive Officer.

Introduction

Founded in 2001, PacketFront of Stockholm, Sweden, is a developer of purpose-built open access broadband systems for FTTH networks.

A native Canadian, prior to ADC Hubert held a variety of business development, customer service and sales leadership roles in a 12-year career at Nortel.

Q: Where is PacketFront's business today and what are you offering to customers?

What we offer our customers is an out-of-the-box solution for FTTH deployment, everything from the access router to the CPE, to the management software and tools that support billing, helpdesk functions and subscriber databases to deploy FTTH.

That's what differentiates PacketFront from the crowd. We've primarily focused on utilities and municipalities because that's where most of the FTTH action is.

Historically, the company was focused on Active Ethernet and we've opened that up now in the past year so we can offer a solution for both Active Ethernet and GPON. The company was bound to one technology and we didn't want to tie ourselves to a single technology as the customers have a choice today concerning how they deploy FTTH. When the next technology comes along then great, we'll look at that as well.

Today, the company is predominately a European business; our core markets are the Nordics, that is Sweden, Denmark, Norway and Finland. Finland has really opened up since last year when the government made a decision to deploy broadband extensively.

During the 4th quarter of last year we must have had approximately forty utilities and municipalities come to see us about FTTH.

We have a large presence in Dubai and the Netherlands as well, and we're working on breaking into France and Germany this year.

There is some activity in Eastern Europe, primarily with Ericsson. PacketFront acquired a company called 42Networks back in 2006 and 42Networks was an Ericsson spin off that built CPE. Because of this, Ericsson is still a channel for our CPE.

Q: Is there still room for PacketFront to expand sales levels in Scandinavia?

Absolutely, we don't have 100% market share yet, but we're working on it! There's definitely room for expansion in Sweden. Sweden is now consolidating. In order to participate in this consolidation, we have created an aggregation solution.

For example, suppose that I'm on an Alcatel-Lucent network at home, you're on a Cisco network and your brother is on a PacketFront network. Let's assume that the PacketFront operator acquires my Alcatel-Lucent network and your Cisco network. The issue that the operators have is providing ubiquitous services across all those network platforms and what we've done is create an aggregation solution where we sit on top of all the networks to enable consistent service delivery across the multiple technologies, such as CATV, DSL, FTTH and also across the multi-vendor networks such as Alcatel-Lucent, Cisco or Huawei.

Historically, PacketFront was an end-to-end play, i.e. PacketFront equipment only works with PacketFront equipment, but as markets consolidate we need to open that up so that we can participate in the consolidation.

Just because I have a pretty smile, my customer is not going to rip and replace all the Alcatel-Lucent equipment and all the Cisco equipment. Over time, as I get into the networks and see where the competitor's weaknesses are, I can work to replace that equipment.

Q: It's surprising to hear that Germany and France are only just beginning to be attractive markets to you. Why has it taken so long, was it a case of resources?

From a timeline perspective, I'd say Germany is at least ten years behind the Nordic markets. Today you have funds flowing down from chancellor Merkel to re-ignite the economy and to do broadband deployment, but in terms of the actual amount of broadband deployed, or in terms of the types of services available, they are far behind the Nordic markets.

So it's primarily a regulatory issue and establishing the environment so that FTTH flourishes and the services are available. Again, remember where Germany came from. Today the country is predominately a DSL market, originally it was an ISDN market.

For an operator to deploy FTTH, they look very carefully at the copper installed plant, and how to sweat that asset. Some of the operators such as NetCologne make FTTB decisions vs. FTTH decisions and start with FTTB, deploying to multi-dwelling units.

In the case of France, only since last year are we really seeing municipalities beginning to deploy FTTH under the umbrella of the carrier's carriers.

Q: Can you explain the current status of your operations in the U.S.?

We have very little activity in the U.S. There was an acquisition of a company called DynamicCity back in 2004 and we have agents on the ground in the U.S. but no major activity at the moment.

Q: Can you explain why there is this lack of activity, is it the cost of building a business in the U.S?

Yes, when I joined PacketFront, the second thing I did was shut down the U.S. activity because of the drain on cash. The pure-play FTTH activities that PacketFront does is actually a very narrow addressable market over there. Only now with the second round of U.S. funding are we beginning to see this addressable market open up.

Q: What about smaller telecom companies, are you into the smaller territories such as Iceland or Liechtenstein?

Now we're very focused on the core countries that I've mentioned earlier. It's a question of priorities and establishing a certain critical mass before we expand too far. In the past, the company did over-extend itself regarding the acquisition in the U.S. This was premature given where the market was and what the company was doing.

Q: Why, after a considerable amount of success in Europe, have you needed to raise another Euro 9 million?

Re-financing. There is a debit to equity conversion in there, and secondly there's new cash going into the company to fuel growth. As we continue to expand into France, Germany and Switzerland, we need to have the money to fund this expansion and our owners are very supportive.

Q: Is much of that money going to be used for R&D?

Almost half the company is R&D so we continue to fund that. We're mainly focused on an end-to-end Active Ethernet and GPON portfolio.

Q: What is left to build in that portfolio?

In GPON, we are doing IOT testing now for our ONT, so that's in progress with some of the large OEMs, and the next real step is taking the ONT, for example and cost reducing fairly significantly so that it becomes a mass-market product.

Q: In terms of technical developments, what do you see going forward that will allow you to stay ahead of the competition?

There are two differentiators, the first is that PacketFront's solutions hang together as an end-to-end FTTH solution, and the second is the automation.

On the automation side, we keep pushing the envelope in order to stay ahead of the competition and we support our customers to keep their businesses lean. The competitive solutions that we see just don't have the level of automation that PacketFront has.

Q: Would you say that PacketFront is a technical leader?

When FTTH kicked off, PacketFront clearly was a technical leader. On the GPON side we have some catching up to do, I'll admit that, but we are catching up.

If you look at the next generation CPE that has been launched, the aggregation solution that has been launched for multi-vendor, multi-technology environments, I think we'll see PacketFront coming back to the leading edge.

Q: You mentioned Ericsson as a partner of yours, do you have others?

We have individual system integrators that we work with in different countries. In terms of the big OEMs though, the only one we work with is Ericsson due to the historical bond that exists between the two companies.

Q: Is that something you would like to change?

Yes, we're working on that. It takes time though, some of these big guys have other things on their agenda and are sometimes reluctant to work with some of the smaller fish. But that is part of the strategy going forward and we do also need to extend the local systems integrators.

Q: What does the future hold for PacketFront as you see it?

We're going to stay a FTTH specialist, what we're trying to do is become more technology agnostic so that this Active Ethernet label, which we have had, isn't the only thing we're able to do.

In the past we've gotten into a debate with customers, some of which say GPON is the right way to go and some say Active Ethernet is the right way to go. The answer is that it doesn't actually matter. Some prefer one, some prefer the other.

Q: Is there room in the industry for an FTTH specialist?

I hope so, so far there is. And we see that from our revenue base and from our client base. It's all about timing, a lot of these countries are really slow in getting off the ground. Now we're seeing some signs of acceleration and as this happens then the addressable market out there begins to grow as well.

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