Starent Networks: A shining star in the telecom firmament

Date:   Friday , February 29, 2008

The year 2007 was a strong year for technology stocks from an IPO standpoint, with investors beginning to look beyond the big-name headline grabbers such as Google and Apple. It was a resurgence created by many factors; but one which needs special mention is the investors’ belief that the global demand for all things tech will continue to grow. Hence, when Starent Networks, with a solid and high-growth technology in the telecom sector and a strong customer base which included the likes of Verizon, Nortel, Virgin Mobiles and U.S. Cellular went public in June 2007, it was a welcome arrival for the IPO enthusiastic investors looking at exciting opportunities. CNBC rated it as one of the high-growth, high-momentum stocks of the coming year, while Goldman Sachs, the investment banker added Starent to its ‘Technology Framework’ list of growth stocks.

Not only did the company do well in the IPO, exceeding investor expectations, but had a soaring balance sheet at the last quarter of 2007 with no debts to speak of and a significant amount to spin off further expansions without cutting corners. It reported fourth quarter revenues of $50.6 million, a near 40 percent leap sequentially and more than double the sales from a year earlier. Analysts had, on an average, expected revenues of $43.1 million.

Though Starent Networks seems to be on the right track, it also faces the challenging task of keeping pace with the fast growing wireless and telecom industry. But, for Vijay Kathuria, Vice President and General Manager, Starent India, the challenges are nothing but exciting opportunities. He is confident of attracting more tier-one customers. “The IPO changes the perspective and gives confidence to the customers” he explains. An energetic team of 300 engineers in India that develops applications for the products rolled out of the company’s headquarters in Tewksbury, Massachusetts, is under the leadership of Kathuria.

Keeping pace with Technology
Ever since the reality shows made it to the top in the world of entertainment, the telecom industry is in an upward swing. Whether it be the Big Brother show in the U.K., American Idol in the U.S., or the Kaun Banega Crorepati show in India, these game shows are quite popular with the masses - thanks to the opportunity it gives the audience whether it be to even enter the contest through SMS, calls, and other mobile services or be it to help your favorite stars win. But the challenges the telecom industry had to face initially with this new trend in the entertainment industry were manifold.

Managing the huge traffic of SMS in the network on these occasions without choking the network and channelizing the data efficiently and effectively are big challenges. But these challenges are modest in comparison to managing the data traffic of mobile subscribers accessing high bandwidth applications such as YouTube, or services that require low latency such as push-to-talk over the mobile. To offer highly scalable, reliable, and intelligent mobile networks that provide a high quality subscriber experience operators require infrastructure solutions that can intelligently identify and manage the data and route them accordingly. This challenge is fast growing as mobile operators are deploying an increased number of multimedia services, such as high-speed Internet access, mobile television, and video telephony. All of this will only accelerate as voice increasingly becomes a commodity, and multimedia services become market differentiators.

When the mobile operators like China Unicom, KDDI, and Verizon faced this challenge they turned to Starent Networks to provide key elements of their multimedia core network. Starent Networks is a U.S. based company that runs a large part of its development from India. The company offers technology that provides the functions and services required for the delivery of advanced multimedia services through the mobile operators’ packet core network. “Our products act as a gateway which connects the radio access network to the Packet Data Network to enable wireless subscribers to access the Internet to download music, video content, and get access to other multimedia services,” explains Sundar Ramaswamy, Director of Engineering, Bangalore Development Center.

As mobile operators deploy a greater variety of multimedia services, they are looking to implement more control over each session so that they can enhance the subscriber experience while maximizing network efficiency. In order to do this, they need to put more ‘intelligence’ into the network. An intelligent network provides mobile operators with the ability to inspect data packets from individual transactions in great detail. This deep packet inspection allows the mobile operator to shape each subscriber session using quality of service, bandwidth allocation, and traffic flow control. This ability to actively manage network traffic flows allows the mobile operators to deliver a consistent experience as subscribers roam through a mobile network or move across different types of networks. Starent Networks’ solutions integrate intelligence with the high performance characteristics required of the next generation mobile network.

The company designs and develops its next generation intelligent mobile infrastructure for a variety of radio access networks including 2G, 2.5G, 3G, Mobile WiMAX, and WiFi. As operators look to deploy multiple radio access technologies, they will seek to simplify their networks by utilizing core network components that can integrate multiple functions. The Starent solution is capable of supporting multiple modes of access, such as CDMA and Mobile WiMAX, in a single platform. This capability allows the mobile operators to deliver a uniform service experience to subscribers from a single platform, simplifying the network and limiting operator costs. Further, the company has designed its solutions for use in today’s mobile networks, while also keeping them readily upgradeable to respond to the evolving mobile operator environments or requirements, such as IMS or MMD. This simplifies the service deployment and network operations, while potentially reducing costly upgrades resulting from the investment in new network elements each time a new technology is introduced.

As a result of its technology approach, Starent Networks has emerged as a market leader in the mobile multimedia networking market. This places them in a favorable position as mobile multimedia communications continues to grow.

Staying ahead in the telecom space
The exciting interactive multimedia environment offered by the operators where subscribers can access business tools, send instant multimedia messages, watch a TV show, or download the latest music hits can only be successfully delivered when the core network is capable of high speed data transfer and furnished with the intelligence to shape each transaction.

However, to build applications that provide the above mentioned services to the operator is not an easy task. To run multiple applications in one single platform requires a robust architecture. But, for the engineers at the India center of Starent this challenge has been quite exciting. While most of the competitive solutions in the market are repurposed routers or network switches from other applications, Starent has built its solutions from the ground up. While routers and network switches are capable of forwarding packets of information, they lack the integrated processing power, memory, and the software needed to examine individual packets and apply defined business policies and subscriber services to them. To overcome these shortcomings, mobile operators typically connect the repurposed switches and routers with numerous enterprise servers in order to provide intelligent services. These multi-element configurations increase network complexity and impact performance, such as session latency. The team in India has helped develop solutions so that they increase efficiency, improve availability, and simplify the network architecture.

“Our platform is very user friendly and can handle from 500,000 to 3 million calls at a time, depending on the technology and configuration,” says Kathuria. Thanks to the high performance characteristics of Starent’s solutions, the company has been successful in attracting over 60 mobile operator deployments in more than 25 countries. The deployments include CDMA and UMTS operators from major markets including SK Telecom of Korea, Verizon Wireless and Virgin Mobile of the U.S., and KDDI of Japan amongst others. “Apart from being a high capacity platform, it can handle the recovery of sessions after a disruption within the platform and self-heal without affecting the continuity of the sessions. Today, the number of simultaneous sessions that pass through the platform at any given time is very high. As the call gets transferred from one base station to another, there is a high chance of many handovers that need to be handled by the system,” explains Kathuria.

In addition to the access, mobility management, and call control functions, Starent’s solutions are capable of integrating advanced services such as enhanced charging, Intelligent Traffic Control, and content filtering in the core network. This is called In-line Services. Traditionally, such services would be deployed out of line of the packet stream in a server farm or elsewhere in the network. By integrating these services ‘in-line’ into the core network, mobile operators can simplify the design of their networks since they have fewer network elements and thus can improve the flow of network traffic. This also enables the operators enhance their service offerings or provide new services. One such example is content filtering, with which operators can provide parental controls and prevent certain subscribers from accessing inappropriate or unlawful mobile content.

Building relationships
As the operators around the world are upgrading to a more advanced, higher bandwidth technology, Starent is cementing its relationships with its existing clientele through its recently introduced ST40 multimedia core platform. The next generation ST40 platform is capable of handling a much higher capacity and performance to support the increase in 3G multimedia traffic. “We continue to build our relationships with our customers, including those early customers who started deploying ST16 in the year 2003,” says Ramaswamy. “This indicates a positive trend as we have been successful in maintaining the customers’ confidence in us and delivering the solutions they need to satisfy their subscribers’ expectations despite stiff competition from giant players in the networking industry,” he explains.

To keep pace with the fast changing technologies in the telecom industry, Starent encourages innovation within the company. Innovation is rewarded in a variety of ways including cash awards and even stock options. “As a new kid on the block, we had to develop products superior to those of our competitors to succeed. This was possible through the constant research and development activities encouraged in the company”, says Sandeep Bhambani, Director of Engineering, Pune. The company now has more than 30 patents in process, and is working on the next generation, 4G, wireless technologies. “Though India is now largely at 2 or 2.5 G, a lot of advanced countries are at 3G and moving towards 4G. At Starent Networks, we keep pace with the developments happening globally on the technology front and also help shape the future of telecom through our participation in the telecom standards bodies,” explains Bhambani.

The company recently announced that it will partner with Airspan Networks Inc. (Nasdaq:AIRN), a leading provider of WiMAX and WiFi-based broadband wireless access networks, to jointly deliver an end-to-end Mobile WiMAX network solution. It has also signed a memorandum of understanding (MoU) with the Ministry of Economic Affairs in Taiwan for the promotion and development of the WiMAX industry in Taiwan. The Ministry of Economic Affairs (MOEA) also signed MoUs for cooperation in the promotion and production of WiMAX products with Sprint Nextel, Nokia Siemens Networks, Alcatel-Lucent, and Motorola.

The going has been steady for the company till now. It has come out of the tumultuous days when it could have burnt the cash and run into the hands of big guns that were in the acquisition mood. In recent months it has announced breakthrough deals in Mexico and the U.S. During the past year, the company introduced its new ST40 platform (designed for IMS rollouts) and struck deals with UMTS operators in Europe (Germany, Portugal, Poland, and the U.K.) and the Asia-Pacific (Australia and Taiwan). But the competitive juices are flowing at Starent and it is now up to the company to confirm its place as the young and promising company with key strategic accounts and a solid technology. Because post IPO, the market is watching closely and quarter to quarter performance decides the destiny.