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October - 2012 - issue > Company of the Month
Stoke-Taking-the--Mobile-Market-by-Storm
Vimali Swamy
Monday, October 1, 2012
There is a new chip on the block. 2004 saw the foundation of Stoke, a mobile network equipment provider in a very short span of time has not only proved its mettle but with successful deployments across Europe and North Asia has catapulted itself into the elite list of players in this space like Cisco, Juniper, Nokia Siemens, Alcatel Lucent, Erickson and more. So what is the secret behind this rocketing growth of the company? Ask Vikash Varma, CEO and he affirms it’s not just the technology but also the keen sense to foresee trends, spot the opportunities and the backing by some of the biggest venture capitalists and prominent telecoms carriers.

Exploring opportunities ahead of time has been one of the many strengths of Varma. Long before carriers foresaw the congestion that would be caused in the network due to spikes in data services, Stoke started by selling its gateway as a 3G mobile data offload element, but found that carrier interest was low. Although the advent of iPhone and Android devices meant that carriers were experiencing enormous traffic spikes, with LTE deployment just round corner they found an investment in 3G at this point unnecessary. Seeing this, Stoke shifted gears and started positioning its product as a Femtocell gateway and an LTE security and aggregation platform. Though Femtocell adoption was not as widespread as initially expected, Stoke managed to make the carriers take notice of its different offerings. Today, the company has several LTE contracts lined up globally, one of the biggest one being with Japan’s NTT Docomo.

3G vs LTE: Exploring Opportunities

3G was a good network when it came to phone calls but the complexities began when the smart devices took off as the spectrum was being choked with the explosion of data usage. Stoke developed RAN offload solutions that could help carriers decongest the spectrum and enable them to maintain a quality user experience, while giving subscribers access to all the services, security and standards they receive over cellular networks using Wi-Fi.

Faced with unprecedented demand for mobile data, operators are forced to use Wi-Fi to augment scarce spectrum and offset capacity shortages making Wi-Fi a mainstream market force in the mobile industry. While major operators have publicly embraced Wi-Fi, but they have yet to implement the integration that would make Wi-Fi an extension of their networks. Handover from cellular to Wi-Fi is anything but seamless. Consumer or ad hoc Wi-Fi offload offers congestion relief, but encourages users to choose Wi-Fi over cellular, distancing the subscriber from the service provider. Stoke RAN offload solutions allows operators to establish and maintain a trusted connection from the device to the mobile operator core while extending the operator's ‘commercial reach’ over Wi-Fi connections. Enabled by the Stoke Wi-Fi eXchange, the solution offers high-density secure session termination of Wi-Fi connections outside the operator core, including 3GPP defined interworking and traffic steering features.

“The rollout and deployment of 3G was very scattered globally. While the developed countries embraced it much early, its deployment was quite late in developing countries like India where it has limited success so far . But despite the disparity, the carriers across the countries face the same challenges with 3G such as network congestion, a complicated, hierarchical architecture and cost,” explains Varma. This is why all carriers are excited with the deployment of LTE all over the world.

“In developed countries like Japan, US and many of those in Europe, high quality mobile connectivity is emerging as a fundamental part of everyone’s life just like water and electricity. With the rollout of LTE, carriers are hoping to attain this level of service. This is what presents us with a big opportunity,” says Varma.

LTE presents several benefits with its flat architecture, it has far better spectral efficiency allowing for more data services to be offered on the same unit of spectrum as compared to 3G.However, being an IP Only network, as well know IP is famously unsecure. Hence a a major concern is security as carriers bring super fast mobile broadband to consumers across the globe. The smartphones, tablets and other devices could become vulnerable to hacks that previously only concerned PC users. This is because unlike existing 3G networks, which are only partially IP-based, LTE networks are all-IP. Simply put, when devices are connected to IP networks, with their own IP addresses, they become vulnerable to attack the same way as personal computers — devices can be hacked, spoofed or infected with viruses. While standards have been defined for next-generation mobile networks, there are still some grey areas in terms of security: while the need for network security is explained, the specifics are unclear — no standard solution is proposed.

This is the area in which Stoke has managed to develop an edge against other players. Stoke's Secure eNodeB Aggregation solution establishes and manages secure IPsec connections to LTE RAN eNodeBs, including user and management plane traffic as well as control plane traffic.

“Our LTE security solutions support millions of subscribers every day in the world’s most comprehensive nationwide LTE networks, delivering better than 99.999 percent reliability. Over the years, we have gained more experience developing and deploying secure RAN access to the Evolved Packet Core than any other company on the market today,” beams Varma.

A testament to this is Japan’s biggest carrier Docomo selecting Stoke over other established players to roll out its LTE deployment across the country back in 2009. The carrier put the company through a rigorous testing phase lasting over 18 months before they finalized on it. Today, Stoke has over 700 gateways deployed to provide Docomo the seamless service it offers. “The deal with Docomo really put us in the map. We now have successful deals across Korea, parts of Europe and U.S. as well,” explains Varma.

Business and Growth Forward

Stoke’s entry into the market has all the hallmarks of that of a debutant — major grooming, raising venture capital, fine-tuning its product lineup and making a dramatic first showing through its deal to supply mobile broadband gateways for NTT DoCoMo’s LTE network in Japan. Now it’s prepping for the big fish –North America.

Established equipment providers have long-standing relationships with operators and argue that it’s better to stick with a single vendor solution instead of muddling things up with a third-party vendor. But Stoke thinks it has found a niche and is out to convince operators to shake up the product mix in their networks with best-in-class equipment from a relative newcomer. There is a renewed interest amongst the operators in looking for innovation, finding avenues to allow innovative companies to gain access and prove their new approach to solving problems that were not there before. This is the chance that Varma is hoping to bet on.

Stoke is assuring the carriers that their 4G deployment does not have to be a repeat performance of their 3G networks, when they ran into difficulty handling massive increases in data traffic. To increase its traction with carriers, the company is approaching partnerships with companies like Samsung who already have an established market and rapport with the carriers. In many countries especially like Korea, this approach has really worked aces for Stoke. The business is booming and the proof is the increasing line up of clients, a 200-300 percent increase in its revenue and ongoing business expansion. In the last two years, the company has expanded its reach tremendously. In addition to its existing offices in Santa Clara, California and a development centre in Bangalore, India, the company has set up new sales offices in France, Japan, Korea, Spain, South Asia Pacific, UK and more.

So how does the business work for Stoke? Varma is quick to tell that it is through licensing model. “The company charges a standard fee for the first year post deployment of its equipments for a certain amount of user base. There on, the fee varies depending on the number of subscribers that get added,” he says.

With the buzz that the company has created with its innovation, Varma does not forget the investors who have been backing the company all the way long. Since its founding, Stoke has had a strong support from Kleiner Perkins Caufield & Byers, Sequoia Capital with others joining over the years. Today, the company boasts of a long list of VCs that include DAG ventures, Focus Ventures, Integral Capital Partners, Pilot House Ventures, Presidio STX, LLC , Reliance Technology ventures, Samsung Venture Investment Corporation and Docomo Capital, reinstating the fact that the company is in for a long haul, successful one at that.
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