The acquisition, coupled with an endorsement today by Alcatel, a leading digital subscriber line (DSL) network equipment manufacturer, serves to highlight the competitive nature of the emerging market for voice-over-DSL technologies.
Terms were not disclosed. Both CopperCom and DTI are privately held.
Voice-over-DSL technology takes the souped-up lines generally being used for Net access through phone networks and allows those connections to carry voice traffic. That benefits a phone company because it can offer several lines at lower costs to customers.
"(The deal) means they're not a one-trick pony," said Brett Sheppard, a DSL industry analyst at TeleChoice, a communications consulting firm. "They can now move toward a true end-to-end packet network and not just a packet network for the (local networks)."
Analysts believe CopperCom needs to broaden its product offerings, and therefore its revenue possibilities, particularly in the face of competition from similar voice-over-DSL equipment companies such as Jetstream Communications, TollBridge Technologies, Accelerated Networks and General Bandwidth, among others.
The high-speed Internet access market is set to explode in the next few years, with Net-based voice services serving as a key driver of growth. TeleChoice predicts there will be 9.6 million DSL lines in the United States by 2003, up from 504,000 last year. Meanwhile, U.S. Bancorp Piper Jaffray, in a report released by the investment bank last month, predicted voice-over-DSL lines will increase to 2.9 million lines by 2002, up from about 200,000 lines this year.
Already one of the leading equipment providers in the small but growing market for voice-over-DSL technologies, CopperCom plans to sell DTI Network's software-based call switching systems in addition to its voice "gateway" equipment.
CopperCom's gear links the public switched telephone system with Internet Protocol (IP)-based high-speed networks, resulting in lower cost phone calls and multiple phone lines for homes and small businesses.
By adding DTI's "softswitch" technology, the company expects to broaden its potential customer base and allow competitive phone companies to build new voice-based applications not possible with today's hardware-based voice switches.
"The merger with DTI is all about looking a bit further down the road," said Jennifer Stagnaro, vice president of marketing at CopperCom. "Currently, the only thing service providers can do is compete on price. We want to allow the service providers to compete on differentiated services based on the technology that DTI brings to the table."
Executives said the softswitch technology will help CopperCom separate itself from others in the market, such as TollBridge and Jetstream.
"Now with this acquisition CopperCom is moving the playing field to another level and we become much more of a strategic partner for service providers as they build out their networks," Stagnaro said.
TeleChoice's Sheppard said he believes the acquisition will allow CopperCom to expand its business, rather than be subsumed by larger back-end DSL equipment providers.
"This will create a longer revenue stream for CopperCom. It positions them well for the long term," he said. "They're not designing themselves as a (company) where the only logical outcome is for them to be acquired. It gives them a longer term strategy of organic growth."
The combined company will be called CopperCom. Cynthia Ringo, CopperCom's chief executive, will serve as CEO of the combined company while DTI chief executive Dennis Chateauneuf will fill the roles of president and chief operating officer.
In another deal that could bolster CopperCom's business, Alcatel, the French telecommunications gear maker and a leading provider of digital subscriber line multiplexers (DSLAM), signed a deal with CopperCom today to resell CopperCom's voice-over-DSL equipment.
Separately, TollBridge today announced $45 million in a mezzanine round of funding led by chipmaker LSI Logic and venture capital firms Meritech Capital Partners and TeleSoft Partners.