Overture-Hatteras marriage is all about closing the Ethernet fiber gap

Sean Buckley, FierceTelecomWhen the cloak of secrecy was lifted last week to reveal that Overture and Hatteras were going to merge into one larger company--the first large acquisition to take place on the Ethernet vendor side in a while--the immediate realization was that the combined companies would create a larger Ethernet Access Device vendor that will target near and long-term opportunities to extend Ethernet services to a larger audience.   

Overture emerged in the early part of this century with what I would call a Swiss Army knife Ethernet solution that addressed the near-term reality of Ethernet over TDM with NxT1 bonding and copper bonding, along with fiber networks. Hatteras, meanwhile, focused the majority of its attention on Ethernet over Copper (EoC).

From a vendor standpoint, the new Overture will become an even bigger threat to fellow EoC-based EAD vendor Actelis, which continues to advance its efforts domestically and internationally.   

Putting aside the obvious competitive play, EoC and Ethernet over bonded T1 circuits emerged at a time when Ethernet services were still relatively embryonic.

Both Overture and Hatteras product sets resonated well with the likes of large incumbent carriers including AT&T (NYSE: T), Qwest (NYSE: Q) and Verizon (NYSE: VZ) and competitive providers including tw telecom (Nasdaq: TWTC) and XO (OTC BB: XOHO.OB) to deliver Ethernet services over both copper and available fiber.   

Each company addresses what Vertical Systems Group dubs the "Fiber Gap" that exists between tall shiny buildings in major downtown cities and smaller SMB locations where service providers can't justify extending fiber to today or anytime soon. Yet, these SMBs desire more flexible bandwidth connections that had traditionally been limited to 1.5 Mbps T1 connections or paying the high price for a TDM-based DS3 (45 Mbps) circuit.

The same need for EADs that support fiber and copper-based Ethernet still exists today.

In talking with Ethernet analyst colleague Rosemary Cochran at Vertical Systems Group, she says their research revealed that 82 percent of U.S. small to medium business (SMB) buildings aren't connected to fiber, and probably won't be for a long time. She added that 73.3 of U.S. commercial buildings still lack access to a direct fiber connection and 27.7 percent are fiber-ready. 

"Most businesses aren't able to get direct fiber, meaning everything else like SONET, T1, Coax, or T3 has to get used," Cochran said. "Service providers will use whatever they have to use depending on the speed, the location and the application."

Vertical's theory is also shared by Michael Howard, the co-founder of Infonetics and another long-time EAD follower, adding that EADs with copper capabilities will be able to address near-term wireless backhaul opportunities where wholesale service providers and wireless operators haven't been able to justify building a fiber out to yet.

"In spite of all the talk of the need to ‘fiberize' buildings and cell sites, the reality is it just does not happen that fast," he said. "In the backhaul arena, there's always going to be rural areas where it does not make sense to lay fiber yet the bonded copper technologies you'll soon be able get up to a 100 Mbps on the existing copper at cell sites."

Take XO Communications. Although XO has aggressively rolled out long-haul and metro fiber to support Ethernet service, the competitive service provider has enhanced its Ethernet service reach through an aggressive roll out of EoC over the past few years with Hatteras.

The need to have EoC and EoTDM and NxT1 is not just about connecting sites that are within a service provider's current territory, but especially to connect their MNC customers domestic and international out of region connections where service providers have to establish last mile relationships with other carrier partners.

While it will take time to assess how effective the deal will be, it's clear the new Overture is all about closing that Ethernet service and fiber gap that isn't going away anytime soon.--Sean

Suggested Articles

Tech Mahindra announced on Tuesday the launch of a dedicated Google Cloud Center of Excellence to help drive enterprises' digital transformations.

Juniper's enterprise and cloud divisions carried the day during the company's Monday earnings, which offset weakness in the service provider sector.

Arista Networks beat out some big names in its deal to buy Big Switch Networks, which came to light last week.