Focusing on Tier 2 and 3 carrier growth: ADTRAN's Jay Wilson

On the Hot Seat
Jay Wilson, Senior Vice President & General Manager, Carrier Division, ADTRAN

Jay Wilson


Jay Wilson is feeling good about growth in his company's carrier division. In Q3 2011, the broadband and optical segments of the division grew 93 and 20 percent, respectively. And while ADTRAN (Nasdaq: ADTN) is well known in the Tier 1 U.S. service provider space, the vendor has made continued inroads into the Tier 2-3 telco market as a trusted supplier. FierceTelecom Editor Sean Buckley caught up with Wilson during the company's two-day press and analyst CONNECT event at its headquarters in Huntsville, Ala. to talk about the unit's growth and how it's differentiating itself from other vendor competitors by acting as solutions provider that tries to understand the total problem the service provider is facing.

FierceTelecom: To start, ADTRAN saw a lot of growth in the carrier side in 2011. What do you attribute that growth to?

Jay Wilson: In spite of all of the turmoil that occurred in the supply chain it was a good year. That being said, our penetration with the Tier 2-3 carriers has been really significant. While it has been exciting from a new customer acquisition perspective or from a new project perspective, the good news is a lot of wins we have or have not announced are still in front of us. Some of the customers are still in the early stage or in the planning only stage. What's nice is that we had projects that we're right in the midst of including tier ones in the U.S. and some of the international ones that are going on and they still got a good runway ahead of them. We've been able to attach new applications in those Tier 1 U.S. and international projects. Where we have seen upside from those things is in the new projects in the Tier 2 and the new acquisition of Tier 3 customers.

FT: What about the ongoing product transition you're conducting in optical and last mile access?

JW: From a product perspective, our transition from primarily where VDSL was introduced in all of our broadband product line occurred last year. That was a year of what--I wouldn't necessarily call it a year of transition, since the growth is not only the back end of VDSL, because there's quite a lot of ADSL we still sell depending on whether they are doing exchange based or CO-based deployments. Now, moving into bonding, ADSL is still being used fairly broadly. The contribution of VDSL to our shipments is increasing and we do expect it to increase because if you're in a Fiber to the Node (FTTN) environment or short loop environment, VDSL is the preferred choice. I would say that the emergence of VDSL has been a big contributor to our broadband overall... Functionally, we rounded out our Fiber to the Home (FTTH) offering because I would say earlier last year we weren't as well as equipped in that area as we would have liked, so we made a hard R&D focus to double down to build our FTTH capabilities up. Where we are this point are two main components of that are in the GPON domain, and if you look at Tier 2-3 carriers, Active Ethernet, in particular, or Ethernet-based FTTH is important. In fact it was a requirement for customers like Valley Telephone. Even 18 months ago we would not have had what was needed to (get) that Valley Telephone opportunity. While FTTH has not been a majority part of our broadband business, we do expect it to continue to contribute more over time much like VDSL.

FT: You talked a lot about the Tier 2-3 carrier market, which has been traditionally ignored by larger vendors, while other emerging vendors have struggled to support them. With those trends as backdrop what sets ADTRAN from the pack?

JW: If you look at the coverage of the smallest to the largest carriers in the U.S., there's no vendor that covers it as well as we do. I think we have adequate exposure in all tiers of the telecom space now and that's been intentional. We've have been more vocal about the Tier 2-3 activity intentionally to send a strong message to that market segment. There have been vendors in the past that were built in that segment and they may have turned their attention to the Tier 1s and sort of alienated the Tier 3s in the process. I am not saying they turned their backs on them necessarily but that's what occurred. If you talk to the Tier 3 carriers it's clearly something they worry about more than they did 10 years ago. When I say worry about it, they are saying 'is this partner going to be there five or ten years from now, and do they have the capability to help deploy this new service or new network?'

In the case of Valley, which is doubling the size of their network, they needed to know two things: one, that we were going to be there; and two, that we were going to help them and not just going to ship them equipment. It was interesting when I met with Valley Telephone's General Manager Dave Osborn. When I asked him what more can we be doing with them he said he wanted to meet our customer service people. He later told me that that conversation was one of the big differences that swayed it in our favor because they were really convinced, after their visit here made them feel more comfortable, that this was a vendor relationship they were ready to invest in. That's the way we'd like them to all play out, but that's why we have been very vocal to demonstrate to the others that we're here to stay; we're not looking for you to give us a shot in the arm in 2011 and walk away. I think that's been important because those guys recognize that as a single voice to influence my strategy it's hard to believe they'll be successful so they want to know what the others are doing. It's more of a community in that regard. The bigger carriers know that they have the sway to tell us what they need and expect we'll deliver it.

FT: During a recent joint session you had with the head of your enterprise business, you talked about the need for ADTRAN to pursue more international opportunities. Although you have strong ties with the likes of Korea Telecom, Telmex and Telstra (ASX: TLS.AX), can you talk about ADTRAN's international strategy and the plans you have to expand it in 2012?

JW: We've got plans to start to disclose a bit more of our international activity. We've been very selective in what we talked about. As a public company there's a whole lot of focus on making sure we set clear expectations, but we are going to talk more about more about some of the wins and it's my intention that they be representative of the same ADTRAN that our customers like about us here in the U.S. What I mean by that is we want to be able to replicate that strategy in other parts of the world. It does not mean the economics will always be the same or the support will be the same, but I want the same takeaway because our core competencies are no different in Asia than they are in the U.S. We need to make sure that value proposition is well understood and supported in the same way.

How it is shaping up? I would say I am pleased with the progress we're making. I would say it's not like we're bidding on ten things and we're only winning two. We're having good success. I expect we'll continue to grow at a good rate internationally for some time. The Mexico project is one that a lot of people are more familiar with and if we win two or three more of those with other carriers in the world it changes the game completely. We're definitely looking for those. We're not out there trying to hit singles every time we're up to bat. We're taking them, but we're definitely looking for doubles, triples and home runs as well and we expect to hit them.

FT: Another element that seems to have an effect on your reach into the service provider market is the ability for the enterprise segment to pull in carrier customers. How important is that to solidifying relationships with your carrier customers?

JW: You know, what it ends up being is a real credibility building process. One is the business market is very strategic, not to say that infrastructure is not. Anybody that's tied to the sales side responsible for their enterprise strategy is going to want to talk about their business services strategy. This seems very simplistic, but it allows you to have something more interesting to talk about. When you go into a discussion and you've got a number of different to offer you have the more likelihood of having something resonate with the carrier. It's not unheard of to go into a carrier in another part of the world fully anticipating to sell them a DSLAM and come out with a managed service opportunity. It's tough to equip your sales force to be successful with that, but that's the strategy. I don't care if they want to do an IP telephony build out with us and we went thinking that it was a Fiber to the Home or broadband opportunity. In my mind I say let's get the relationship and let them know more about who we are and when they realize who we are the other stuff will come when the timing is right.

You can't dictate the timing that a carrier needs to happen. There is some pull-through because of the integration we have done. There are some integrated interfaces, network management and some aggregation benefits of using the Total Access 5000 (TA 5000) with the IP business gateways. It's those types of things that others can't offer. If I can get to a scenario where I have an end-to-end solution with my gateway and my aggregator with the TA 5000 and my network management system covering both of those things, Cisco (Nasdaq: CSCO), Alcatel-Lucent (NYSE: ALU) and Huawei can't offer that. They'd have to have two or more players to accomplish what I am accomplishing that in that solution. That's where it's difficult going in the first time selling that story, but once you get in with one of the pieces it's a natural discussion. We stitch together the solution after we stuck our foot in the door and that's where the customer loyalty starts to occur because we're helping them either operationally or getting to revenue faster.

FT: So it's all about taking a holistic, solutions-based approach?

JW: Strategically, we do. We want our sales teams to be thinking about that, but that does not mean that sometimes an opportunity to break in may be an RFP that we need to win whatever they asked for. What you want to do is get to the solutions sale because it defines who you are and defines what the carriers are doing. That's the theory behind that.

Focusing on Tier 2 and 3 carrier growth: ADTRAN's Jay Wilson