Alcatel-Lucent Finds Stimulation for “Broadband for All”

| May 14, 2009 | Broadband Infrastructure | Competitive Intelligence Report

| Analysts: Erik Keith, Ron Westfall

Current Perspective: Slightly Positive
Vendor Importance: Moderate/High
Market Impact: Moderate/High

Event Summary

May 12, 2009 -- Alcatel-Lucent announced its "Broadband for All" program in the United States, which provides advisory services to help telecommunications companies, municipalities and developers apply for broadband stimulus funds as part of the American Recovery and Reinvestment Act (ARRA) of 2009. The Act provides more than $7 billion in grants, loans and loan guarantees to un-served and underserved rural areas, offering them broadband access and services that have been previously limited or unavailable.

Analytical Summary

• Current Perspective: Slightly positive on Alcatel-Lucent’s “Broadband for All” program. For background and clarification, Alcatel originally introduced the Broadband for All initiative in 2006 (prior to the Alcatel-Lucent merger), with the initial focus of the program on delivering mass-market broadband to emerging markets and high-growth economies. However, with the advent of the broadband stimulus program in the U.S., Alcatel-Lucent has decided to expand the scope of its Broadband for All program to include/address the underserved (and un-served) areas within the U.S., where there is still a substantial market opportunity.

• Vendor Importance: Moderate to high to Alcatel-Lucent as it needed to introduce the “Broadband for All” program targeted at U.S. broadband stimulus funds to reinforce the company’s extensive track record as a supplier of “Buy American” equipment within the USDA Rural Utilities Service (RUS) program and better positioning itself to win National Telecommunications and Information Administration (NTIA) funds as well in countering some rival marketing efforts in this regard. Alcatel-Lucent also needed to reiterate how its portfolio can address meeting the rural and underserved aspects of the U.S. broadband stimulus package.

• Market Impact: Moderate to high on the U.S. broadband infrastructure market, as Alcatel-Lucent is already well-entrenched as the market leader in this region, and the company’s new “Broadband for All” program demonstrates the company’s renewed commitment to expanding its presence in this important market by reaching out to the smaller Tier 2 and Tier 3 telcos and other service providers which have historically not been the company’s target customers. With Alcatel-Lucent’s extensive resources and turn-key capabilities enabled by this program, the target operators are far better positioned to garner broadband stimulus funding under the ARRA.

Analytical Summary

• Broadband infrastructure rivals that can effectively target the U.S. broadband market need to continue portraying Alcatel-Lucent’s “Broadband for All” marketing initiative directed at the $7.2 U.S. broadband stimulus program as non-unique. This includes meeting a new level set of customer needs that may not necessarily play to Alcatel-Lucent’s strengths within the Big Two incumbent telco networks (i.e., AT&T and Verizon) such as addressing underserved areas and public interest goals (e.g., public safety, public health).

• U.S. headquartered broadband infrastructure rivals such as ADTRAN, Calix, Motorola, Occam, Tellabs, and Zhone need to continue stressing in marketing efforts that the “Buy American” provision embedded within the ARRA legislation can favor purchasing their solutions with broadband stimulus funds in case there are any lingering concerns about interpretation of the “Buy American” clause related to at least the $4.7 billion worth of NTIA funding efforts.

• Broadband infrastructure rivals such as ADTRAN, Calix, Occam, and Zhone should continue to assert that they can plausibly assert some time to market advantage in relation to Alcatel-Lucent in terms of dedicating market resources exclusively to the evolving U.S. broadband stimulus package as well as making the case that they can provide even more focus on addressing rural and underserved settings. Zhone can also reiterate its “100% manufactured in America” assertion against not only Alcatel-Lucent but also virtually all of its direct U.S. rivals.

• Cable infrastructure rivals such as Cisco, Motorola, and ARRIS need to tout that they stand to capture a larger portion of cable operator business derived from broadband stimulus funds in relation to Alcatel-Lucent. Since cable operators lead the U.S. market in broadband subscribers and address extensive rural areas, it stands to reason they are in a position to win notable portions of broadband stimulus funds.

• Major broadband infrastructure vendors such as Ericsson and Nokia Siemens Networks should note that they possess extensive U.S. broadband-related channels, including engineering resources that would not preclude them from winning some U.S. broadband stimulus related business, especially in relation to China-based players such as Huawei and ZTE. Ericsson and NSN can also highlight their technology and market leadership in the mobile broadband market, which will undoubtedly be leveraged by operators to address the targeted un-served and underserved markets (both rural and urban).

Recommended End User / Customer Actions

• Telco operators of all types and sizes (i.e., ILECs, CLECs, RLECs and IOCs) need to consider the cost-benefit and return on investment (ROI) potential of leveraging the Alcatel-Lucent Broadband for All program in order to obtain the maximum payout from the US $7 billion broadband stimulus fund, regardless of whether they are planning to deploy fixed or wireless access systems to expand their broadband service footprints.

• Cable operators, especially those that are interested in upgrading their networks to FTTH systems and supplementing underserved/un-served areas with wireless broadband services, also need to evaluate the Alcatel-Lucent Broadband for All program as a key enabler for said service expansions, as the company is an established technology and market leader in both FTTH and wireless sectors, and its broadband stimulus funding assistance program may be the critical service enabler (and differentiator) vis-à-vis rival systems vendors.

• Municipalities, utility companies and housing developers also need to evaluate and consider the Alcatel-Lucent Broadband for All program, which again may provide them with the best avenue for garnering their “fair share” of the American Recovery and Reinvestment Act’s broadband stimulus fund.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

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