The last nine months have seen something of a colonisation effort by US data communications companies looking to enter the European ISDN market through takeovers of British and German suppliers. In March, Santa Clara, California-based 3Com Corp arranged to buy Cirencester-based Sonix Communications Ltd, which specialises in low-end ISDN products – ISDN-to-Ethernet bridges and such. In May, Xylogics Inc followed suit with the acquisition of Watford-based Scorpion Logic Ltd, and in June Shiva Corp, headquartered in Burlington, Massachussetts, agreed to buy Edinburgh-based Spider Systems Ltd. In the last two months, two more deals have followed. In October, Aldershot-based Fivemere Ltd was bought by Network Express Inc of Ann Arbor, Michigan (CI No 2,781), and in November, Sunnyvale, California-based Global Village Communications announced its intention of buying KNX Ltd, a Skipton, North Yorkshire-based manufacturer of Windows-based ISDN remote access products.
The deals are evidence of recent changes within the US domestic market which have made ISDN a more popular option amongst a variety of customers, according to Eric Owen, a senior research analyst with consultancy International Data Corp. I think the carriers there now have seen the benefits of ISDN, and the tariffing mechanisms offered by some of these regional carriers are very favourable, he says. They’re offering flat rate tariffing where the line is open all the time, for example, which is something we haven’t seen here. In the US, according to senior industry analyst at IDC Ian Keene, the main applications for ISDN are different from those in Europe. It’s used, first, for the LAN interconnectivity market, where there’s very big growth in low-end access routers, he says. According to IDC, the proportion of branch offices with a data link to head office will grow to 80% in 1999 from 30% in 1994, and while ISDN dial-up access routers held just 40% of that market in 1994, this will grow to 80% in 1999. Suddenly, therefore, there is perceived to be a large and lucrative market for ISDN in the US, a development which has caught domestic suppliers on the hop. And quite apart from the growing US market for ISDN products, says Owen, is the incentive of a large and unified export market in Europe which demands ISDN products and capabilities as a matter of course. Companies like 3Com, Cisco and Bay Networks suddenly realised that they must have ISDN capability on their products and have come over and bought the best of breed – which is British, he says.
By Emma Woollacott
The standards for Basic Rate ISDN are now pretty well set in Europe, and also the way these products are approved for use has been formalised – theoretically, you can go to the British Standards Institute in Milton Keynes and get the product approved for all European countries. AVM Telecom Ltd, based in Londonderry, Northern Ireland, is a subsidiary of Berlin company AVM Computerssysteme AG, which holds over 50% of the German ISDN equipment market. Managing director Jeff Dukes comments: Frame relay was adopted very heavily in the US and not so much in Europe; conversely, Europe went into ISDN in a big way and the Americans did not. They simply do not have the products that are Europe-compliant, but they feel they should export – as we all should. The biggest problem for US data communications companies wishing to enter the European market isn’t product development, according to Dukes, but the lack of a customer base and distribution channels. The speed at which this technology can be developed is just a few months for a new controller or terminal adaptor – but it takes longer than that to get acceptance in the market, he says. He added that while he believed that AVM Computerssysteme had been approached with an eye to a takeover by a number of parties, he was not aware of any details. However, he said, the company was doing too well to be interested in a takeover. Nigel Oakley, UK product marketing manager at 3Com, agreed that the series of takeovers was evidence of the continuing strength of the European ISDN market. It’s only recently that American customers and suppliers have recognised the strength of ISDN, he said. The European market has been very advanced in its development and usage of ISDN, and a lot of that has been driven by the fact that the leased line tariffs here are heavier. But the American market has recognised the power of ISDN, and it’s starting to grow. As well as the Brits, German ISDN suppliers are proving desirable takeover targets for North American data communications firms. Recently, for example, Montreal-based Eicon Technology Corp took over German board manufacturer Diehl ISDN GmbH.
Again, the reasons are attractive technology and an larger market and customer base: Germany has 51% of the total number of ISDN lines in Europe, according to IDC. France is less popular, says Keene: It’s not as big as Germany, and there are two conflicting standards for the application programming interface – PCI in France and CAPI in Germany – and CAPI is selling in a seven to one ratio to PCI. Although it might seem as if there’s hardly anybody left to be taken over in Europe, analysts say there’s likely to be more market consolidation yet. Owen suggested that attention might shift slightly from ISDN hardware vendors to suppliers of ISDN software applications. However, he said, the hardware takeover trend is not over yet. I don’t see any signs that 3Com, Cisco and Bay are going to stop their acquisition trends. 3Com, it appears, is constantly evaluating 20 or 30 companies so that if the chance of a takeover comes up they’ve already done all their research, he said. There is always the case of companies making acquisitions in order to get into new channels in Europe – you could argue that UB Networks Inc, for example, would be desirable to a US vendor.