Cisco tips $380 million into broadband financing

Cisco tips $380 million into broadband financing

Cisco has been digging into its wallet of late, as the switch maker rallies 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 a deal 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.

The announcement comes after an earlier Memorandum of Understanding for a similar deal between Van Gogh Investments (VGI), a small carrier NetComm purchased in October, and Alcatel failed to eventuate into a signed contract.

NetComm was recently awarded a Carrier Licence and David Stewart, managing director at NetComm, 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 that it has to be all things to all people. 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 Competition 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 NetComm's broadband services will be the corporate or SME customer rather than the end user. NetComm, however is offering an all-comers approach.

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.

"It's certainly happening with other [carriers] too. OneTel, I know, have 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", added Ellershaw.

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 this week, marks a distinct shift from the traditional vendor-carrier sale, claims David Stokes-McKeon, director 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."

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