Customers are gaining more control over setting up their own broadband services, as smarter devices roll out on the edge of networks.
Business managers, by simply pointing and clicking, will soon be able to provision a few more phone lines during a busy time or order more bandwidth for the day that branch offices send in their sales data .
While the telecom industry as a whole is in a slump, the action on the edge is hot. Worldwide revenue from telecom services and equipment that operates at customer premises will explode from less than $3 billion last year to nearly $40 billion by 2005, according to Frost & Sullivan.
Major players are leaping into the market. European powerhouse Siemens bet $1.5 billion when it purchased Efficient Networks, one of the top companies in the space, late last month. Global supplier Proxim invested $223 million to buy Netopia, another customer premises device manufacturer, in January. Nokia purchased Ramp Networks in December for roughly $105 million, and Vina Technologies bought Woodwind Communications Systems in October for nearly $16 million.
The recent merger activity highlights the promise of next-generation equipment, due in the coming months, that takes advantage of broadband pipes, which increasingly reach businesses, big and small. Companies are starting to deploy equipment that offers businesses loads of services that can be provisioned on demand and billed without ever calling a service provider — from videoconferencing to virtual private networks (VPNs).
"Were pushing the intelligence to the edge of the network, because you have to have a way to distribute services effectively to the user," said David Allred, vice president at broadband services provider Telocity, which was recently acquired by Hughes Electronics.
While many thinkers expected the Internet to centralize operations back to mainframe architecture, engineers are instead distributing the services and intelligence of the network to its farthest edge: the customer premises.
Market observers said the recent flurry of mergers indicates a symbiosis between small companies with innovative technology and bigger ones with money and customers. "Larger equipment companies need to meet the evolving carrier and customer needs and enhance their systems integration proposition," said Ron Westfall, an analyst at Current Analysis. "And the smaller customer premises equipment [CPE] vendors see they need to hook up with a larger vendor for more staying power."
By having services such as bandwidth-on-demand and quality-of-service assurance, businesses can run their bandwidth-intensive applications whenever they need to. While the new devices are still expensive, ranging in price from $800 to $1,500 each, companies rolling them out said these are examples of what businesses can do with them:
- Daily backups from branch offices can be done at a set time of day, when a manager orders more bandwidth.
- Sales departments can handle heavy order volume by demanding more bandwidth for just one day.
- Videoconferencing can be done with a few clicks of the mouse.
- Businesses that use voice-over-Digital Subscriber Line (VoDSL) in place of traditional phone services can point and click on a Web-based manager to add a voice line.
- Partners and telecommuters can be given a VPN connection to the network in a few minutes.
- Voice and data packets can be routed to any device on the network, such as a personal digital assistant or a Web appliance.
Customers will be able to make changes in equipment residing in their data centers to complete such provisioning, without having to call their service provider.
The shift of intelligence to the customer premises will enable businesses to implement new services as they become available, said Bert Whyte, president and chief executive of Network Equipment Technologies, which builds a platform over which carriers can create new services for their customers.
"The electricity providers first job was to make sure electricity was available to everyone, but they didnt know there would be microwaves and TVs that would utilize that power," Whyte said. "People who are pioneering this area will come up with more applications that take up more bandwidth, and its our job to enable this."
Service providers stand to benefit by offering more services at larger profit margins, as they face the toughest market conditions in years, said David Sanford, senior product line manager at VoDSL enabler Jetstream Communications.
"Carriers are looking for ways to increase the value of services they can offer, differentiate themselves and create a bundle that increases customer retention and increases the recurring revenues they get from one customer," Sanford said. "Its much easier to add these services on top of the initial voice and data once you have this intelligent high-speed connection."
Network Telephone, an integrated communications provider in Pensacola, Fla., has been slowly rolling out intelligent edge devices to its customers. Chief Technology Officer Arvil Fowler said the move is beneficial to Network Telephone and its customers, but is also expensive. "The cost of the [CPE] is a little higher than wed like to see," he said.
Some predicted that the next-generation devices will first take off in homes. The new rage in consumer broadband has been the "residential gateway," which is really a dumbed-down version of the business device, with some consumer-driven services.
Start-up Broadband Gateways designed a device called the Evolo System that contains a DSL modem, two voice lines, an Ethernet connection, a home networking connection, a standard phone connection, firewall and 25 calling features such as call waiting, call forwarding and conferencing. Using a standard Web interface, users can decide which services they want and when. The Evolo System is sold to carriers for $500.
"There will still be an increased reliance on processing in the network, but that will be for applications that are intensive and need to be accessed by multiple users," said Rashid Skaf, Broadband Gateways vice president of marketing for the Evolo System. "But for individual usage, that has to be pushed to the edge, where its more efficient than using up network resources."
The majority of users in the home are technically inclined, 3Coms home gateway product manager Julie Walker said. 3Coms CPE product, the Home Ethernet Gateway sells for $159.
Both Skaf and Walker said this next generation of edge device will be so intelligent that it will replace the PC as the center of a business or home network.