The following transcript has been edited for length and readability. Listen to the entire discussion here on The Broadband Bunch. The Broadband Bunch is sponsored by ETI Software and VETRO FiberMap.
Brad Hine:
Hello, again, Broadband Land. Welcome to another episode of The Broadband Bunch. I’m your host, Brad Hine, continuing to bring stories, stats, and samples from the world of broadband. Today is day two at the Fiber Connect 2023 conference put on by the Fiber Broadband Association. And we are on-site at the Gaylord Palms Conference Center in beautiful Orlando, Florida. With me today is a new guest, but not a new company. He is a longtime journeyman in the broadband industry. Please welcome the CTO and CSO of ATX Networks, Jay Lee. Jay, welcome to the Broadband Bunch.
Jay Lee:
Hey Brad, thanks very much. And thanks to you and the Broadband Bunch for having myself and ATX along.
Brad Hine:
Absolutely, and this is the second time. I think we interviewed your CEO about a year ago, which was hugely helpful I know. We always want to catch up with some of our partners in the industry and get a report on what you guys are doing that’s new. Also, how we’re meeting the challenges that we know are in the market and how we’re evolving.
Jay Lee:
Right. Super.
Brad Hine:
To start off, tell us a little bit about ATX from your perspective and what you’ve been doing for the last year. You’ve been there quite a while, haven’t you?
Jay Lee:
I think coming up on 25 years this year. I’ve seen a fair number of things with respect to changes at ATX and just the broadband industry in general. It has been a very interesting, exciting ride. I think the tip of the iceberg’s just coming around right now in terms of some of the exciting upgrades and new build cycles that are going to go on.
Brad Hine:
Lots going on. Where is ATX today? I’ve seen a lot of press releases come out this year, so tell us a little bit about what you guys are previewing or bringing onto the market today to better your customers.
Jay Lee:
As an organization, I kind of step back and think of us in terms of — We have two major silos. One is a products-based offering to broadband service providers, and I can dive into that a little bit. Also, we’ve got a services business that’s fairly new to ATX but aligns really well with what’s going on in the market, not only in terms of the work that needs to be done. But there’s a shortage of workers that are required to get it done. That’s been a pretty successful venture for us. I can talk a little bit about that, but maybe I’ll come back to the product offering and talk a little bit about that if you’d like to do that first.
Brad Hine:
Yeah, let’s jump into that. I know that you play a certain part of the industry overall. Broadband represents anything out there that we connect via the internet and networking in general. So yeah, tell us a little bit about what you guys are doing right now.
Jay Lee:
Yeah, maybe I’ll talk about a few of the product sets that we do outside of what we’re showing here at Fiber Connect and cover those. And then talk a little bit about the products that we’re profiling here at Fiber Connect. We have two main product portfolios. One being commercial video gateways, and the other being basically access network-type products.
Commercial video gateways are products that help broadband service providers or more so help them transition their video services from their networks into bulk account-type networks or enterprises. Thinking of say a cable operator who’s delivering services to a hotel. There tends to be a need for some type of gateway device to allow that transition to occur in terms of video content traversing those two networks. Then we’ve got access networks portfolio. A significant portion of that is aligned with cable operators and HFC network equipment.
As you know, from you and I talking previously, cable is embarking on a very, very significant network upgrade and really looking to exploit some of the offerings that both DOCSIS 3.1 and DOCSIS 4.0 offer them, in terms of being able to deliver higher speeds to their customer. It is so high that it really becomes a fiber-like service offering.
We provide a lot of the equipment that allows them to upgrade their HFC network in order to support the delivery of enhanced DOCSIS 3.1 or even DOCSIS 4.0 services. It is a pretty well-positioned portfolio for what’s coming. We also have an optical transport portfolio that really came out of our work with the MSOs. That portfolio has lent itself nicely to use cases that some of our MSO customers have made use of with respect to some of the RDOF initiatives that they’re delivering. So we see direct relevance.
If a set MSO is using this product, it would seem to make a lot of sense for a lot of the operators that are attending the show here at Fiber Connect. It’s our first time having a booth here. So we’re to some degree kicking tires, but we’re pretty confident in terms of the offering and should get some good customer uptake in it.
The portfolio that we’ve got is really a more cost-effective way of delivering capacity across that middle mile portion of the network. We’re pretty excited about it. We’ll see where it goes. Then another part of our access portfolio is actually related to energy storage, so not so much transport of RF or optical signals, but more so helping to back up all of the devices that are delivering those signals in the event of a power failure.
Traditionally, you can look at how any broadband service provider backs up these types of services. It’s traditionally been the lead acid type of batteries or, even more now, lithium-ion seems to be getting some good traction in the marketplace. Both of those solutions have an underlying chemistry associated with them and in turn, have their warts in terms of being green or they’re hazardous. There’s a volatility aspect with lithium.
The technology that we’re bringing to the market and are introducing to broadband service providers is a technology called supercapacitor which is truly electrostatic charge-based technology. And as such there are really no hazardous substance issues with it. There are great temperature performance characteristics. Charge discharge cycles don’t deteriorate the battery.
It’s pretty exciting with respect to what supercapacitor brings relative to some of the alternatives. There’s definitely a total cost of ownership aspect associated with it that folks need to get their head around. But we certainly believe there are a lot of good opportunities and use cases for this product as we, as a society, move forward to build greener more energy-efficient networks.
Brad Hine:
That’s a great point. The two big words are efficiency and cost savings. Now you’re allowing safer, more green products to be out there. How are your customers responding to this already?
Jay Lee:
Yeah, so far, it’s very early innings for us. I guess I’d speak at more the technology level than the product level because we’ve still got tweaks to work out, not to the underlying technology, but say to form factor to fit in certain types of cabinets or meet certain types of voltage or current specifications to really fit it into use cases that customers actually have with their various pieces of equipment that they want to be able to back up from an energy storage standpoint. But there’s been a ton of interest in and around this, so we’re pretty excited about the path forward on this.
Brad Hine:
I can imagine. That’s the way the world is going right now. With the amount of funding that’s coming into this market, I know there’s a concern about how much it is. Is there enough? Are we spending it wisely? Are we getting the most out of each dollar that we’re going to spend and how is it going to be spent? How do you see that filtering down through what you’re doing right now? You’re aligning yourselves for cost saving, say, for upgrading DOCSIS to higher speeds for your customer. How do you see that funneling down into you right now?
Jay Lee:
Yeah, actually as you’re asking me that question, one of the things that was going through my head was a conversation I just had about probably an hour ago. It is in the context of supercapacitor and the total cost of ownership aspect associated with it in that you pay more upfront. But over the long haul, you’ll save from an operational expense perspective.
One of the comments this customer had is around operators who are funded by, in particular private equity, and would probably be incented to spend more upfront in order to be able to display a more cost-effective OPEX and as such EBITDA line, which inherently drives value in that type of environment. As it relates to the government funding, one of the takeaways I have from a lot of the sessions I’ve attended here, a lot of the conversations I’ve had, and I’m by no means an expert on it, but my impression is there’s still a lot of questions about how exactly the funds will flow. So we’ll see where it goes.
I can tell you as an organization what we’re doing to help position ourselves to help operators meet some of the requirements with respect to the funding they’re going to get and how they spend that. We are putting effort into ramping up manufacturing domestically. We actually have aligned with our contract manufacturer for a number of our products to ramp up a facility in Michigan of all places in and around where the auto industry was fairly prevalent.
I think the CM’s looking to leverage some of that environment up there and hit the ground running. But we see a lot of value in that, even outside of the BABA type of requirements, just from a supply chain security perspective, from some regard and being close to your core customers. There are inherent advantages that are right.
Brad Hine:
Absolutely, I hear a lot about the supply chain. It’s doing better. It’s healed in some ways, but we want to make sure there’s an insurance policy and a buffer just in case. Obviously, it’s just smarter to move them geographically closer to where we’re going to be doing business.
Jay Lee:
Absolutely.
Brad Hine:
I am hearing that a lot from a lot of people.
Jay Lee:
I think there’ll still be some challenges from a bill of materials perspective with respect to some of the underlying elements that go into products and which jurisdictions those elements of the overall bill of materials, where they come from, and how they’ll be treated from a tariff perspective or from a BABA perspective. But I think every vendor’s facing those types of challenges, and I think we’ll eventually get through it. It sounds like there’s going to be a little bit of leniency from the need of a group in terms of when these types of thresholds are going to be put into place. But we’ll see. As I say, I’m not an expert in it. So I hope I’m not misquoting my interpretation here.
Brad Hine:
There are a lot of assumptions right now until we know a lot more about what’s going to happen in the next few months. You mentioned the conversation you just had an hour ago. I’m assuming you’ve been patrolling the exhibit floor. This is the first time you’ve been to a Fiber Connect, so what’s your experience so far? The first few ideas that pop into your head.
Jay Lee:
Yeah, I am really excited about the energy around the show. I think it’s really well-attended. I’ve been spending a lot of time in meetings and in and out of sessions. So from what I understand, some of the folks from ATX have been here. Traffic’s been reasonable. The couple of times I’ve been on the floor, the energy is there. There are lots of people wandering the hallways.
Certainly, there’s just a ton of pent-up excitement and energy around what we’re staring at here in terms of a massive fiber build-out. It’s been interesting to see this side of the industry’s perspective on cable to some degree. There’s been a little bit of a beat-up on cable and what it can offer relative to fiber. I think some of that needs to be taken into context depending on where said cable provider is operating.
I think cable still has a pretty strong foothold. If anything, this whole push to fiber has really encouraged cable to look at leveraging their HFC asset at least one more time and take advantage of, as I said, DOCSIS 3.1 and ultimately DOCSIS 4.0. DOCSIS 4.0 is in essence a specification designed to deliver fiber-like services. That’s certainly been interesting.
I think cable has some pretty good ability to compete in this space. That’s not to say that they’re not looking at fiber, obviously. I don’t think there’s a cable operator out there who doesn’t have a fiber build as their strategy for new build and to use it strategically and surgically. I think any cable operator would totally agree that fiber is the endgame. They’ve just got a little bit of a longer path to get there.
Brad Hine:
Well, there are very few people maybe over the age of five that have not grown up with cable TV at this point, and we see how things evolve in this business. We know there’s a lot of cable plants out there that, economically, that’s really the real discussion. It doesn’t make sense to replace it at this point because it’s working fine if we can just improve the standard of it. So what’s the timeline on a DOCSIS 4.0 At this point?
Jay Lee:
Yeah, there’s been some discussion and press releases around that, but fairly recently with respect to DOCSIS 4.0 moving out to the right. I think it’s been announced publicly by a number of operators with respect to DOCSIS 4.0 trials happening in 2024. I think we’ll see DOCSIS 4.0 capable modems in the market in ’24 or ’25. There’s an interesting use case for those.
I think pretty much every cable operator’s considering using a DOCSIS 4.0 with a DOCSIS 4.0 cable modem with basically a DOCSIS 3.1 capable headend if you will, and create this service called DOCSIS 3.1 plus, where they really can start to take advantage of some higher capacities in particular in the downstream and start to look at multiple gig by one gig in terms of downstream upstream.
Brad Hine:
That’s encouraging.
Jay Lee:
I think that’s imminent here. We are in the middle of ’23 or a little past the halfway point of ’23. I think in terms of a full end-to-end DOCSIS 4.0 capable network, I see 2025 as being a trial time point and some significant rollout likely in early ’26.
Brad Hine:
Wonderful.
Jay Lee:
They’ve got the gas pedal down on the cable side of things.
Brad Hine:
Yeah, I mean everybody does, right?
Jay Lee:
For sure.
Brad Hine:
We must evolve and innovate. I think it’s so exciting. Things seem to be going quicker than they ever have. That’s why we love this industry too. I feel like —
Jay Lee:
It never stops.
Brad Hine:
— being in the industry in my day job and then reporting on it for the Broadband Bunch, there’s never a dull moment. We’re always learning, right?
Jay Lee:
Absolutely.
Brad Hine:
There was another thing that we mentioned that caught my attention when we first spoke. It was about some of the services that are new to you. I’m really interested in it because I know there’s a labor shortage that we’re seeing. We want to plug more people into the next generation of this evolution of technology, so to speak. I speak to people every day who are looking at their retirement in several years, maybe in the next 10 years. By the time all this money hits the market, a lot of those folks will be out of the market. Tell us a little bit about ATX services that you guys are doing and the long-term effect of that.
Jay Lee:
Yeah, it’s an area that’s brand new for me. It’s been really interesting to be exposed to it tangentially. I’m not responsible for the business unit. But the person who runs our business unit is Bob Murphy. It’s been really interesting to watch him and his team go to work and garner some success and take a business from zero to sizable and growing over the last 12 months.
Our CEO, Dan Whalen, brought Bob in to start this services business. And I was like, “Well, okay. No idea really what we’re getting into.” Bob came in with a really interesting model in terms of, not only ramping up a services business that leverages both internal employees to ATX but subcontractor services in particular local markets as well as this training and field replenishment program that he has orchestrated.
Basically, what that involves is essentially recruiting graduates from a lot of the institutional colleges that train for electrical linemen-type jobs. These graduates come out of the school with a lot of the certifications and skill sets necessary not only to be an electrical lineman but in turn could also pivot fairly easily into the telecom industry.
What Bob and the team do is they’ve aligned themselves with a number of these schools and grab these graduates as they’re throwing their diploma or their hat into the air and say, “Hey, what about the telecom industry as an option?” And they offer them the ability to pivot into becoming a telecom service technician as opposed to working the electrical lineman type of role.
There’s a training element where Bob and the team take what they have and build on it so that they become proficient at building out fiber, splicing fiber, dealing with RF equipment, et cetera. He’s been able to build that quite successfully. We’ve got programs going on that are supporting RDOF types of initiatives.
We’ve got programs going on that are helping MSOs through some of their mid and high-split upgrades to leverage DOCSIS 3.1 as we talked about. On top of that, has alignment with some MSOs whereby after we’ve trained some of these folks, and it’s on-the-job training, so they’ve also participated in helping the set operator get their network upgraded, that the operator could hire some of these folks after they’ve been trained and make them a part of their organization. So it’s a win-win-win. It is a win for the graduate, ATX, and the customer. It’s a pretty innovative program. We’re seeing lots of demand. So much so that I know Bob can’t keep up with it.
Brad Hine:
I can imagine the demand at this point. I know traditional public schools on the path from high school to college and graduation. There are a lot of people out there, today who are getting their degrees and really do not have a relevant skill. So you’re actually talking more of a vocational education either post-high school or post-college. Somebody can jump in with that experience already and learn the business.
With the amount of money going into this space in the next 5, 7, and 10 years, these jobs are going to be huge. I already know people out there making six figures doing jobs like this. Both people that went to college and people that didn’t go to college. It’s just going to be more of them. I’m really fascinated because this is a great business. It’s a service to the community of people who want to be tech innovators, and it’s also filling jobs.
Jay Lee:
Absolutely. I mean, it’s checking a lot of boxes. To your point, I think it’s especially great for the graduates who are looking to garner a career. This isn’t like an upgrade that will be done in five years. Even when the set upgrade is done, it’s a network that still needs to be maintained. This is a permanent career path if folks choose. It’s interesting. And certainly, in the cable industry, there are a number of executives and high-level management positions that are filled with people who actually started out as technicians. It’s a really interesting path that they’ve taken, but that opportunity exists. There’s no doubt about it.
Brad Hine:
That’s a great point, also. I can’t tell you how many people I’ve interviewed over the last four years. The CEOs of companies or companies that they’ve sold or whatever process or piece of the business that they’re in, where they said, “I was the guy that climbed that tower and put those antennas up there. I was the guy that connected and spliced those fibers at one point, and I had to go through that whole business to learn how to be a better CEO.”
Jay Lee:
Absolutely. Learn from the ground up.
Brad Hine:
And I can’t imagine a business in the future at this point that will not rely on the communication of some form of broadband in some way, shape, or form, whatever device you’re going to use.
Jay Lee:
Absolutely. I couldn’t agree more with that.
Brad Hine:
Well, in terms of the future of ATX, I’m curious, in the next 5 to 10 years, where do you see ATX in this equation? It’s kind of the crystal ball question, looking into the future.
Jay Lee:
No, hey, listen, we’ve been around, not necessarily under the name of ATX. But we’ve been around since the mid-nineties. We have no intentions of going anywhere. Since the mid-nineties, we’ve continued to innovate alongside the industry and provide product sets and new services, to the industry that are applicable and help broadband service providers solve the challenges that they’re facing. I see no reason as to why we’re not going to continue to do that. I think we recognize where we are in the industry today.
We recognize where the industry’s going. I think we pivot our portfolio more toward the fiber side of things. We’ve done a really good job in terms of where we fit in the cable ecosystem and how we’re helping cable operators on that side of things. Fiber is definitely something we need to focus on. I think we can step it up a little bit more in terms of our technology offering in the access network, which is also a pretty active area. I think that’s where we end up in 5 or 10 years.
Brad Hine:
Well, it sounds like you have a fabulous strategy with the cable side that you remain experts in and a lot of the optical work that you’re doing too. You have two great paths that are going to go parallel. And you’ll have a lot of great decisions and opportunities to make down the road.
Jay Lee:
That’s the plan.
Brad Hine:
Well, as we wind up this episode of the Broadband Bunch, I have one question that I’ll spring on you. You’ve been with ATX now for 25 years. You’ve been in the industry. You have a lot of experience and knowledge. If you could go back to the beginning of your ATX career, in any way — It doesn’t have to be technology; it could be management. If you could take your DeLorean time machine back in time and whisper something in your ear, some advice, for the next 25 years, is there something that comes to the tip of your brain there?
Jay Lee:
That’s a tough one. I probably would’ve worked to position the company into the optical space sooner than we got into it. I think as an organization, we missed a pretty good runway with respect to some of the optical transport that was being deployed by cable operators. This is now more so a legacy technology. I think we missed a window there that we could have doubled down on and been successful. That’s sort of off the cuff. I’d have to think about it a little more.
Brad Hine:
I’ll have to be content with that only because we’ve all seen the cable industry in how massively successful it’s been. This is really a great time to get on board. You’re really not even starting. You have optical work that you’ve already done. And really the amount of money coming into this space is really the beginning of a very large wave at this point.
Jay Lee:
Absolutely. Yeah, so the optical space I was referring to was a more analog optic-based portfolio. Like I say, this is, could have, should have, would have done it 15 years ago. I think it was a market area that I know as a company we could have embarked on and in retrospect done pretty well on. It’s a market that’s over now. And our portfolio is all digital optic space as opposed to analog optic space. We’re getting a second chance this time around, so it should be good.
Brad Hine:
Well, I hope you’re having an awesome time at Fiber Connect. I know we still have a day and a half left here. I want to thank you for coming and chatting with us.
Jay Lee:
Thank you, Brad.
Brad Hine:
If any of our listeners want to get in touch with ATX or they want to get in touch with you, how can they do that?
Jay Lee:
Sure, yeah. They can reach out to me. I’m pretty sure my contact information’s on the web, but letter jlee@atx.com. Give me a shout, (416) 817-1871, anytime.
Brad Hine:
I love it. Well, Jay Lee, thanks for being here today. We’ll look forward to an update from you maybe in the future too. We’d love to have you back so you can bridge that time since we’ve spoken again just like we did in the last year with your CEO.
Jay Lee:
Righto. Thanks, Brad.
Brad Hine:
Well, from Brad Hine and the rest of the Broadband Bunch, thanks to everyone for listening. We’ll catch you next time.
