Fastback Networks buys Sub10 Systems to create backhaul dream ticket

You say sub-6GHz, I say 60-80GHz, let's call the whole thing a major competitor to big tin vendors.

Fastback Networks has acquired mmWave system provider Sub10 Networks, creating a company that it says will be able to provide backhaul solutions for any dense urban macro or small cell deployment scenario.

The intention of merging Fastback-Sub10 is to create one software defined radio product line, integrated on the same silicon, with the same management system, that can either operate at sub-6GHz (NLOS) or at 60/70/80GHz (point to point V Band/ E Band). Kevin Duffy, CEO of Fastback Networks, speaking in a 1-2-1 briefing with TMN prior to the merger’s public announcement, claimed that product mix will give the company the weapons to attack macro and small cell networks as operators densify their networks following initial LTE deployments.

As operators densify they will have to fill in more macro, dropping from towers, to rooftops, to below the roofline to below the treeline – so the [backhaul] problem gets harder and harder. And the only way to solve that is to move away from 6-59GHz spectrum and go to either mmWave or sub-6GHz . That’s the future,” Duffy added.

Kevin DuffyDuffy said that although Sub10 and Fastback were attacking the backhaul market from opposite ends of the spectrum, they were aligned in terms of outlook.

“They’ve got a great patent portfolio, we’ve got a great patent portfolio; they’ve got Tier One customers in Russia and Europe, we’ve got major Tier One customers in the USA.

“So we got together and said this would be perfect. Here’s how we kick Alcatel-Lucent’s and Ericsson’s ass, because they’re kind of dinosaurs, they’re stuck in the [6-59GHz] middle*. The NEPs are OEM-ing these products from us, all of them, they’re coming to us collectively for these high performance futuristic products because they don’t have them. So we said why don’t we put it in one and then attack the services angle and change the total cost of ownership – and really change things up.”

* UDPATE 17 March, 2015:
“Fastback Networks has pointed out that the statement above was meant in reference to traditional 6-59GHz radio technology, in a five year time frame, rather than being a comment on the established NEPs. In fact, Fastback Networks works closely with NEPs to bring its products to market.”

Duffy said that the merged Fastback would be the only company in the market with a comparable sub 6GHz/V Band/ E Band product range , allowing operators to deploy the same platform to connect any two points together in a dense environment.

Strictly speaking, Duffy’s assertion looks correct at present, although other companies might disagree with his market analysis. Dragonwave offers both sub 6GHz (Harmony Radio Lite) and E Band products (Harmony Eband), and it is also part of Nokia’s backhaul partner grouping that includes NEC and Saie. Similarly, a vendor such as Alcatel-Lucent will also be able to integrate sub-6GHz and mmWave products from within its own product range and that of “ecosystem” partners – which currently includes Sub10 Systems. Other vendors too are adding products as time goes by. Intracom, for instance, was showing new V Band (StreetNode V60-PTP) and E Band (Ultralink-FX80) products at MWC, to add to its “mid-band” microwave.

Fastback Networks has been known for its Any Line-of-Sight trademark, in which its Intelligent Backhaul Radio (IBR) offered both NLOS sub-6GHz and LOS capability enhanced with techniques such as refraction and reflection. This provides an as-line of sight deployment where necessary. So does acquiring Sub10 mean that the company has admitted its LOS technology was lacking?

“That’s not true: the fact we [now] have a product that goes faster in pure LOS doesn’t defeat the fact that ours works in LOS. What’s good now is where before would have to compete with Sub10 for the LOS sites, we don’t have to compete now,” Duffy said.

All of Sub10 Networks’ investors have remained invested in the new, merged company – a sign of their commitment to the new company, according to Sub10’s CEO Stuart Broome. That of course is hard to judge but another interpretation could be that the investors have not made the exit multiple they required from the Fastback deal and are hoping the merged entity will give them a better chance of their desired return on investment. The combined investors in the new company include Matrix Partners, Foundation Capital, British Growth Fund and Juniper Networks.

So we are not one of those guys hoping for the small cells market to happen before they run out of cash.

Duffy added, “This is a company that isn’t sitting around, and the application space is not only small cells, we’re doing macros in the US. They [Sub10] are doing macros and small cells. So we are not one of those guys hoping for the small cells market to happen before they run out of cash . This is now a company creating a formidable problem for our competition because we are sending a signal to their investors – these are multi-billion funds all behind a single entity and they are in for the duration.”

Fastback has raised $40 million in three rounds so far since 2011, with the latest being a $15 million round in January 2015, and Sub10itself has been backed with over $10 million to date. Fastback has around 50 employees and Sub10 just under 30. No people are expected to be made redundant in the sale, Broome said.

Sub10 Systems Stuart Broome

Sub10 Systems’ former CEO Stuart Broome, now Chief Sales & Marketing Officer, Fastback Networks.

Broome added that Sub10 has been adding (operator) customers in Russia through MTS and in the Vodafone Group, with about 5,000 links active. He claimed the order book was good and the company in a position of strength. Fastback “backhauled the SuperBowl”, Duffy said, along with a host of other special events in the USA, and the company is providing macro backhaul links to a Tier One US operator in several major US cities.

Both companies work alongside NEPs for post-sales fulfilment, for example Sub10 is a member of Alcatel-Lucent’s partner community – although Alu has recently also named Siklu as a provider of point to point mmWave systems within its portfolio. Duffy said that he didn’t see an issue in working both as a strong partner and competitor to the major NEPs. Indeed he is relishing the prospect.

“They [the NEPS] see we are a legitimate contender, and even though we use them [the NEPs] as fulfilment we believe we will achieve enough scale soon enough,” he said.

The companies will likely port to a new silicon supplier, or select either of their existing platforms, Duffy said, upon which they will build their merged platform.

Broome added, “Fastback’s radio is SDR using Qualcomm chips, we do SDR on TI chips so the philosophy of both CTOs was incredibly similar in terms of thought process. They don’t want an inflexible FPGA solution, they need to be able to react. So we have got fantastic options, and [the merger] is creating further options because we are stronger and these guys are starting to line up to say we want this [business].”