Good morning. Welcome to the DZS Horizons 2022 Investor Day. I'm Ted Moreau, Vice President of Investor Relations. I wanna thank everybody who's joining us here live in Dallas, and I wanna extend an online welcome to all of our online attendees. We have an incredible story to tell. But first, I'm not gonna read the entire statement. Basically, what you have to know is we're gonna make forward-looking statements. All of our numbers are gonna be non-GAAP, and we have risks and uncertainties that are outlined in the 10-Qs and 10-Ks filed with the SEC. For the majority of my career, I was a sell-side analyst, transitioning several years ago to investor relations. I was absolutely thrilled to join DZS. I thought..
All I could think about was, "Man, this company's gonna go through a transformation that's gonna be absolutely incredible." You know what? It's exceeded my expectations. We started to show that in 2021, but we're just getting started, and it's gonna be an amazing journey, and I'm glad that you guys are joining our ride. We are led by Charlie Vogt, our CEO, a third-year technology industry veteran. He has incredible vision, passionate about what he does, but more importantly, he's just a great person, and he really cares about his employees. He may owe me a round of golf or not. All joking aside, please join me in welcoming Light Reading's 2021 Person of the Year, our CEO, Charlie Vogt.
Well, thank you, Ted. Welcome to hot Dallas in May. I think we hit 95 degrees yesterday, so I apologize for that. I want to say something because it feels weird that we're all here together. It's been almost 2.5 years before we've been able to have a conference like this. To have this many people who have actually flown into Dallas to spend the entire day with us is pretty remarkable. I just wanna say sincerely thank you for everyone who made the trip. I know there's about 35 online attendees. It's asking a lot to spend, you know, 3.5 hours with us today. We've got a lot to share with you. There's a lot for us to be excited about.
For the analysts covering the company, shareholders who are here, we have some media that's here. I think you'll get a lot out of today. You have an agenda in front of you. There's a lot for us to cover. My job today is to really tee things up for the smart people in the room. We have Miguel Alonso, who's our new Chief Product Officer. That'll cover a lot of what we're doing on the fiber to the home and converged and optical side of the business. He's got two of his key product line managers that will also be up here speaking on what we're doing to transform both the network as well as the consumer experience from a software perspective.
We have Gunter Reiss, who recently joined the company from A10 as our new Chief Marketing Officer. He's gonna talk about the enormous opportunity the company has and what we're doing to pursue that. You'll hear from Misty Kawecki, our CFO. Following that, we'll have an open mic Q&A, where I'll bring Misty and Miguel up here with me, and we'll do the best job we can to answer any questions that everyone has. I don't know if you got an opportunity to see the Kentucky Derby last Saturday, but it was pretty amazing, not to mention the fact that I actually bet on this horse.
It sort of was a surreal kind of moment because, you know, for me, who has been here at the helm for almost two years, it felt like Rich Strike and DZS had a lot in common. It's a company that, you know, we've been working really hard to sort of reinvigorate the brand. We've obviously done a lot. You're gonna learn as to what we've done to really bring on a luminary management team. Here was a day where you had a horse that wasn't even in the race that got an opportunity to participate 30 seconds before the race started. The owner had never been in the Kentucky Derby. The jockey had never ridden in the Kentucky Derby.
Odds of winning was 80- 1, and they won. I'll leave that as a subliminal note because as we go through the day, I think there's a lot of similarities. I'm also super excited that since COVID, I've never had a board meeting with everyone in person. We have two of our board members that traveled in all the way from Seoul, Korea, that were here. In fact, we had an all-day board meeting on Tuesday. Tuesday night, they got an opportunity for the first time in their lives to actually see an American baseball game. The Rangers actually delivered. It was an exciting day, but I just wanted to, if I could, just quickly introduce them. Min Woo Nam is our Chairman of the Board.
He was the founder and CEO of DASAN, which was part of the merger with Zhone Technologies in 2016. A very brilliant entrepreneur, has done amazing things in the Korean and Japanese market. He'll be here all day and this evening for those of you who wanna speak to him. The guy that sort of makes everything happen for him is Choon Yul Yoo, who they've been together, I think, a little over 30 years. He's been his operating partner, and he's here as well. Dave Schopp is another independent board member, very successful private equity leader in the industrial space and has been instrumental. He was instrumental in recruiting me into the company. Barbara Carbone is a 30-year...
I don't wanna say that 'cause you don't look like you've been 30 years. 30-year retired KPMG leader. Joon Kim left yesterday. He had another commitment, but he was actually in. We have two exceptional board members that have spent most of their career at KPMG. Then Matt Bross, who is an icon in himself. We're really lucky to have Matt on our board. As you'll hear from John Cioffi today, Matt has spent his entire life in the technology space as was the Chief Technology Officer at WilTel and then British Telecom.
Had the unique opportunity to be the CTO, the global CTO of Huawei for a number of years, which has certainly brought us a lot of insights, especially as we think about and pursue the aggressive capex and grow replacement opportunity. I just wanted to say thank you for the five of you to be here. I thought I would just baseline today. I just got a couple slides on 2021, but I do think it serves the purpose of where we are today and how we got to where we are. As I said, I joined the company in August of 2021, or in 2020.
January of 2021, we had a mission to really eliminate 100% of our debt and to raise enough equity for us to really begin to invest in the very aggressive playbook that we had laid out for the board. In January of 2021, we raised $64 million. It was 3.5 times oversubscribed. Since then, we've acquired two companies in 2021, Optelian, which was an optical transport company that really has helped us to accelerate the pace of what we're doing on the mobile and optical edge front. We also acquired a software innovator called RIFT, who had spent seven years developing an amazing platform for network and access orchestration and software automation. We launched 29 new products last year.
We launched what we call XCelerate, which is our next generation GPON portfolio. We delivered $504 million in orders last year, which was 62% year-over-year increase. We ended the year with $350 million of revenue, which was up 16%. We ended the year with $225 million of backlog. We had 105 new customers. It was quite a year for a team and a company that, in its own right, was going through a significant amount of transformation inside the company. Just to kind of look at our profile, this is, you know, just year-end 2021, which has shifted a little bit, and it will over the course of this year.
If you look at our regional breakout, you know, Asia has been a big participant in the company's orders and revenue over the last, you know, three, four years ever since Zhone and DASAN came together. As you can see, for those of you who are following the company, the Americas, which makes up North America and Latin America, has really been on a surge, and we've done a lot to increase our share in those two markets. EMEA has also grown significantly. We ended last year with Asia representing about 50% of our business, Americas representing 30% and EMEA 20%. From a technology perspective, we've kind of been hovering in that 75/25 range from a fixed and mobile perspective.
You'll learn today that really the catalyst for mobile for us is Open RAN. There's a lot of exciting attributes as to what's going on right now in the mobile space, and specifically the acceleration and the adoption of Open RAN. We believe that as Open RAN really unfolds, we're gonna be in a really good position. You know, to the right of the slide just kind of gives you an idea of some of the customers that we claim as DZS customers today, and certainly, we're working hard to grow those. I thought this was an appropriate slide since I don't have anything in the presentation today that talks about supply chain and inflation.
It certainly is overshadowing a segment, not just with DZS, but our entire segment that really has an amazing opportunity over the next decade. I don't know, in my 30 years in this space, my 20 years being a CEO, that I've ever seen a market that has so many tailwinds, although it's overshadowed with the challenges that we're all facing today. You know, last week in Shanghai, I think there was 700 ships that were at sea waiting to port. It is a reality of our business, but I don't think that it is a defining element of the success of companies in our space, especially when you look at the demand curve. You know, broadband today has really truly become an essential service.
I say this often, but given a choice of AC or broadband, most people would take broadband. I think that, you know, when you look at the fact that there's $130 billion worth of government stimulus funds behind this industry, there's a lot for us to be excited about. We're gonna talk a lot about our playbook, which really hasn't changed. We sort of launched this playbook 18 months ago when the board brought me in, and the first priority for me was really bringing in the A team. You're gonna get an opportunity to meet many of them today.
You know, one of the most proud moments of my career was when I was running GENBAND, and we took a company from an idea to about $800 million in nine years in one of the most challenging times. If I look at the team that we had there and I compare it to the team we have here today, the team we have here is just off the charts amazing. At the end of the day, it's all about people, and we have some of the best and brightest that are leading this company. The opportunity is huge. I mean, we're chasing a $25 billion market, and that's our addressable market.
If you look at the sub-1 gig to multi-gigabit upgrade cycle that's underway right now, you look at the evolution of 5G and Open RAN, you look at our pursuit and the opportunity we have here in North America and Europe, it's significant. Certainly, you'll hear from me and you'll hear from others, you know, the opportunity that we have across Europe. You know, Europe is one of the regions around the world that are probably the furthest behind from an evolution to fiber to the home. You also look at the fact that that region happens to be a market that historically was made up of Nokia, which was Alcatel- Lucent and NSN and Huawei.
The opportunity for us to participate in a lot of these cap and grow opportunities across Europe is significant. From an innovation standpoint, I'm just telling you, we're doing some very, very innovative things today. You'll hear from Miguel and his team. I mean, our approach to next generation multimedia PON is like no other in the industry. We launched our Xperience and Expresse, as well as our XCelerate portfolio, our next generation combo card, which you'll learn about is something that is very unique in the space. Obviously, you're gonna hear a lot more about what we're doing to double-click on the service assurance and consumer experience part of the portfolio with DZS Cloud.
Let me just take two minutes to introduce the team. There you go. You'll hear from Misty later today. She's our Chief Financial Officer. She was with me at now Ribbon when I was at GENBAND, but she was CFO of MediaKind. Daniel Won has been with DASAN almost from the beginning. He's our Chief Revenue Officer from Asia. Jay Hilbert, who's also here, is our Chief Revenue Officer for the Americas as well as EMEA. Jennifer Yohe joined the company about a year ago, spent most of her career with Comcast and Charter, I'm sorry, Comcast and Time Warner and is doing a lot to open doors in that market segment, which is a new growth area for the company.
Gunter Reiss joined the company three or four months ago from A10, where he was Chief Marketing Officer there, brings a tremendous background to the company. He spent more than a decade at Ericsson, so he's got a really strong software as well as mobile background. Geoff Burke, who's our Chief Strategy Officer, spent most of his career at Calix and has been here about two years, helping us do some pretty amazing things within our ecosystem and growing the business. Andrew Bender is not here today. He was in Australia and didn't make it all the way back, but he's our Chief Technology Officer, and he has really been instrumental in a lot of the core innovation that we've been working on. He joined us from VMware.
He was also with me in the growth that we had at GENBAND over the years. You're gonna hear from Miguel, who spent most of his career at Calix. He was pretty instrumental in what Calix was doing to evolve from platforms to systems to software and some of the transformation that he and the team are working on here today is amazing. Norm Foust recently joined the company. He's running operations. He spent his entire career in this space running supply chain and manufacturing, started with AFC, which was acquired by Tellabs. Then he went on to Calix, and then he was with Cyan that recently got acquired by Ciena. He's done a fantastic job scaling companies. Laura's out of town.
She runs HR and people around the world. Justin Ferguson is also here. He's our Chief Legal Officer, and Raghu Marthi is our CIO. We have quite an amazing team that I wanted to highlight there. I'm not gonna go over our segments in detail 'cause Miguel and the team are gonna do that. You know, when you look at the size and scale of DZS and you look at, you know, the portfolio that we're covering today, it's pretty impressive. I mean, we have one of the most comprehensive broadband connectivity portfolios of anyone in the space. In a matter of literally a year, we've done more in the software space than I think many of our peers have done in the last decade.
You'll learn why we feel like the software assurance and consumer experience portfolio has us in a very unique place. Then on the mobile and optical edge, it's really been a combination of us innovating organically as well as through some of the M&A that we did with Optelian. We talk a lot about where we're at right now in the space. As you'll hear from us, and I think you'll hear from many of our peers, we're really in the early innings both from an innovation perspective as well as where we're at from a deployment cycle. In fact, I've been talking a lot about what I believe is a dual super cycle.
I mean, you've got an upgrade cycle right now from sub- 1 gig- 10 gig on the fixed side, and you've got an upgrade cycle that's underway right now from 4G- 5G. Right behind that, 5-6 years from now, you're gonna see the next wave of fiber to the home, which is gonna be somewhere in the 25-50 gig, and you're certainly gonna see the evolution from 5G- 6G, and that's just gonna give us a significant opportunity to continue to grow that. Gunter will talk a little bit more about this, but this is our bottoms up addressable market.
We took all the data from Dell'Oro and Omdia, and we scrubbed it and looked at where our products are in the market and what we believe our addressable market to be, and it's pretty significant. I mean, it's over $20 billion. We're just scratching the surface right now with the products and services that we have, but it's a pretty significant market that we're chasing. You know, I think we're up to $125 billion of government stimulus funding that's behind this broadband era.
Something that I know we're all sort of consciously aware of right now, but it's still something to pinch ourselves because, you know, we've been going through upgrade cycles for years, but we've never had this much government stimulus behind this sector. I think it speaks volumes of just where governments around the world see the need for internet and high-speed broadband in their markets and how important it is to their competitive nature. I thought it would be important to just kind of appreciate where we're at in the upgrade cycle from DSL to PON. As you can see, ever since the pandemic, you know, fiber to the home and high-speed PON solutions have really taken hold.
This is direct from Omdia, and you can see that, you know, really by 2030, we see this market growing from about 1 billion- 2 billion subs, most of which is gonna be dominated by PON. On the right-hand side of the slide, it just kinda shares where we're at from a TAM perspective, but we're growing from a market that's, let's call it $10 billion-$20 billion, over the next 6-7 years as well. This is the European chart that I was sharing with you earlier, and this is where we think we have a great opportunity, especially when you consider that Nokia is in most of the service providers that span Europe.
Huawei was either a primary or a secondary supplier to so many of the service providers that spanned the European, western European especially markets. When you look at the forecast over the next 3, 4, 5 years from DSL to PON, it's pretty staggering. If you look at that just in its own organic state, and then you look at the opportunity for us to rip and replace some of the Chinese suppliers, it's pretty exciting. There's a lot of activity that the company has today. There's probably more RFP activity in Europe that we're chasing today than any region in the world. This is just a chart to show just where are we in the fiber to the home PON market perspective.
On the left-hand side, it just gives you an idea to see where we're at from a GPON to XGS-PON evolution. You can see that, really over the next 2, 3, 4 years, we see a significant amount of XGS-PON that gets deployed. While there's a lot of noise about 25 gig and 50 gig, you can see from this chart, there's a little that gets deployed here over the next couple of years. On the right-hand side is just the ONTs that sort of follow the core OLTs that get deployed inside the network. We have really invested a lot of time and energy in the O-RAN space. Why? We think that it's transformative.
We think it's a game changer for companies like us, companies that historically haven't had an opportunity to participate in what was historically a very closed network. The way 3G and 4G and even 5G networks have historically been built has really been with three suppliers in a very closed and proprietary nature. As O-RAN really evolves, it gives companies like DZS an opportunity to participate in a very large market, and it's a $30+ billion market.
If you look at how this market evolves over the next several years, this is data that was recently gathered from some of the top service providers around the world, which are really saying that over the next few years, you know, more than 50% of all the service providers around the world will begin to deploy some fashion of O-RAN. When you look at the slide to the right, you can see that, you know, by 2025, you've got an O-RAN market that's representing about 10% of the traditional mobile market. What are we doing to help service providers increase their average, their ARPU as well as just lowering cost and lowering churn? It's all about delivering next-generation multi-service fiber to the home solutions.
It's about leaning into what's going on inside the home. There's a lot of innovation that DZS is participating in right now with next-generation Wi-Fi solutions and mesh solutions. Obviously, what we're doing in the core with our service assurance and software automation tools, as well as what we are doing now with the transaction that you'll learn a lot more about today with ASSIA, that really gives us a different kind of participation inside the home from a customer experience software perspective. Our mission is pretty simple. We wanna transform, we wanna help transform the service providers. We believe today's Telecom provider is really transitioning and aspiring, and wanting to become an experience provider. It's really all about delivering smarter services faster and at scale.
We'll talk a little bit more about this, but this is our in-home upgrade cycle opportunity. I mean, on the left-hand side here is just a chart that speaks to who we believe tomorrow's service provider wants to be, and it's really all about the agility. It's about being more aware of what's going on inside the home. It's about being more adaptive and being able to deliver a lot more data analytics. In the middle here is, you know, our portfolio. I mean, we have one of the most complete portfolios from ONTs to Wi-Fi devices to now in-home software solutions that gives us an opportunity to participate both on the infrastructure side as well as on the enterprise and recurring revenue side.
In a minute, I'm gonna introduce John Cioffi to you, but last Tuesday, we announced what we believe to be a very transformational acquisition of ASSIA's two primary software portfolios. The first is called Expresse, the second's called CloudCheck. Expresse is really a service assurance and data analytics tool that has historically been the differentiator for ASSIA to really provide the line conditioning and signal quality that a lot of the service providers around the world required. CloudCheck is really all about how do you participate in in-home experiences?
How are you giving, you know, the consumer the controls to be able to manage their Wi-Fi network, to be able to manage security, to manage other devices that are in the home? You'll get an opportunity later today to actually see our experience studio that we unveiled this week. The transaction includes about 110 employees, 85 of which are software developers. They're, you know, they span between Silicon Valley and Madrid, Spain, where most of the engineers are. There's about 60 customers that come with the transaction. We're highlighting a few here.
I got an opportunity, you know, during the due diligence period, along with John, to speak to a lot of their customers, and it was really exciting just to see just how transformational this is and how exciting they were for DZS to be the company that is acquiring the technology. This is a slide that really just helps you appreciate what our DZS Cloud portfolio looks like today. On the left-hand side is our service assurance and software automation platform, something that we call DZS Xtreme, and this was fundamentally accelerated when we acquired RIFT. On the right-hand side is DZS Xperience, and this is, again, everything to do with increasing the subscriber satisfaction and giving us an opportunity to participate in the experience of the in-home user experience.
As you can see, with the ASSIA assets, you know, we really complete the gap that we had. You'll hear more from the team today about the two specific software platforms, but we couldn't be more excited about the opportunity that we have. For us, it's about leveraging our install base. If you look at just the fiber to the home opportunity, we have an opportunity to upgrade our sub-1 gig- 10 gig. Now with our software portfolio, we have an opportunity to sell into our existing broadband connectivity and mobile transport portfolio. As I said, we think that takes somewhere between 5-7 years and the cycle's gonna repeat.
It's an opportunity, we think, over the next decade to participate in the dual super cycle. This is what the footprint looks like with both DZS and the ASSIA customers coming over. DZS has about 20 million connected homes. ASSIA has about 125 million connected homes. Together, we touch about 150 million homes, so the opportunity for us is significant. Something that I've said many times, you know, for us, we're really focused on the tier 1 and tier 2s.
You know, in the end, when you look at the number of subscribers, when you look at the number of connected homes, and for us to really be able to move the revenue needle, the margin needle, and the earnings needle, it's really about being able to penetrate these large tier 1 and tier 2s. Everything we're doing in the way we're building products, the way we're designing our service and support, is really all around tier one and tier two customers. You'll hear a lot more about this from Miguel today, but you know, what gets us really excited is the fact that we have a very comprehensive broadband connectivity portfolio.
Now with our software portfolio, we really have a unique ability to enable, you know, what we believe to be the industry's most complete end-to-end solution. This just gives you an idea of what the customers look like at the end of this transaction. You know, today, I think DZS represents somewhere around 20 of the top 50 service providers, and with ASSIA we'll have 30 of the top 50 service providers. For us, it's a game changer because the ability for us to cross-sell, for us to be able to lean in and partner with a lot of these service providers in a way that we're not doing today is really what this transaction's all about.
This slide really is how we sort of looked at the transaction. There's common customers that we have an opportunity, like an empty slot, where we have an opportunity to do more with. You look at a company like LGU, which is one of our largest customers in Korea, that we have a big installed base on the fiber to the home perspective, that we have an opportunity to introduce the software portfolio to. Then from an ASSIA perspective, you take a customer like Liberty Latin America, where they have a great footprint, and it gives us an opportunity to cross-sell in our fiber to the home and mobile and optical edge solutions. How big is it? It's pretty big. We think, and this is again data that we assembled ourselves.
We think it's a $1 billion recurring revenue opportunity for DZS. We looked at the 150 million homes that we'll have. We looked at the 700 active customers that we have. Obviously, we don't have the math on the slide for a reason, but we looked at what we believe the enterprise license opportunity is for DZS Xtreme, and we looked at what the subscriber-based opportunity is over time with our CloudCheck and Expresse software portfolios, and we think it's a pretty significant opportunity. Before I hand things over to Miguel, endless opportunity for us from an innovation perspective, very focused on open standards. From a software perspective, I think you're gonna continue to see us double-click on this particular area.
You'll, for those of you that are here, you're gonna get an opportunity later today to actually get a walk through with our lab. We've got an 8,000 sq ft working lab next door, and we unveiled yesterday our experience studio, which is pretty amazing. I mean, we basically took what we believe to be an average studio with two people living in the home and all the different attributes from different IoT devices to esports to just ultra-high definition and video conferencing. To be able to do all those simultaneously, you need a gig of data.
What's even more interesting is, we just passed here in the United States, a $42 billion broadband stimulus bill, and the guidelines on that bill is 100 meg down and 20 meg up. For those who wanna participate, like we believe most consumers do in the home, they won't be able to do it. We believe that fiber to the home is essential, and we're excited to be able to share that with you guys earlier today. We're just getting started. To bring back the analogy of Derby Day, we see DZS really as the horse in the race that I think people need to pay attention to. With that, let me introduce Dr.
John Cioffi, who I've known for many, many years. He's kind of been the godfather of DSL. He's done some things in this industry that's pretty remarkable. He's been a professor at Stanford University since 1986. He still is a professor there. He's still teaching when he has bandwidth. He started ASSIA in 2003 with really the premise of delivering signal quality or ratios and technology that the industry really needed, especially when you looked at, you know, the challenges with conditioning on copper lines. That has, over the last decade, really evolved to support PON. You know, he was very successful with Amati when he sold that company to Texas Instruments in 1997. He's got over 150 patents that he holds himself.
We're really excited about this transaction together, John. With that, say hello. Thank you. Thank you. Thank you.
Well, thank you for that kind introduction, and hello, everyone, today. It's been a long time since I've been to the horse races, I think when I was a kid, so I'm getting prepared for that. Following Charlie, it's a hard act to follow. ASSIA is a kind of company that a lot of people haven't heard too much about. We've been around for a while, and really the idea was improving broadband connectivity. One of the things I sometimes, if I'm giving a large public talk, and I'll try you guys here, I'll say, "How many of you have had a problem using your cell phone or the Zoom call stopped and froze or whatever in the last week?" Right? We're getting about half the audience here for that.
Those of us who work in broadband over the years, maybe we haven't completely done our job yet because these things still have these issues and don't work so well. With that kind of looking at broadband connectivity, today you have kind of the edge of the network over on the left-hand side. You may have fiber going to some intermediate point in the network, or you might have twisted pairs all the way. I've kind of shown both here, fiber to the home and then halfway there. What you do find is a lot of the fiber numbers that you'll see in the statistics out there. If you dig down in most of the analysts' work, you'll see that there's a lot of shorter DSLs at the end.
The fiber doesn't quite go all the way. In listing it, for the public, obviously it sounds a lot better, if it's a fiber connection. There's still hundreds of millions of those out there, but with fiber increasingly getting closer. When you get to the home, of course you have the devices in the home now. It doesn't stop there, and you wanna connect, and typically that's Wi-Fi, these days. When we got started with this, 20 years ago or so, the idea was trying to apply artificial intelligence to the connectivity level, the, broadband to the home, connections, whether that's a PON, whether it's a copper connection or a combination of those two, and to try to learn what's going on and improve the experience that the customer sees.
As you get into the home, about 2009 or 2010, it became evident to us that the preponderance of the expense that a lot of our customers were seeing in terms of service of the customer, whether that's calls, handling calls or dispatches, was actually occurring inside the home. We needed to do something there if we wanted to continue to drive the value proposition of dropping their operational expense and improving their use. As we kinda drove off the footprint, there were some opportunities for the Wi-Fi even where we didn't have an Expresse presence, but a lot of those did derive from having the fixed line connection. What our product basically does is it collects data from a lot of the intermediate points along the connection path. It processes them.
It looks, it tries to analyze and find where the problems are, how important are those problems. Is that a problem that the customer's gonna notice and complain about? Intelligent optimization, where you actually try to tune the link, any parameters that are available, learn the best settings for them. That's sometimes called a profile. We adapt basically the connection, and we try to do that across all different types of equipment. That's the vendor neutrality that Charlie mentioned previously. Hopefully that gives you kind of a basic idea. We were doing AI in broadband before it became popular, before the terms virtualization and so forth came into common use. To give you kind of an idea on the evolution that we've gone through, really it was just me and my wife. Her name is Assia. She's French.
You see the little Eiffel Tower and the emblem there. We fit an acronym, Adaptive Spectrum and Signal Alignment, to it. I was doing some consulting work. It was largely with the old SBC group, which is now AT&T, developing something for their network. Whoops. Got a bunch of slides came up there at once. Actually, we didn't have the traditional venture capital type of foundation of the company.
It was actually us and AT&T co-developing a product which they use throughout their network today still, and then we had the exclusive rights to take that to the rest of the world basically as part of that program. We began to grow the company in a couple of phases, kind of company development, scaling more R&D, adding to the footprint, global expansion, that went to multiple continents. Basically our current offerings today in the Wi-Fi and the Expresse DSL and PON space. Of course, the last step here is the imminent acquisition of this business unit from us by DZS. Give you again maybe a simplified view of that same diagram. You can have problems in the fiber link. Actually, it's not error-free by any means.
You can have it in the copper section, you can have it in the wireless section, or any of those combined. In the Expresse product inside the dotted box here, basically, the idea is to get a stable connection. Then people won't be raising their hands like you all did at the beginning of the talk here. Lower the complaints, lower the dispatches, reduce the churn. That's a pretty substantial value to most of the service providers. Typically, it really makes a dent in their budget. I won't give you any numbers here today on that, but it's important for them to run their networks. Essentially, what we're doing was virtualizing the access connections with Expresse. It comes down to basically management and cancellation of crosstalk and other impairments that you see on the connection.
Now, that's evolved, the opportunity for GPON as it starts to go in, maybe all the way, maybe part of the way, a lot of our customers today, we manage both of those. As they're migrating their network, the natural thing is just to evolve on the Expresse product, to the newer, fiber connection, whether it's part of the way or all of the way. Our footprint has largely remained the same as the world evolves on the, fixed line side, to more and more use of PON. Here's just some examples. This is kind of supportive of what DZS is doing in that the different types of PON are starting to roll out. We started with 1Gb PONs, now we're going to 10 Gb PONs, there are 40 Gb PONs.
There's even some exciting stuff in the XR space and so forth in the future that was mentioned earlier. The plan is to keep evolving the product just as we did from DSL to fiber through the different fiber alternatives, as that market grows. Next, is the CloudCheck. This is the part that's inside the home, okay? If you have a fiber connection, you're still gonna see about 25% of the time, the fiber is the problem if there's a broadband issue. The other 75%, you're gonna see it's a Wi-Fi issue inside the home. It's about 50/50 on the copper networks in terms of where the root causes are occurring.
Now focusing inside the home, the connection from, let's say, the gateway or the access point, your router, if you will, in your home, the idea is again collecting data, bringing it back to the cloud, that's that CloudCheck server, okay? There are different mechanisms that are in standards, and we've been very active in contributing to those and seeing them evolve and develop. We do have a little piece of software that goes inside the gateway. It's called an agent. There's another set of standards on how to connect those agents to the underlying hardware. This is so-called purple mesh, multiple extenders, or if you like, repeaters inside the home. We have software agents in these places.
We have the cloud software, and we repeat the same process of trying to drive down the customer call rates, the customer dispatches, but in this case related to the Wi-Fi connectivity. I'm not gonna go through all the items on this list, but basically, we do analytics on Wi-Fi. There's a lot of specifics that will relate to an issue and what its resolution might be, and being able to determine not only what it is, but where it is very important. Is it in the interface? Is it in the gateway? Is it in the station? Is it on the connection between, is it something simple, like a password error, or is it something more complicated like other systems interfering? To be able to discern where the problem is and what you might do to fix it.
If you can fix it automatically, of course, that evolves, that happens without any human cost, and you reduce the operational expense that the internet service provider would incur to fix that problem. There's lots of different types of ways to do that, and we've developed algorithms, and they're artificial intelligence based again, that allows us to basically learn from the connections, what's wrong, how to fix it, how well did that work, update it again, so forth. Because we now have all of the segments in the broadband connection to the home and to the end device, there's an overall end-to-end type of analysis that can occur. Where is the problem among those segments? Specifically, what type of issue is it? How important is it?
Would the customer complain? Hopefully that gives you an idea about ASSIA and what we're bringing to DZS as part of this imminent transaction. Thank you.
Thank you, John. Thanks, John. That was great. As John said, we're actually hoping to have the transaction closed at the end of this month. I promise to take care of the 110 employees that are coming over, John. Okay. I have the pleasure of introducing to you Miguel Alonso. As I mentioned earlier, this is a big day for him. He is officially being promoted to our Chief Product Officer. He's been running all of PLM for the company since he joined the company over a year ago. He had a pretty significant role at Calix in managing their entire portfolio, including their Calix Cloud, in its early stages. He has done an amazing job here at the company.
I'm very happy for you and we get an opportunity with this stage to hear from you and your team. Congratulations and welcome.
Thank you, Charlie. Thank you very much. Really appreciate it. I... About 18 months ago, I had the privilege of meeting Charlie for the first time and experience what it feels like to go from zero to Charlie speed in 2.5 seconds. The speed keeps on growing. Very happy to be here. Very excited to be, and thrilled to be part of this transformation that we're bringing to DZS and to the industry. If you look at your agenda, you will see that Andrew Bender, our Chief Technology Officer, was slotted to give us an overview of the Converged Edge, the broadband and software innovation.
In his absence, I'm going to take the opportunity to just spend a few minutes talking through what are the high level guiding posts that we use to orient and inform our product roadmaps in the future. Then after that, I will take you through a portion of our product portfolio, and will be followed by Rene Tio and Rick Wank covering the entire portfolio. Everything starts with people. At the end of the day, everything that we do in the network, it is to serve the needs of subscribers, people. The last two years have shown an incredible acceleration of secular trends that had been going on for decades. People are working from home. People are learning from home. When I was a little kid, my main form of entertainment was sitting on a couch in front of the television.
Today, my 13-year-old son locks himself in a room with a VR headset, and he is part of that entertainment. Social media started to change how people interact. Teenagers today go in metaverse rooms, and they get together to hang out without ever being in physical contact. Service providers have realized that they are not the ones defining the services that their customers' needs. It's the subscribers that are defining those services, and the service providers have to deliver them. Remember, everything starts with people. As we look at the key vectors of how we orient our thinking, the empowered consumer is the fundamental building block where we start everything. From a technology point of view, virtualization is also another key element of how we think through our product evolution. Virtualization has happened in the data center for over 10 years.
It is the concept of separating the infrastructure hardware through which data runs from the control software that decides how that data runs through that hardware. It's very helpful because provides horizontal scale, it provides tremendous operational efficiency and flexibility to do the things that the service provider is trying to accomplish. Those same concepts are percolating to the access networks, and we are very active in making sure that we enable and facilitate that evolution for our service provider customers. I've been hearing about convergence for over 25 years, and frankly, it has always been a big word that had very little reality behind it. As we stand here now, I look at convergence as something real that is happening and that we are going to be enabling. It is convergence from a physical infrastructure point of view.
When you look at fixed access networks and mobile access networks, the technologies underlying those networks are very similar. Most importantly, we believe that software will enable service providers to deliver and manage services without having to concern themselves about what kind of underlying infrastructure they're delivering those services through. That's a key element of what we do. Last but not least, openness. We want to make sure that service providers are able to choose best of class solutions from best of class services, and they never become slaves to an end-to-end ecosystem provided by a single provider. Those are the things that orient our thinking. As you will see, all these things that I'm talking about here will be reflected as we go through the different product introductions later on in the day.
Also important to note, when I joined the company in 2021, we went through three transformational events in 2021 from a product point of view. The first one is we made a choice to pivot from a company that built a lot of products to a platform-based company. By that I mean a company that has developed a platform that is common infrastructure for all the products that we're building on top of it. From an internal viewpoint of view, that has the advantage of providing a lot of repeatability, a lot of efficiency in engineering. That makes me very happy. I can do more with less. It's quality because I'm doing a lot of reuse of modules that have been tested already, so they don't have to be retested every time.
The most important thing is that we are able to respond to our service providers' needs at breakneck speed. We're working with service providers in the mobile space and rejiggering our front call solutions to address their specific needs in record time. In record time. That's the result of working in that platform evolution. The other thing that we did early in the year, we acquired Optelian, a company with 20 years of experience in the optical transport space. People were looking at us saying, "Oh my gosh, you guys are getting into the optical transport." Not quite right. Not quite right. It's all about taking those optical transport technologies and bringing them into the access space. This has been happening in the network for decades.
I remember the first time I put an OC-48 interface into a DSLAM, people were saying, "You're building a transport box." It was an access box. We're bringing those optical technologies into the access edge. Then the other transformational key event of 2021 had to do with the acquisition of RIFT. We knew that for us to affect not just network transformation, but business transformation to our service providers, we needed the software to enable that business transformation. RIFT gave us the talent, and it gave us the platform to execute on a vision that took a world-leading automation software that was dedicated to the NFV orchestration world and extend it to bring it to the access network and to the experience domains.
We will have through the course of the day today, we will have Rick, Rene and myself talk through how all these transformational events of 2021 are already percolating through our product offering and our product roadmap. Over the next 90 minutes, we will now be transitioning to focus more about our products and solutions. As Charlie mentioned earlier, we chose early on to orient ourselves around four key technology pillars: broadband connectivity, connected home and business, mobile and optical edge, and cloud software. I'll start the session covering the broadband connectivity and connected home and business, and then we will have Rene Tio follow to talk about cloud software and what that does to transform our service providers' businesses. Rick Wank will close it with the optical and mobile edge presentation.
That closes the Andrew Bender portion of the session. I like the title Broadband AI on the Road to 100G. Broadband is not what it used to be anymore. Software, artificial intelligence, and higher and higher speed services are the name of the game. You now have to start to see that I like these simple but very orienting pictorial depictions of how we orient ourselves. When you look at broadband connectivity and connected home and businesses, the very first thing that we think, of course, is making sure that we have industry-leading fiber access solutions. It's the infrastructure. You have to have that. Now, that has to be paired with in-home devices that do not become the choke point of what service providers are trying to do from a service delivery point of view.
Now that you have your infrastructure, you do need the software. You need the software to make sure that that infrastructure is running well and to make sure that those subscribers are experiencing what they expect to experience when they run the network. Then last but not least, subscribers' needs evolve very rapidly. To match that evolution, we have to have the thought and technology leadership to influence the industry and influence service providers around the world to make sure that they are able to implement those technologies in the network, and that they never paint themselves into a closed, cul-de-sac. We'll go through these four key elements as we go through broadband connectivity, and you I think you will get and come to appreciate what we mean by each one of them in a little more detail.
Now, like I said at the very beginning, everything starts with people. When you look at broadband access networks, it is very easy to oversimplify the needs of the access network and define them based on the speeds that subscribers expect. We oftentimes talk about the gig to multi-gig transition. By the way, this was a meg to multi-meg transition not that long ago. Now it's gig to multi-gig. When you're delivering gigabits per second to a subscriber, you're not just delivering them to a subscriber, you're delivering them to all of your subscribers. As that bandwidth traverses the network, the needs and capacity needs that you have in the middle mile and in the network interface to your core grow exponentially. When you're thinking of gigabits in the access, you need to be thinking of terabits in the middle mile.
You need to be thinking of DWDM and wavelengths at 400 Gb per second in the interface to the transport network. I think you're now starting to see why that Optelian acquisition made so much sense, 'cause you cannot have and deliver those services without the right bandwidth throughout the system. This is something that we keep in mind as we architect our systems. The other things that are super important for us are the concepts of our design principles. What's our philosophy? We're not in the business of building one and done for meeting a specific need. We think that we need to deliver service flexibility, architectural headroom, and operational simplicity. Let me tell you about service flexibility. There is not one size fits all.
Every service provider has a different need at a different place in the network, at a different point in time. So it is very important that the broadband access solutions that we bring forward can intercept the needs of those service providers wherever they are. We want to give them freedom of choice. There is no right or wrong. There's a right solution for the right service provider at the right time, in the right place in the network. Architectural headroom is a very simple concept. I've been in the access industry for 30 years. Products that I introduced 30 years ago are still delivering service today. It's just the nature of the access network. Once something goes in, it stays in for decades. That's how we orient our product design and architecture.
We want to make sure that when a service provider is deploying fiber access solutions today at 10 Gb speeds for subscribers, that infrastructure that they're putting in the network is going to live, scale, and evolve to support the 10 Gb, the 20 Gb, the 50 Gb, the 100 Gb per second service offerings. Then last but not least, operational simplicity. The one thing that has prevented, historically, service providers from adopting new technology is the cost and complexity associated with putting new technology in the network. By that I mean multi-million-dollar, month- or year-long IT integration cycles to either introduce new vendors or new technologies. What we're doing is we're leveraging software to provide service providers with the tools they need to have multi-vendor service orchestration and network orchestration tools that frees them from having to do those very complex integrations.
We'll talk more about that in my section a little bit. Rene Tio here will have an in-depth discussion of how we accomplish that. Let me talk about service flexibility. To talk about that in a little more detail, I am showing you a picture of a line card in an optical line terminal. The only reason I do that is because this line card embodies every attribute of what we talk about when we mean service flexibility. From a subscriber-facing interface point of view, it can be programmed to deliver gig services, 10 gig services, 25, 40, 100 gig interfaces. It can be configured to enable migrations from GPON to XGS-PON, having GPON clients coexist in the same physical plant with XGS-PON clients, which gives tremendous flexibility to the service provider.
From a hardware point of view, we've used the concept of system on a card architecture. Rather than having, you know, complex systems that are made of different hardware modules, this line card is an all-encompassing system. It has your subscriber interfaces, it has the switching capacity to be able to perform the routing of traffic and the decisions in the line card itself, and it also can give you the physical network interface to route this traffic through to the network. That gives you, once again, the flexibility you need to grow and evolve your network without ever being constrained as to the bandwidth bottlenecks in the network. Last but not least, from a software point of view, the embedded software in the line card is modularized, it's containerized.
What that means is that it's while it's running in the line card, it can also be separated from the hardware and have it run independently in server infrastructure, so you can realize the vision of a virtualized network. That's what this card embodies. It's the service flexibility that I talked about earlier. Now from an architectural headroom point of view, now that you saw that picture with the gigabits going to terabits, going to 400 gig wavelengths, I think you will appreciate how we orient ourselves around architectural headroom. From a service interface point of view, the world today is in the GPON, XGS-PON, 20G-PON type services. The next step in that evolution, as is being defined by the standards bodies, is 25G-PON.
This is going to be seeing its first deployments to deliver business services, to deliver more capacity, more backhaul, but it's not the end of the road. It's just a continuation of a road we've been on for many years. We have architected our products to go to 25G, of course, but also to deploy 25G-PON as followed by the standard, and also contribute to the next generation of PON with 100 gig plus based on coherent PON. That's something that we'll be driving in the industry very forcefully. From a switching capacity point of view, we talked about those gigabits turning into terabits. We do have those centralized switch fabrics that provide that type of capacity.
What's most important is that the distributed switching architecture of our system permits the system to scale horizontally, providing virtually unlimited switching capacity. That's what service providers need to be able to have the peace of mind that this system will never stun them in the future. Last but not least, network interfaces. Today, we live in the world of 10 Gb per second, 100 Gb per second. We are already on the road to get to 200 Gb and to bring those optical transport technologies integrated into the access space so we can have those 400 gig DWDM network interfaces that are required to deliver those really high bandwidth services that we know subscribers are going to be needing in the future. From a virtualization point of view, we talked about earlier what that means, right?
It's about separating hardware from software, data plane from control functions. What the access industry has struggled with is something that the data center industry had never had to struggle with. In data centers, it's very easy to replace equipment. In the access network, not so much. I mean, this equipment is literally tied to a piece of fiber that goes to a subscriber. It's in a cabinet in a very harsh environment. So the concept of saying, "Hey, for you to virtualize your network, just forget about everything you've done. Either replace it or leave it alone, and you know, go deploy the new infrastructure that is virtualized." It doesn't quite work very well for service providers. They need an evolutionary approach.
They need an approach that allows them to deploy today in whichever way they want and evolve to a virtualized world without having to upend, replace, equipment that has been in the network. That's what we're proposing, and that's what's very unique. We do not create a chasm to go from traditional network deployments to virtualized network deployments. We create a continuum for those service providers. From an operational simplicity point of view, this is when we start talking about the software that overlays that infrastructure. To me, operational simplicity is all about service speed, agility, operational scale, and enabling extraordinary experiences. Service speed, it's about how quickly, as a service provider, I can react to the needs of my consumers to deliver new services over a heterogeneous network infrastructure made up of many, product types from many vendors using many different technologies.
We offer that with our Xtreme product portfolio. Agility is about how I, as a service provider, can incorporate new technologies in my network to meet those service needs and do it so without having to incur months of work and millions of dollars of IT integration expenses. Operational scale comes in two ways, in my view. There's an element of operational scale which has to do with being able to run a network with fewer people. There's an element of operational scale that has to do with delivering services broadly throughout the network. And just as important, be able to scale your business even as you are defining and delivering bespoke services that are high value to specific customers in your network.
You are able to have many bespoke services because you're not encumbered by those expensive integration cycles. Obviously, when you do all that and your network is running very well automatically, as John Cioffi very well said earlier, you are delivering the best experiences that you can deliver with your network. I spent a lot of time on the infrastructure, started to tease you about some of the software elements that make that infrastructure really shine. The next section for the next 10 minutes or so, I'm going to talk about how artificial intelligence is going to be driving exceptional experiences. Before going there, I think we shouldn't miss the point of what happens when a service provider chooses to transform themselves from being a network operator to being an experienced provider. What happens is very simple.
They make more money, they save more money. At the end of the day, a business is what they want to do. The way they make more money is very interesting because they make more money, obviously, because they're delivering better services. They produce higher average revenue per user. Their customers are also happier because they're getting the services they want from that service provider. They don't have to wait, and they don't have to suffer, if the service is not good. It's better services, more revenue, happy customers, customer loyalty. From a savings point of view is, you know, you're not spending all the money that you would otherwise spend, annoying customers with customer support calls or annoying customers with technician visits to their homes, or to install systems.
You're not spending the money to make up all the customers that you lost because they were not happy with your service. So make money, save money. That's the key benefit that an experienced service provider reaps when they make that choice to go from network operator to experienced service provider. Charlie talked earlier about the in-home upgrade cycle opportunity. I like to look at it from right to left. You have, on the one hand, more and more service providers choosing to become experienced providers, not network operators. You have a multi-gig upgrade cycle happening in the network that is now being followed by having to upgrade the otherwise, what would be otherwise a bottleneck in the home. You need to have equipment in the home that can support those multi-gigabit services. You need to have equipment in the home that is not dumb.
It has to be intelligent. It has to be intelligent enough to collect a lot of data, send it to the cloud so the analytics can work the magic, so it performs flawlessly all the time. It has to be cloud managed. Cannot have scale without that. From a software point of view, that's the other transformational key. Service providers have realized that they can use software to deliver differentiated, sustainable value to their customers. Differentiated makes them better, sustainable makes it better over time. From a business model point of view, that translates into a software as a service very compelling and very lucrative for our service provider customers and for ourselves.
The way we address that is, as you see in the middle of this slide, is with both software and in-home systems, be it traditional fiber termination systems or in-home Wi-Fi distributions, distribution systems. That's where I will be focusing in here for the next few minutes. Now, the acquisition of ASSIA has been transformational. You heard Charlie talk about that. John Cioffi very eloquently explained the history and pedigree of the company and the products. From a product perspective, the acquisition of ASSIA has been an acceleration of our vision to deliver an experience product portfolio to our customers. When you look at the new experience product portfolio from DZS, it is now made up of three fundamental key products. Expresse, CloudCheck, and CloudCheck Home. Each one of those interacts with different parts of the network.
They all come together to provide a single seamless end-to-end view to the service provider, and each one of those is going to be used by maybe a different type of persona within the service provider organization. They're going to be network operations people that are going to be very focused on the Expresse and CloudCheck and their combination. CloudCheck is also going to be used by customer support personnel. That is going to allow them to do and resolve customer issues very quickly. CloudCheck Home is all about the subscriber. The way these products come together, when you look at Expresse and CloudCheck, it's all about leveraging data collection, artificial intelligence to make sure that the network is always running as good as it can run to deliver services to customers. This is a hands-off approach.
This is literally data analytics and artificial intelligence, detecting issues in the network and correcting them without having to have human intervention. Now, sometimes you will need human intervention. These tools also put in the hands of the service provider the ability to proactively address network issues even before they are perceived by their customers. When they are perceived by their customers, be able to get to the root cause and resolution very quickly, so those calls are very short, and those calls don't turn into a truck roll or a service technician dispatch to address the issue. The beauty of the system is it looks at it end-to-end. It's a single pane of glass that is looking at symptoms in the network and is providing recommendations and solutions to address whatever the issue in the network may be. CloudCheck Home is...
We will be demonstrating this in our experience room today. It's all about putting control in the hands of the subscriber. At a very basic level, there's an element of automated network performance optimization that is transparent to the user. There's also an element of personalization and control. Most users, most consumers in the world know nothing about Wi-Fi. The only thing they know is whether it's working or not. We want to make sure that we can personalize that experience for them, so they can think of the network as users in a home. We want to make sure that they can have control over how those users in the home have access to the broadband services. Perhaps the most important thing of CloudCheck Home is the concept of it becoming an advanced services platform.
By that, I mean it becomes the vehicle by which we and our service provider customers can deliver more services over the existing broadband connections. Think about things like cybersecurity, home automation, home security, telemedicine. These are now things that a service provider can offer to their customers for a charge and deliver tremendously higher value to them. Let's not forget about the systems in the home, right? You still need to have that infrastructure that is delivering the Wi-Fi. For us, it's optimized in its performance using software. It accelerates the delivery of new services because it decoupled the hardware from the software. Virtualization, remember that. Software-defined networking. It enables innovation because it produces ever higher capacity and low latency communications inside the home.
Last but not least, it empowers the consumer to take control of everything they need to do over that broadband connection. To get to the close of my talk here, I hope that you will all appreciate how we at DZS are reimagining how broadband access is being delivered. I hope that you appreciate that the service flexibility, the architectural headroom, and the operational simplicity that we bring forward to our customers, service providers' customers is differentiated from anything that anybody else is doing in the industry. I hope you appreciate that our software that is capable of providing that evolution to virtualization, to provide end-to-end quality of experiences, and to allow service providers to be agile, flexible, and scalable is things that when you put them all together becomes a very compelling value proposition for our customers.
I thank you very much. I think we will be taking a break now, and we will continue after the break with the rest of the product sessions. Thank you very much.
All right. Welcome back from the break. As we resettle in the room, I just want to take a minute to introduce the next speaker. As I mentioned earlier, he will be covering more of our cloud product portfolio. So Rene Tio, please come on and join me. Rene joined DZS through the acquisition of RIFT, and Rene has been in the software and automation space for his entire career. He's pioneered technologies that are unbelievable, and I couldn't be more excited to have him be part of our team and leading that software innovation portfolio. Rene, I'm gonna let you be-
Okay.
Take us through it. Thank you so much.
Okay. Thank you, Miguel, and lovely to see you all today, and good morning. Today we're gonna talk about enabling service providers transformation to becoming experience providers. Now Miguel's already done an introduction into our product portfolio, and I'm gonna do a double take, a deep dive more on the right-hand side of cloud software. In particular, our network automation and orchestration capabilities that will really help the service providers basically deploy smarter services faster at scale. Now, Miguel talked about that, you know, now service providers are kind of like being driven by their subscribers into their usage of broadband, right? So they need to now react to that quicker as new applications come in, new use cases come in.
When COVID came around, the whole idea of what you use your broadband for changed, and service providers needed to adapt to that. Enabling them to create services that are smart at a much faster pace than they are doing this today, but at the same time, allowing them to do those services and design those services with the same level of staffing, create more services, address more subscribers, address more locations, right? That's what we mean by at scale. You're increasing the services, the ARPU, as well as, you know, keeping, making sure that their OpEx doesn't grow linearly along with those services and subscriber growth as well. It's important to understand that there have been many phases of transformation over the years, but fundamentally, there are still barriers that exist today.
There have been many missed opportunities. For example, many of us have a access service to our house, and you know, the most common one is high-speed internet. Many of our customers today are really just doing high-speed internet, and they are really differentiating based on speed alone. That's not a big differentiator. It's relatively simple for me or any other of their customers to pick another high-speed internet service from a competitor, and if there's no differentiation, you know, they lose out. Why is it that the access providers or service providers today are differentiating only on speed? Well, the reason is that it's easy to deploy.
As you move towards the high revenue services that are targeted towards specific customers, like power users, power gamers, or specific verticals, like for telemedicine or things like that, it becomes much harder to deploy because now you're talking about multiple locations, you're talking about SLA guarantees. You're also talking about a multi-vendor ecosystem that you have to deploy this over, as well as multiple segments of the network. Not just the Wi-Fi at home, not just the OLT that's in the network, but even the transport segment as well as various other things like BNGs and all these things that comprise what we consider a broadband service or a network service to the subscriber.
The bottom line is, they're missing the opportunities because the service providers don't address enough of those things that are on the right that, you know, give them higher ARPU because they're just a little bit more difficult or quite a bit more difficult to do. The second thing that we see, that is a barrier to service provider transformation is just the types of choices they have for automation today. Many service providers today do automation through what we call a high code method, which means that they actually have people who are in-house that are coding things, you know, on the fly for each service, for each new integration to a vendor, for each location that they add or each acquisition that they make.
These high code options, of course, require a lot of people. They require a lot of new people to develop. They require a lot of people to maintain. Worst of all, it takes a long time to develop. You know, a lot of staff, and the time to service is lengthy. Now, there is an alternative which some service providers do, and they rely on their suppliers to do this, the coding, and that introduces even more problems. While you know they don't have to increase the staffing, the cost of that service because they rely on their suppliers to do this becomes high. You have the same lengthy time to service, the lengthy development cycle, but worst of all is that they're no longer in control of their own services.
They have to rely on the supplier to do the service for them, and they're locked into the supplier, right? At DZS, we wanna throw that out the window. We wanna make it simple for service providers to design their own service, to do their own integration into their multi-vendor ecosystem, to be able to design these services exactly once and deploy them network-wide over their entire install base of multi-vendor, multi-segmented ecosystem. That's how we envision the transformation of a service provider. Now, how do we arrive at this? It's important to understand that we've always at DZS, we've been on the forefront of automation now for, well, since 2015. We were actually the first open source orchestration system out there.
In 2015, we, along with some like-minded suppliers, Intel and Telefónica, formed Open Source MANO, OSM. This was the first open source orchestration out there, which, you know, which is what brings us our DNA of openness and multi-vendor capability. We continue to expand by providing automated network assurance, which further, you know, expanded our capabilities in being able to do network automation and took that in 2018 into a very well-known standards body called TM Forum, where we did an award-winning proof of concept with about 10 other suppliers to show how you can do multi-vendor services and multi-vendor network automation and network assurance. We continue to build on this by providing the world's first open 5G-capable orchestration system. We partnered with Mavenir.
While other suppliers were still doing silos with their own network 5G functions, we took it and made it open. In 2021, we introduced the first intent-driven automation system out there, which allows a service provider to take their ideas of a service and then be able to map that out by themselves into detailed configuration into the entire network ecosystem. Now, all of these capabilities are built into DZS Cloud today. You see the same, you know, the four bullet slides that Miguel loves, I love it too, which show the four guiding principles of DZS Cloud that are in the system today. The first of that is the ease of use on the left-hand side.
We wanna make it easy for service providers to design their own services, not rely on their suppliers, not rely on any supplier at all, but to be able to design their own service, and more than that, to be able to deploy that service, that same service that they designed network-wide across locations, clouds, vendors, you name it. The ease of use is driven by our UI. Everything that a service provider wants to do, they can do with a single pane of glass UI that it has drag and drop APIs, a drag and drop interface that allows them to design the service and then and wizards on the back end to walk them through the whole idea, the whole process of deploying this network-wide. The ease of integration is another key capability of DZS Cloud today.
The idea here is that instead of relying on suppliers and being locked into a supplier, you put the capability of integration in the hands of the service provider. Many of our customers already do this themselves. They do write their own scripts to do integration. What we do with the ease of integration is we lower that amount of scripting and custom coding that I have to do by adopting what is known in the cloud industry as low code principles. Just by dropping the amounts of code that they have to write, you shorten the time to service and also you shorten the and you also lower the maintenance and development costs for each service.
The end-to-end intelligence on the bottom left is extremely important because you want the network, in essence, to run itself. You can gather analytics from everywhere, but if you're not doing anything with those, the data that you're gathering, right? That data is just sitting static somewhere. The end-to-end intelligence is the idea that you take the service as a whole. That you can visualize on the UI, on the single pane of glass, again, across multiple segments and across multiple vendors, and then be able to drill down on that service.
At the top level, you'll have a dashboard that says, "This service is running good for this subscriber." If it goes yellow, you double-click and go down, "Oh, you know, which segment is it that's going yellow or going red?" That's the idea of taking all that data that you get, and then being able to map that out and follow the thread and figure out what's going on and what's going wrong for a particular subscriber. Not only do you have the visualization of that data, we also allow the automated action. That data that you're gathering, if you can make recommendations to a human, you can also automate it in through our automation system.
In essence, the network just takes care of itself, and you get an alert that something happened, and something's got fixed, and everybody goes their happy way. Bottom right-hand side, when we talk about lowest TCO, now I'll be the first to admit that everybody claims this, every supplier claims this. How we stand behind it is our ease of use by putting the capability of service design and deployment, and integration in the hands of our customers, so they can do the multi-vendor integration themselves by breaking the vendor silo, right? By making that network automated, that's how we stand by our statement of lowest TCO. You're gonna see a short video demo at the end of this, and I thought I'd give a quick introduction, here to show you what we mean by ease of use.
As mentioned, everything can be driven by the UI. There are open APIs and everything, like that. Typically, what you want to do is you want to have a UI for the service provider to design their own networks, and that's exactly what we have here. This shows the design pane for probably one of the most complex services that you can deploy today, which is a 5G slice. 5G slices tend to span vendors, locations, domains, right? It goes from radio to core to cloud and, you know, cloud in the core, and different types of infrastructure, from routers to clouds, public and private clouds, for that matter.
We allow that design to take place through a single pane of glass, simple UI, through a drag-and-drop API, and of course, you can always, drill down into details on the right-hand side of that, design pane. Once you get into deployment, you have a wizard that, again, is driven through our UI. The wizard will step the operator through, the whole process of saying, "Okay, which cloud do I want to deploy it on? and, you know, which customer is it for?" Once the service is deployed, you can monitor it again through the single pane of glass. Finally, with automation, as the network is designed, you can also put in, trigger points into the service so that the service will know what to look out for, in case something goes wrong.
For example, if it starts seeing that packets are being dropped or there's latency increasing, it can take corrective action automatically and heal itself, scale itself, and basically relieve the burden of having somebody typing at a, you know, frantically typing when a trouble ticket comes in. Another key aspect of DZS Cloud, of course, is having the whole network intelligence. We talked about a multiple segment and multiple vendors. In a typical access service, this is kind of what it looks like. You have things at home, equipment at home, infrastructure in the network, at the access end of the network, infrastructure at the internet end of the network. Most service providers will have, the larger ones in particular, will have at least two vendors for each of these segments.
Being able to take your service design and then being able to deploy that, after you design it once, being able to deploy that network wide across locations, across suppliers, and across segments is a very, very key capability. And along with that deployment, of course, is also the intelligence in being able to gather information from all these pieces of equipment, which is how we, you know, loop in all the products from the ASSIA acquisition by leveraging their ability to, you know, integrate with 150 different CPE devices to bring that intelligence into the network. You know, we talk about multi-vendor, and this is a very ugly picture for many different reasons.
It's ugly because this kinda shows the problem that service providers are faced with today when they're dealing with a multi-vendor ecosystem. Basically, every time they have to deploy a service, every time they bring in a new network segment, every time they bring in a new supplier, there are integrations that need to be done. Today, all those integrations are exposed right to their billing systems, right to their customer systems, which means that every time they have to do a service, they have to go through multiple integrations and really lengthy development cycle for that service.
The problem is really at the top layer with the OSS and BSS because those interfaces or integrations that change that interface into the OSS and BSS are typically very, very costly. I've seen seven figures from certain suppliers for you know, for interface changes at those layers. If you take this type of approach where every change in a network below perturbs the layers above, it's gonna turn into a lot of work and a lot of money for the service provider. What DZS Cloud provides is the ability to do everything just once.
One integration up to OSS/BSS, one single design for every service, and one integration of each supplier, and then you take that service that you designed yesterday, you roll in a new acquisition today, or a service provider rolls in a new acquisition today with, you know, an entire new set of suppliers. They do that integration once, and all their services will still work as is from day one over that new, over those new set of equipment. This saves tremendous time and saves a lot of money for our customers.
More than that, because there's this whole simplicity aspect of it, the staffing is also, you know, similarly streamlined, in some cases even reduced, when they take this type of approach to integration and service deployment. Finally, we're gonna show a brief video demo of the system as it is today. As mentioned, it will be over one of the most complex services that we have in the world today, which is 5G slices. One of the things you're gonna see that I found very interesting is this demo starts out with a picture of a NOC or a network operations center. What struck me about that was how much it looked like mission control at NASA. Like multiple screens, multiple desks with even smaller screens.
While I understand why it's there, the act of deploying a service really should not be rocket science. It should be simple, and that's what this demo is going to show. Okay. UI. Now we're going through the service instantiation phase, and you can see the wizard walking you through the steps of deploying it across multiple clouds. This is the progress that is being shown of the service actually being deployed, and then service deployment showing the status on a single pane of glass. This shows a different API, which is the OSS/ BSS API. This enables. That type of API enables you to do single-click ordering through a customer portal, enables things like gaming on, you know, it's speed boost for gaming on demand.
Now the drill down page as you're monitoring the service after it has been deployed. The drill down allows you to go from the top level of a service all the way down into the deep details of the infrastructure down to the compute host or to public or private cloud, wherever that infrastructure actually resides. All done through a simple UI via mouse clicks. Thank you very much.
Hi, my name is Rick Wank, and I am the product manager in charge of the mobile and optical edge pillar. I'd just like to say I think of the broadband connectivity and connective home businesses pillars as kind of a steamroller approach. We're, you know, our strategy there is we'd be driving down the street, just crushing everything in our path. You know, maybe at the end of the day, you park it, and you get out your little scraper, and you scrape your competitors off the roller of the steamroller. When it comes to mobile and optical edge, it's a slightly different strategy. We're hunting niches. We're hunting these niches that we think have huge potential going forward.
We think over the next few years, these niches that I'm gonna talk about in the next. The optical space and one in the mobile space have enormous potential, and we think we have an edge and an opportunity to really be successful in these. The thing I really wanna highlight that's relevant is in the last four years, we've been very focused on kind of a strange aspect, and that is thermal system management of high speed optical solutions. Now, why have we been focused on that? Well, hopefully, I'll be able to explain that in the next couple of slides. I don't think I have to spend a lot of time explaining how much bandwidth explosion is happening at the edge of the network based on the last, you know, X number of slides we've been seeing.
Most of the slides talk about the growth and bandwidth at the user side. I'm in the transport business, so I'm talking about the infrastructure side behind the user side. Obviously, if the user side is growing from, you know, 10 gig- 25 gig to 50 gig, or you're going for 1 gig- 10 gig from 4G- 5G or fronthaul is 100 gig, etc. What happens on the transport side? Well, today in the access network, state-of-the-art is really delivering 10 gig, 25 gig infrastructure. And usually, that's multiple wavelengths. Maybe it's a single 10 gig, 25 gig. We usually do multiple wavelengths of 10 gig, 25 gig over a fiber into the edge of the network, and then you distribute it out to the houses and do aggregation and those kind of things.
What's happening, what we've seen for a couple of years now, we've expected for a couple of years to happen, is that infrastructure has to change. That infrastructure has to go to 100 gig. Not just 100 gig, it has to go to N by 100 gig. It has to go to 400 gig. That is the real challenge, is taking that access, the optical edge access on the transport side to N by 100 gig and 400 gig. Because in truth, there are technological hurdles to doing that. This is sort of a mapping of the different technology that is in the space. The first set on the left is 10 gig, 25 gig in what is doable today.
You know, typically, you can go up to 80 km, and when you think of access, you think of maybe last mile when you're in the metro space. When you're thinking of the rural space, where a lot of the money is flowing for RDOF and those kind of things, sometimes the last mile is the last 50 miles or the last 80 miles. There's the last mile mean a lot of different things depending on where you're at. These 10 gig, 25 gig solutions are well-known today. They support DWDM, they're hardened. Now, hardened is an important word you're gonna hear from me about 100 times in the next 30 minutes. Usually, it means the number one characteristic of hardened is extended temperature.
A lot of our solutions go in pedestals at the edge of the network. We have the extended temperature. We're not talking about necessarily maybe half of the time we're deployed in the central office where it's temperature controlled and air-conditioned, but the other half of the time, we're deployed in a metal box at the edge of the network or near a building or those kind of things. A cell site, those kind of things. They're also relatively cost-effective today, the 10 gig, 25 gig. This is using non-coherent technology. If you move to a 100 gig and 400 gig with non-coherent technology, what we call direct detect, you start to have problems at a 100 gig and 400 gig. Those problems, the biggest problem is it won't support DWDM.
You can't put multiple wavelengths on a fiber with non-coherent technology at 100 gig and 400 gig. It doesn't work. You're limited for 100 gig for one fiber. The problem there is they're already deploying multiple wavelengths on 10 gig and 25 gig. If you're already deploying 10 wavelengths on you know, 10 wavelengths on 25 gig, 100 gig doesn't do you any good. You really need multiple 100 gigs. You really need potentially moving to 400 gig to fill this, to fill this space to deliver all these bandwidth at the access. The other problem is distance. I show on this chart that 100 gig can go 80 km. In reality, it goes about 20 km or and 400 gig can only go about 10 km.
The way they get 80 km today in 400 gig, I mean 100 gig, is they send four 25 gig wavelengths. They make it look like 25 gig to the fiber, and you can go 100 gig. That doesn't. You can't do that for multiple N by 100 gig. You have a distance problem, and you have a DWDM problem. Well, of course, this problem was solved 10 years ago in the long haul space using coherent optics. Coherent optics, you know, you're locked into phase. You have DSPs on the other end. They're very historically very sophisticated products. They were designed for the long-distance network. They can go very long distances. They support DWDM. They're tunable. They're phenomenal products, but they started out in the long haul.
They moved into the regional, and they moved into the metro space. The problem to date is they've never been hardened. This gets back to my original strategy, what we've been doing for the last four years, and that is figuring out ways to harden these coherent optics so they can be deployed in the optical access space. The other problem we think is from a cost perspective. What we're seeing is we're starting to reach lots of third-party opportunities, pluggable modules as opposed to fixed modules, where the costs have started to come down to align with what you can deliver in the access space. Right now, to a certain extent, we think there is a this gap. This gap is on the left side of the screen.
You have coherent-based 100 gig, 400 gig systems, DWDM systems, ROADMs, if you're familiar with that term, that can get you to the central office. It can get you through the core of the network. You know, nowadays, 100 gig, 400 gig, they're even doing 800 gig, 1.6 T. You know, these are very sophisticated, expensive, large systems, but they're in the central office, and everything has to be air-conditioned. They're really designed to deliver a lot of bandwidth, but we're sort of stuck there because now at the access, there's this explosion in bandwidth in the access and the technology to the transport technology to get from that central office to the edge. You know, there's really this gap, and this is the gap.
This is that niche on the optical side that we've been looking at for a couple of years and been working hard to solve this problem. Behind the scenes in our R&D department. We are launching a new product family. It's called the Saber product family. The design attributes of this optical transport is 100 gig and 400 gig coherent optics that are temperature hardened, so they can go in the outside plant. Up till now I've equated hardened with temperature, but when we say hardened, there are a lot of other characteristics. These products are built from the ground up to meet the very rigid requirements of being deployed in outside plant cabinets and those kind of things.
Hardened is the most critical, but there's also fog and salt and earthquakes and dust and all those kind of things. You really need to build these products from the ground up to go in these locations. A very small compact size, very cost-effective, and also importantly very open and interoperable because we know that we'll be interoperating with potentially other systems that aren't necessarily made by DZS in the central office that are already deployed today. Of course, we expect this to be managed by our DZS Xtreme software, and there's a lot of opportunity to do interesting optical analytics inside this space, health analytics, automation, those kind of things. A lot of these are tunable DWDM.
There's a lot of really cool things we can do on the software side to manage this. Importantly, it is adjacent to our, you know, our steamroller. It's adjacent to our broadband connectivity solution. It's not like we're going off and doing optical transport, you know, somewhere in the metro regional space. This is an adjacent solution, and ultimately with this expertise, we could integrate this functionality directly into our broadband access solutions. Going back to the optical gap I showed earlier, we really think this Saber product family has the ability to fill this gap with a unique product and really bring these coherent technologies, 100 gig, 400 gig, the next step closer to the edge, which is where DZS plays today. We think this is an emerging market.
It's got huge potential going forward. It complements our existing product set and we have a different. In this Saber product line, we think we have a differentiated value proposition. We're built for the access and what you'll see when you go upstairs, when Charlie gives you the tour, you'll see 100- and 400-gigabit hardened products. You'll see the Saber logo. You'll see some of our new products. We do have one or two products that we've been working on that have been released for a couple years that fit this space. We are rebranding a couple products into the Saber space, and we're launching a really interesting new modular compact product over the next few months. You'll see us talk a lot more about that to the market.
I'll just say that, our customers we showed it to are very, very excited, and Jay's sales team is probably even more excited than the customers that we show it to. Okay, now I'm gonna go to the second niche, which is talking about the 5G transformation built around O-RAN and our mobile transport products. Here's a simplified version of just the RAN and the 4G and 5G RAN. I'm gonna focus on the 4G side on the left just to start. What I did here is I made a pink box. I don't know why I chose pink, but I made a pink box around the part of the network that's proprietary 'cause it's the same socks. It matches the socks. The pink box around the part of the network that's proprietary.
The part of the network that's legacy equipment, Charlie mentioned the three vendors, we all know them well. What you see, and you've all driven by cell sites on the road, what you see is you see a big concrete hut on a concrete pad with a bunch of equipment in it, coax cable running up to the tower, the antennas on top of the tower. This is all legacy. It's untouchable. It's the purview of Ericsson and Nokia, and there is a cell site router in that box that we make that you can put in there. It's the one piece that you can get in there to get the traffic in, but the rest of that network, the rest of that cell site is proprietary.
If you take that, some of that equipment and you move it back to the central office, you then have fronthaul. In that environment, the fronthaul is all proprietary. So all you're really doing in 4G is extending the proprietary nature further back into the network, and they do this for various technical reasons because there's some advantage to having the equipment in the core manage multiple cell sites at the same time. So, interference suppression, there's various reasons to have one set of equipment manage multiple adjacent cell sites, you know, at a busy interchange of highways and those kind of things. Now let's look at the right side of the slide. This is what's being deployed today on 5G. Well, it's exactly the same.
The only difference is maybe the pipe's a little bit bigger going to 5G and, you know, and there's very little difference. There's not much innovation happening when you're still using this proprietary equipment for 5G. Now, we play in this space. We sell equipment in this space. We do a good job selling to a lot of our existing customers. It's just not a super dynamic, exploding niche where we think we have enormous opportunity to grow. I mean, we're happy we make good money in this space, but what we think is something's happening behind the scenes that really potentially transforms this architecture into something that we really feel we have an edge in. What's happening is O-RAN standards have really, over the last couple years, started to take hold in the space. O-RAN stands for Open RAN.
It's a consortium of service providers and vendors that are standardizing the RAN interface, so you can break apart the proprietary nature of the RAN, of what's at that cell site or what's going on at the fronthaul. Now, that's really interesting to the service providers, one, potentially because you can use multiple vendors to solve your problem instead of one vendor. Some innovative vendor could come up with a really cool radio without having to make all the sophisticated baseband processing equipment at the same time. There is a use case there, but it also is packetizing the entire fronthaul and bringing IP Ethernet all the way to the cell tower, and it's virtualizing that baseband software.
Instead of being in dedicated hardware in a box on a concrete pad at the cell site, it can go in an x86 processor somewhere in a data center. The data center could be at the cell site, but it doesn't have to be at the cell site anymore. It could be remote from the cell site. What's happening, there are some characteristics of 5G, higher frequencies, MIMO. There are some other characteristics of 5G that want to transform the network. You combine that with O-RAN, and you have a possibility of true network transformation, a truly different looking network. This is something I'll show on the next slide, that Rakuten embraced in Japan several years ago, is very much in the forefront of this idea.
Now, we believe we've been very active in this space. We've been talking to customers. We've been building products. We believe that the mobile transport products we have built or are currently building are basically a catalyst to make this happen. We think that we can really play an important role, and we're essential to it being successful. This is what a new network could look like in a 5G space if it's O-RAN based. What you see is very, very simplified cell sites. The cell sites can be as simple as radios at the top of the tower, a solution like DZS at the bottom of the tower, and that's it. There's not necessarily any reason to pour concrete.
There's not necessarily any reason to have an air-conditioned hut, and spend $100,000 or $50,000 or $100,000 to house the equipment in this cell site. Our solution to we deploy Rakuten mounts right on a pole, and they have antennas. They have nothing else at a cell site. They deploy cell sites in four hours. They have what we call zero touch provisioning. You put in our product, you plug in the fiber, automatically reconfigures remotely from the automation software. Unfortunately, it's not DZS Cloud, but from the automation software on at the end of the network or at the core of the network.
The ability to turn up these cell sites in four hours. Contrast that with what you see today with your own eyes driving down the road, all the concrete, all the things you need to get a cell site today, that you don't necessarily need to do that because a lot of the sophistication is in an x86 processor that doesn't have to go at the cell site anymore. The real model is to build mobile edge computing centers that maybe manage 10, 20, 50, 100 cell sites away from the cell sites. You run fiber to the cell sites, and now the cell site gets super simplified. You just. It's IP to the radio is what I refer to it as. You still need some very clever equipment, i.e.
DZS mobile transport equipment at the base of that cell site to solve a lot of loose ends and problems associated with that network, and that's what we do, is we solve a lot of problems for this new transforming concept. This idea, this mobile edge compute, and if you read carefully enough, you'll start to see people like DISH talk about making partnerships with AWS. You know, what they're hinting at there, you know, maybe that is about the core of the network. What they're hinting at going forward is maybe we're gonna start putting our RAN software in third-party clouds at the edge of the network. Maybe we don't have to build out our own mobile edge compute data centers.
Maybe AT&T and Verizon will start, you know, using cloud providers at the edge of the network to house the vast majority of the complexity of the cell site. The cell site just becomes a very simple radio. Trust me, these radios are dumb. Radios are dumb. You're basically, you know, sending it what it needs to transmit. You know, they've already digitized the radio a long time ago, so they can change frequencies and those kind of things. Our M series and C series products I show on this slide are built around delivering into this niche. Now there's only a few greenfield networks that have been deployed today using this strategy. Luckily, we're very active and been deployed in those networks.
We spend a lot of time talking to a lot of customers who are moving in this direction over the next couple years. It's really gonna be a for people who have not deployed 5G yet or a second wave of 5G, this is real opportunity here, and we think we really in good shape. Of course, we'd love to deploy our Saber product line at the edge to interconnect all these mobile edge computing centers together, even at the cell site. The key design attributes of our products that are focused at this space, we're very aligned with O-RAN and 5G. We do what I call a Swiss Army style problem solving. This is a new and growing niche, and you know, we know more today than we know about.
For the product we built for Rakuten's network 18 months ago, we know a lot more than we know today than we did 18 months ago. We know other things, other problems that need to be solved. We're constantly adding and working with our customers and figuring out what needs to be successful in this new niche space. Again, temperature hardened, that's a theme with all the products in the mobile and optical edge space. Very high bandwidth. You know, instead of delivering 1 gig to the cell site, you're in a primarily a fronthaul space, we're delivering 100 gig to the cell site. So 100 times the bandwidth of what you were delivering to the cell site previously. Extremely low latency.
We're talking about one or two microseconds of latency in order to get the timing to the cell site sufficiently. At the end of the day, we believe we can be a transformation catalyst to enable this change going forward. We do have an expanding product family in this space. We've been aligning O-RAN strategies with our existing customers, potential future customers, any customer who's very interested in deploying O-RAN. I would say the O-RAN POC phase has been the last two years, and you're starting to see more and more transition from a proof of concept into real deployment plans with real money behind it over the next couple of years. Internally, based on all these conversations, we are increasing use case coverage.
We're incubating lots of new products. This slide used to have little babies at the bottom of this slide, and nobody thought that was a good idea. We're incubating new product ideas in different areas. There's a lot of complexity around deploying this in a brownfield scenario where you have existing proprietary equipment, of doing fronthaul and backhaul together, new greenfields and in-building. In-building is a huge opportunity because of the high frequencies of 5G that don't penetrate in buildings. There's a lot of opportunity to deploy O-RAN in buildings. AT&T has stated they'll deploy O-RAN first in-building, so there's a lot of in-building opportunities as well. The whole gamut, we think, we've been looking at and investigating and building products for.
My last slide. I do think we have an edge in the mobile edge in this space. We do have already an award-winning fronthaul gateway that's, you know, deployed in large volume in Rakuten's network and soon to be other networks in on other continents. We do have in-building specialized fronthaul solutions, and we are partnered with various O-RAN vendors, and we're having lots of conversations. We think we cover a lot of space. We think there's a lot of opportunity here. We're very, I'll say we're both confident and hopeful going forward that this will be successful. Thank you.
Thanks, Rick. All righty. I'm Gunter Reiss. I'm the Chief Marketing Officer here at DZS. I'm also nicknamed Mr. Pink. One of the reasons why you see a little bit of a change in our elevation of our branding. As Charlie highlighted, I joined DZS three months ago, and I wanna give you four reasons. First, you're probably not surprised, Charlie, because he's a visionary and he's a one of a kind CEO, and I've never come across somebody like him in my entire career. Number 2 is really the culture at DZS. I live in the Silicon Valley. I worked in the Silicon Valley for a long, long time.
The culture here, the fast pace, just like Miguel said earlier, is just reminds me of Silicon Valley, and I did not expect that for Plano, Texas, and obviously Korea and where we are around the world. Number 3, I felt, with my background, Ericsson, A10, cybersecurity, 5G, broadband access, that I could make a difference for DZS. Number 4 is this slide. The market opportunity is absolutely phenomenal. When you look at the CAGR, of course, you just think about broadband connectivity. I think you have to really change your mind about who DZS really is.
When you listen to Rene , when you listen to obviously, Rick about what we do on the Open RAN space, and then just in general, when you look at the overall market opportunity on the broadband connectivity up to $10 billion by 2024, $17 billion on the mobile edge and optical edge side. I'm super thrilled because I'm a big believer in software, and I think that's where Charlie Vogt and I shared the vision right away when I took his phone call. Just to see the opportunity to double basically from $3 billion- $6 billion, I think will give you an idea why we are bullish about this market. I will give you a few, a glimpse of, you know, some of the campaigns we are running aggressively. I think we have already 700 customers worldwide.
We have more than 20 million homes. The opportunity for us to upgrade to, like Miguel talked about, XGS-PON, our DZS Cloud, which is uniquely positioned. I think the DZS Xtreme, which you heard earlier from Rene, and our DZS Xperience opportunity is absolutely massive. Then to position, obviously, our overall Expresse and CloudCheck capabilities, what John earlier gave you a glimpse of, is another, you know, really fascinating opportunity for us. Then we leverage the Helix portfolio, which is our Wi-Fi 6 and future Wi-Fi 6E access points, is really making us differentiated in the market, but also gives us an opportunity to take advantage of the existing global footprint.
On top of it, we are going to augment this Expresse and the CloudCheck software footprint, and put on top of it our DZS portfolio. Think about we are going to leverage 125 million homes, and we can basically position our DZS Xtreme, where I'm really excited about this end-to-end multi-vendor network orchestration, automation, and service assurance. We can do that not just for mobile, but we can do that for the access world, which nobody else has today in the industry. We are going to upgrade the ONTs, the OLT opportunity with XGS-PON for all those service providers, as well as leverage the rest of our portfolio in mobile and optical, and we are going to run aggressively campaigns for that as well. Then if it
This is actually probably one of my favorites, because what you probably haven't heard yet is the entire base of more than 4,000 broadband providers around the world are accessible to us by inserting a lightweight software of CloudCheck and Expresse into all those billions of ONTs, gateways, and Wi-Fi access points. The other advantage we have is that we have already integrations of our agents with more than 150 of those access points and ONTs certified today, right out of the gate. Then there's one thing which, I think, and Charlie calls and the team calls it the once-in-a-lifetime opportunity. There is obviously in the U.S., the government understands that BEAD. It'll—we need to bridge the digital divide. We need to go after unserved and underserved areas nationwide.
For that, obviously the RDOF was the first funding that the government released, and that's almost $20 billion. Various initiatives around the country are in place there. On top of it, $42 billion for the Broadband Equity, Access, and Deployment fund, which is massive. I'll talk a little bit more in a second. On top of it, you see obviously Canada spending from the government perspective funding more than $3 billion. Europe, where I will give you a lot more detail when you look at that, is absolutely fascinating how these countries are going to support the fiber to the home deployments. Even my little country where I come from originally, you probably are better familiar with The Sound of Music.
When I came the first time to the U.S., I had no idea what The Sound of Music was. Now obviously living for such a long time in this country, it's something which, you know, is famous. Just to give you an idea, in the little country of Austria of 8 million people, as really innovative the country is, it has less than 5% coverage of fiber today. That is surprising. Of course, for a small country, $2 billion is a lot of money. I will talk about some of the other countries and I was initially shocked, but I understand. You have to understand why they are investing these massive funds.
To me, there's a big picture, and the big picture is that if you wanna succeed as a nation in the digital economy, you need to have basically everybody connected with high-speed internet, because ultimately, it's this battle of the digital economy is happening over the next decade, and DZS is going to play a big role in that. When it comes to the U.S., we talk about DZS obviously playing a big role in connecting rural communities with hyperfast broadband. I talked about the underserved and unserved, particularly the ILECs, the altnets, the utilities, the municipalities, all of those, the electric co-ops, they all try to tap into obviously the stimulus funds.
Companies like DZS, like us, we are partnering with them and with some of our partners to basically support them in this, bridging the digital divide. If you look at it, just the BEAD fund, what you saw earlier, $42 billion, there are around 28 broadband offices across the nation, and each of the state will allocate at least $100 million, obviously more. There are more than 80 open RFPs today ongoing, and obviously DZS is very laser-focused on participating. But it's not just the governments which are really betting on this broadband deployments. It's also KKR investing in Jio in India and Telecom Italia. You have Macquarie purchasing Cincinnati Bell. You have obviously a lot of overbuilders, alternative carriers.
I wanna mention one of our customers here also. I just literally talked to Philip two weeks ago. He's a big fan of us. He's doing fantastic work with his team in North Carolina with his various communities in Georgia and across the nation. He has committed over the next 3- 5 years to invest $1 billion just in building this broadband infrastructure. I'll give you another example. I had the opportunity to live for a few years in the U.K., so I know the country relatively well. I understand obviously also that the country today has less than 10% of fiber connectivity. Think about that. You have the government spending and trying to fund some of this broadband connectivity.
The chancellor just recently said that by 2025, they wanted to provide 85% fiber connectivity, and now they extended it. By 2030, they want nationwide fiber connectivity. Freedom Fibre is a good example. It's the fastest-growing fiber provider right now. They will provide by 2024, 2.2 million homes and businesses around the London area. Right now they're offering already 3 Gb to the home for GBP 49 and 10 Gb to the office, or for businesses and offices. Even me in Los Gatos in Silicon Valley, I would love to have 3 gig right now. They are doing something really aggressive, obviously. One of our customers is 4th Utility.
It's a very creative name because they chose it for gas, water, electricity, and the 4 th utility is literally broadband. What they can turn on literally a service within 60 seconds nowadays, and that's pretty fascinating. Kudos to Tony and his team. We are very, again, very focused on the U.K., but we are also extremely focused on the opportunities in Germany. Germany is the fourth largest economy in the world from a GDP perspective. When you, again, take a closer look, just 5.4% of German households are today connected over fiber. Fascinating. The government is committed to spend $12 billion, but the private equity and some of the other private investors spend even more, $31 billion.
Deutsche Telekom is going to spend $6 billion every single year moving forward just on basically bringing more fiber to the home and to the business. Italy. Why did I pick Italy? Italy is interesting because if some of you are familiar, Vittorio Colao spent almost 10 years at the helm as the CEO at Vodafone, and then he went back to Italy, to his country, and for Mario Draghi, he became now the Minister of Technology and Digital Transformation. He was a big proponent to go to the European Union and basically ask for this European-funded program for broadband access in Italy. He got almost EUR 7 billion. He's committed to connect more than 6.6 million households.
They are going to roll out at least 2 million lines per year, and we as DZS are laser-focused again on working with the top seven communication service providers with some of the other network providers. With our differentiated offering, we have a phenomenal offering on our broadband connectivity edge. We have obviously DZS Xperience, DZS, the entire DZS Cloud, the network orchestration, and we have a number of partnerships to contend for these opportunities. When you look in the big picture then for Europe, fixed broadband subscriptions in Europe will increase obviously by 25 million. You have almost 285 million fixed broadband users.
What is again a very fascinating piece of the puzzle in Europe where you see that DSL has been the most common technology. I'll give you two more data points. Sweden, where I also lived, more than 80% of the country is actually covered with fiber optic. And Miguel's, you know, where he grew up in Spain, they have actually 80% coverage. It is just that some of the biggest economies in Europe today are just still relying on DSL, but that's the massive opportunity because you see just from the forecast from Omdia that it will grow fiber from 30%-50%, and that's why we are so bullish about Europe. The Chinese vendor rip and replace opportunity, I think here I wanted to give you some examples. Charlie touched on it already.
You know, Airtel, Etisalat, number of those customers where we had an opportunity to displace or replace already Huawei. In Europe, there are so many opportunities with tier 1s and tier 2s where we contend for and become ultimately the alternative to Nokia. Just like Rick already talked about it, I don't wanna spend too much time on it, but I'm as a mobile guy, I was thrilled to see DZS being just a pioneer in the Open RAN space. I think Rick went at length through it. We are integrated in the reference architecture of the O-RAN ALLIANCE. More importantly, Rakuten Symphony has been really the probably most vocal proponent of how to deliver an Open RAN and an Open RAN deployment.
As you can see, there are so many other opportunities now across the globe, and we are obviously baked into the reference architecture of Rakuten Symphony. What is an interesting not anecdote, but comment just recently, again, by the U.K. government. The U.K. government said, and backed by Vodafone and other operators in the nation, that by 2030, so they allocated another GBP 50 million just for trials over the next year for Open RAN. The commitment right now is that by 2030, more than 35% of all the traffic will run over Open RAN equipment in the U.K.
One of the other exciting parts why I really chose to join DZS was when I learned about the vision to drive really the transformation of the current service provider to tomorrow's experience provider. I think you heard enough from Miguel and the team about on the left side what we do here from disaggregating the architecture from the data plane and the control plane, fully open infrastructure, fully agile, the scalability, software defined, cloud enabled, cloud ready, container ready.
Ultimately what we really try to do for the service providers or for the experience provider is to increase ARPU, to allow them to very quickly, as you saw with Tony at 4th Utility, very quickly to launch new services, so to drive more value out of the network, to reduce operational costs and to increase the Net Promoter Score and to reduce churn. I mean, that's ultimately what you want as a service provider. To play really in this new battlefield, which is the home, and then the home experience. The home, in many ways, is in a hybrid work world, it is also the office. That brings me literally to wrap it up for you.
I'm just thrilled to show you later on our Xperience studio because it just provides you with a glimpse of two things. One is where we wanted to show what it means for a service provider or an experience provider's network operations team to have a mission control just like NASA and to see the entire network visualize it. In the past, we talked about the last mile. Now we talk about we need to be able to guarantee performance all the way to the last meter or to the last foot. That's what we can do. Thanks also to some of the software what we have now with Expresse and CloudCheck, we are able to do that better than anybody else today on the planet.
You will have a chance to see that. The last piece of the puzzle for me is that, the metaverse. You know, Mark Zuckerberg obviously talked about the metaverse. You have Unity, you have so many companies, you have Oculuses and so on. I'm a big believer in the metaverse. When you look at some recent statistics, 2021, the market for the metaverse was around $32 billion. It will grow. By 2030, the predictions are around $232 billion, which is obviously a lot of augmented reality software, virtual reality, the Oculus glasses, other next generation glasses. You will see IoT devices which play into the metaverse. To me, DZS is going to be enabler of the metaverse. That is something what I feel I'm super excited about.
With that, I wanna thank you, and I can't wait to show you later on the experience studio. I wanna introduce now my dear colleague and the CFO at DZS, Misty.
Thank you, Gunter. Love to run it. Good morning, everyone, and thank you for joining us here today, both in person and virtually. For those of you that are here in person, it's great to see you in 3D. Can everybody hear me okay? Okay, great. I can appreciate Miguel's comment earlier. I recently joined the company. I also reacquainted myself with Zero to Charlie. It's been a fun ride. We'll go ahead and get started. As Charlie highlighted earlier in his session, we transformed the company pretty significantly in 2021. First off, a new management team laying the foundation for growth in the future. We raised $64 million in equity, improving our balance sheet, zeroing out our debt, combined with our most recent JP Morgan facility has provided and enhanced the liquidity and foundation for growth.
We also introduced 29 new product releases and expanded our margins through those introductions, combined with some operational improvements that we executed in late 2021. We added 105 new customers. Most notably, we expanded our market opportunity with the acquisition of Optelian and RIFT, increasing our engineering and software expertise. We also established our growth pillars. We're in unprecedented demand for fiber, and we expect that demand to last another decade. We have unique assets at the optical edge, allowing us to expand our market opportunity in the mobile space. Our geographic diversification and expansion to North America and EMEA has been a critical pillar in our growth success. For example, in North America, our revenues were 20% of revenues in Q4 2020, while they are 30% in Q1 2022.
Of course, we continue to pursue Huawei replacements with a strong pipeline and RFP activity. Both our execution of transformation and our growth success in our growth pillars has led to success in a record-breaking year in 2021, with 16% growth in revenues, 62% increase in orders, a significant increase in backlog, new customers, adjusted gross margins, EBITDA. We doubled EBITDA, all led and contributed to $0.27 non-GAAP EPS. You've heard today we are bringing innovation to drive market opportunity. We have unique assets with the new ROADM platform and expansion of our O-RAN solutions, new platform introductions, which will allow for cost reductions for our service providers and for DZS. Our products are 100 gig ready today for networks of tomorrow.
Lastly, we've expanded our software opportunity with our most recent acquisition and DZS Cloud adding to the Xtreme and the Xperience portfolios with the recent acquisition of CloudCheck and Expresse. I wanna share our long-range outlook. First, I'll start off by reiterating 2022 guidance at $380 million-$410 million of revenue, gross margins of 34%-36%, OpEx $112 million-$117 million, and EBITDA of $17 million-$31 million. I'd like to point out that we will revise our guidance after deal close of our most recent acquisition.
Included in our long-range outlook, you can see at least 10% revenue growth, 25% growth in our software and services portfolio, which is a modest growth rate, leading to greater than 40% gross margins, which will be accelerated with our recent acquisition and software contribution. We plan to scale OpEx at a much lower rate than revenue, all contributing to greater than 10% EBITDA margins. What is not included in our long-range model is our software recurring revenue opportunity. Imagine with 150 million connected homes, which is our or is our combined install base between DZS and ASSIA. With a 25% modest growth rate and over 80% gross margins, you can imagine very significant upside to our existing long-range outlook with software recurring revenue. We believe we're driving shareholder expansion of shareholder value through all of these, opportunities.
In summary, we're innovating and expanding our markets. We're capturing market share in North America. We're layering in high-margin software recurring revenues. We're navigating the supply chain headwinds that we and our peers have experienced over the last year and for the upcoming year. We're expanding our software opportunity, which will expand our margins and accelerate our target margin model. We're executing on expanding shareholder value. Combined, I believe that we are well on our path of the race and ultimately will finish first. With that, I'll wrap up my prepared comments and open the floor for my team members to join me for Q&A.
BYFC.
We wanted to leave, you know, 15, 20 minutes at the end here to facilitate any questions that the analysts and some of our shareholders and media has here, and we also will be facilitating any questions that people have online. I guess with that, I'll.
Yes. Hi, Tore Svanberg with Stifel. Thank you for this very informative analyst day, and it's great to see everyone in person. I have a bit of a big picture question for you, Charlie, and maybe referencing the racehorse there. You know, based on what we learned today, you have a lot going on, a lot of irons in the fire. I can clearly see how that horse is gonna run fast. The one problem we have right now, of course, is that the track is pretty muddy, right? I mean, the supply chain is very complicated. Could you just update a little bit on what you are seeing on the supply chain front? Are you starting to see some alleviation, you know, to serve that pretty impressive backlog that you built last year? Thanks.
Yeah. We ended Q1 with, you know, $245 million of backlog. Some of the struggles that we had in Q1, which was frankly the first quarter that we had challenges in converting some of our backlog to revenue, I think had a lot to do with what was going on in Hong Kong and Shanghai with just some of the port closures. You know, there's still a tremendous amount of components and subcomponents that are coming out of, you know, China and different shipping ports all across China. I will tell you that Norm and the team are doing some pretty amazing things to alleviate the dependency on Shanghai.
There are other options for us to utilize other ports, which is one of the things that we're doing in Q2. We're cautiously optimistic. I think we gave a pretty broad range from a revenue conversion. You know, look, everything that we do from a revenue conversion perspective is very detailed, very bottoms-up, and it's you know at the time that we're providing guidance. When we provided guidance for Q2, we gave a range of, I believe, $85 million-$100 million, based on what we believed we could deliver.
I think I also said on the call that in Q1 we could have shipped more than 50% of our entire backlog based on customer request ship dates, had we just had, you know, the components. Look, I know we've got a very sophisticated audience, but the reality is we're building very sophisticated products. You know, it's amazing how many of our subsystems are dependent on a $1 or a $5 filter that has a lot to do with whether or not we can ship that entire system or not. You know, I've been in the industry a long time, that has certainly fortified us to build, I think, some pretty unique relationships with some of the most important suppliers.
We believe that, you know, the relationship that we're fostering and the alignment with their technology and their desire to be in tier ones and tier twos certainly helps, you know, our position. You know, look, I mean, all I tell my sales team every day, you know, we just gotta take the orders when we can. We've got to focus on customer satisfaction. While, you know, short-term revenue and orders is important to people who follow stock or investing in the stock, you know, we're still playing the long ball, and my number one focus, and will remain my number one focus, is keeping customers happy.
I think if we can continue to do that, what I think you learned today is we've got some pretty exciting things underway from a roadmap perspective, where we believe that over time we can continue to take share.
Christian Schwab from Craig-Hallum. Just, on the financial slide, the gross margin improvement that you're expecting, that's on a standalone basis. You know, after the acquisition, I just wanna make sure I heard that right, you'll update that. Is that correct?
That's correct.
Okay, perfect. You know, we got a lot of exciting products kind of sold to different parts within the network, you know? You know, how are you prioritizing, you know, the cloud-based products versus, you know, new optical products versus, you know, old RAN products? You know, can you give us a sense of confidence and conviction that we can it's kind of a heavy task, potentially, if successful in all product categories.
Yes. I mean, if you look at our employee base today, which is closing in on 1,000 employees, we've also, you know, partnered with some third-party software and embedded software resources around the world. I mean, more than half of our resources around the world are true development resources. I would tell you that from a broadband, and I'll let Miguel chime in, but from a broadband connectivity perspective, our fixed wireline portfolio, I'd say we're in a really good place, you know, from the evolution of the portfolio. From a mobile and optical edge transport perspective, you know, it's a pretty emerging market.
The area that I think has given us the most confidence is our ability to work as deeply as we are with a lot of our Open RAN partners and certainly with Rakuten and others. But that's an area that, you know, if the R&D team was sitting up here, they would like for us to invest more money in. I think, you know, part of our strategy there is to continue to see the dollars flowing in and continuing to see the dollars flowing in and then investing as, you know, we see progress with O-RAN.
On the software side, you know, post ASSIA, you know, we'll have gone from no native cloud software architects to 150. The exciting part for us is not just the resources that we're getting, but the skill sets and the talent that we're getting, both from the RIFT acquisition as well as the ASSIA acquisition. We think that really differentiates where we're trying to take the company long term. I don't know, Miguel, if you wanna say anything as it relates to our product investment and where we're at.
Sure. To add to what you were saying, Charlie, I think the priorities, as you were calling them, are really set by the market. They're not set by us. As Charlie was saying, there are areas of the market that are very nascent and emerging, things like optical edge, things like what Rick Wank talked about on the mobile, Open RAN-type deployments. For us, the moment to participate in those is now because those markets, as nascent as they are, they're growing at a high rate. Then those markets that are maybe a little more mature, like you look at broadband connectivity, for example, or even the software as we look at enabling experience providers, its full-blown execution and delivery of products to customers today.
That, that's how we see it.
We have two types of new product introductions. One is a natural evolution to an existing product that we know what the market is, we have an install base, and the probability of success is narrowed significantly. We have true organic new market, new segment, new product introductions like, you know, the hardened Saber product that we talked about. Those tend to be products that we wanna align with customers to get a pretty good indication as to whether or not they're gonna buy if we complete the build, 'cause it's a pretty significant investment. I think that on the Saber side, you should walk away feeling pretty comfortable that we're very aligned with several large customers who are looking for that product.
I just had one last quick follow-up. When the gentleman was talking about Open RAN, I'm sorry, I forgot his name.
Rick.
Rick. You know, he talked about your tremendous success at Rakuten, and then he said, you know, there's soon to be other announcements for-
Yeah. I mean, look, we're being deployed. Our Fronthaul Gateway is being deployed outside of Rakuten today. As I think most analysts and shareholders appreciate and understand, you know, there are some service providers that see the value of a press release for themselves. I mean, 'cause oftentimes, you know, a press release means that, you know, we're marketing and branding whatever it is that they're doing from an ingenuity perspective and promoting what it is that they're doing to differentiate themselves in the market. You know, in a lot of cases, you know, it's frustrating because we can't announce a customer because they have a certain internal policy. It makes it challenging, so we've gotta use words like, you know, we just landed a tier one or a tier 2.
We tend not to talk about a new customer until it converts to revenue. We may have already received significant orders that we haven't shipped just yet. You know, Misty and I haven't really communicated that, you know, we've landed two new European customers, for example, with our mobile transport because we haven't converted the orders to revenue.
Hi. Can you hear me?
We can.
Okay. Tim Savageaux with Northland. I was really hoping to hear a little bit more about ASSIA and what those financials looked like in 2021. Revenues, did it grow? Gross margins? I'll just leave that as a comment. Feel free to respond, how you like. I have a question that kinda relates to that, which is specifically on the overlap between some of the RFP opportunities you're pursuing on the infrastructure side and the ASSIA customer base. Maybe if there is overlap, you could call out a few names for us. I have a follow-up.
Yeah. I mean, we've been very thoughtful about what we're saying in this sort of period between sign and close with ASSIA, for, you know, obvious reasons. We will articulate a lot more details upon closing. I mean, we're hoping that we get the transaction closed by the end of the month. At that time, we will talk about what we paid and what we believe the pro forma revenue and margins are for 2022, as well as over the next three years. I guess what I would say is, you know, they're an engineering company, and they've been very successful as an engineering company. They have 150 million connected homes using their software platforms today.
I think when we begin to bundle those technologies, those software technologies in the broader picture of DZS Cloud and with our OLTs and ONTs, I think it's gonna be a big game changer for us and for what they would've been able to do on their own. What was the second part of your question?
RFP overlap.
RFP overlap.
Infrastructure versus ASSIA customer base.
Well, yeah, I mean, obviously right now, we're in sort of the planning and integration phase with them and, you know, we can do certain things as it relates to that phase from an overall collaboration perspective, but we can't respond to RFPs, we can't price things on the ASSIA side between now and close. There is a lot of sales, you know, collaboration that the two sides are working on. As it relates to our role in being able to, you know, dive deep into some of the activity that ASSIA is working on right now, we're not participating in that today.
Well, maybe I was looking for less than that. You've thrown out a bunch of logos for the ASSIA customer base. Do any of those logos include RFPs that you're bidding on the infrastructure side?
Yes.
Great. Okay, the follow-up is maybe for Rick, and go Terps, by the way. You sized the optical opportunity at $6 billion. I didn't see a TAM for the IP to the radio. I wonder if we could talk about that. Also, what the timing of both of these opportunities might look like. Is this material in 2023?
We plan on shipping, let's call it phase one of Saber in the second half of this year. Phase II, which is kind of the holy grail, as it relates to what that product offering will end up being, is early part of 2023. We do expect some incremental orders this year, but we certainly see, you know, the big opportunity for us in 2023. I don't know, Miguel, you wanna touch on anything?
Very much how we are aligning the product introduction as well as the first anchor customers are already very excited to deploy those products. Second half of this year with the initial introductions, continuing with the full-blown solution 2023. By full-blown solution, we mean further addition of traditionally associated with transport technologies into the access phase, right? Today, we focused a lot on the optics during the conversation, but there's obviously a lot more that comes that is beyond just the optics and the hardening.
Tim, the last part with your TAM question, I mean, we try to stand behind, you know, public, you know, TAM data. There isn't any TAM data on the Saber product. We hope that we can define that TAM, you know, over the next two to three years. If we were to give you a number, it would be, you know, unselfishly our pipeline. I don't know that I'm comfortable doing that just yet. Mr. Woodruff?
Yes, sir. Is this on?
Yeah.
Are you creating space between yourself and Nokia, Adtran, and Calix?
I mean, look, I hope I was trying to say it in the most humble way I could.
It's not like you.
I have a lot of respect for all three of our peers. I mean, Adtran, Calix, Nokia, you know, continue to do a phenomenal job in their respective markets. Obviously, Adtran's gonna change the makeup of their company once they come together with ADVA. What we're trying to do on the optical edge, that's complementing our access portfolio, I think is very unique. I think when you look at what we're doing from an end-to-end broadband connectivity perspective, you know, in the core and terminating at the home and inside the home, and now layering that with a pretty sophisticated, one of a kind, software portfolio, I think that, you know, it's really up to sales to do their job. I think if sales does their job, we're gonna be in a really good place.
I'm sure they will.
Thank you. I had a follow-up for Miguel, and maybe this is again, a bit of a bigger, sort of picture question. You talked about your customers no longer necessarily just selling a network, right? They're selling an experience. I'm just wondering, you know, how that impacts the economics between service providers and yourself. It's pretty clear that as you go a complete end-to-end solution, you know, you should be able to impact that experience in a very meaningful way. I don't know what metric you wanna choose to, you know, maybe elaborate a little bit on how the economics changes as, again, we go from selling to a network to selling the experience.
If I could take the first part, and then you could take the second part.
Of course.
When you think about DZS Cloud, there's two elements of it. There's the Xtreme element, which is, you know, our service assurance and orchestration, and that we see as a product that gets sold as an enterprise license. You know, John Cioffi kind of tried to touch on a little bit without giving any details, but the amount of savings that are attributed to the network operator is significant. I can tell you, we don't get our fair share. The whole industry doesn't get our fair share as to what the savings are.
If we can drastically reduce a $300 truck roll, if we can drastically reduce a service agent who's on the call with a consumer for 30 minutes, being able to identify and isolate where the problem is in the network and even be able to isolate and fix it's game-changing for the service providers. We're laser focused on that, and that's something that I don't believe Calix and Adtran and Nokia are doing to the extent that we are. On the consumer side, what gets us really excited about Expresse and CloudCheck is the ability to share the revenue ARPU with customers. It becomes a subscriber-based recurring revenue opportunity that the service providers can participate in while we're also participating along with them.
We think it's a great rev share opportunity.
Thank you.
You answered it, like, perfectly, Charlie. Maybe what I will add to that is, from a product point of view, right? As we look at how do we enable those service providers? Maybe something that we didn't touch on is the scale, portability and flexibility of those software solutions that apply not just to maybe small service providers in regional areas, but rather to tier one service providers and meeting their needs, right? There's an element of participating in that optimization of the network, in that service creation and the sharing of that revenue, but also doing it at scale, which is super important for us, right?
I don't know if I said, but I think it's really in the hands of our sales team to execute. The product's there.
Thanks for having us. Paul Essi with William K. Woodruff & Company. I wanna follow up, and if I'm taking your $10 million number plus that you said on your call and give you a generous upside to that-
You said $10 million. I said it was a lot higher.
Right. Well, let's say generously well above $10 million. Even if I took that number and compared it to the number of the $125 million and your competition, you're significantly underpriced. Can you address that?
I tried to say that John and his team are brilliant engineers, and I think that, you know, the way they have represented the software historically has been something of an engineering firm. I also think that they've been limited in their ability to bundle things the way I think we have the unique opportunity to do. I do think that there's a significant opportunity for us to take just the install base as renewals come up and create a different go-to-market bundle strategy to increase the per subscriber, both that we would benefit as well as what the service provider would benefit. I also think
Look, I mean, ASSIA has entered a market before there was this market, I mean, before the whole consumer experience became a thing and before Wi-Fi performance became a real requirement and all the things that are being connected inside the home. These guys were developing, you know, technology and software solutions for service providers in a different kind of sale model. Now you have an opportunity for us to sell the core software products as an enterprise license and the subscriber-facing software as a SaaS model, and that's not historically what they've done a really good job with, and I think we will change the game with that.
Your opportunity to raise prices is when the contracts roll off. Can you give us a sense of that?
That and the way we will bundle things.
Okay, how?
It's not just when the contracts roll off, it's also how we might strategically provide more capabilities in the offering that they're buying today. Let's say you've got an Expresse customer today who's not buying CloudCheck. That gives us an opportunity to come in and sell DZS Xperience as a new offering, a lot more value at a different structure. If we have a customer that's buying, you know, Expresse and CloudCheck today, we have an opportunity to come in with DZS Cloud and sell them the entire end-to-end network to include DZS Xtreme. There's a lot of things that we've been working through our models.
You know, the $1 billion SAM that I had shared with you, it's a big number, but we did that with some pretty conservative, you know, math. You know, compared to some of our peers in the market and what they're pricing things out, we went and looked at, well, what if we cut our overall price in half compared to where the market is and give them 10X what they're getting from our peers? What would those numbers look like? That's the way you should probably appreciate it.
Okay. The structure of these contracts, are they one-year contracts, three years? You know-
They all vary. You know, they all vary. I mean, I got a great opportunity during the due diligence phase to speak to a lot of these, I mean, the CTOs of companies like Deutsche Telekom and others, and it was pretty enlightening to hear how enamored they are with this platform, the software, and how excited they are about DZS coming in. I think Tim had mentioned, you know, when we were involved in working with some of these companies, not only with what we were doing with our overall DZS Cloud without ASSIA, but also with our broadband connectivity and some other products.
I think, you know, the light bulb is starting to go off with some of the companies that we're, you know, working very closely with in an RFP phase that all of a sudden, you know, the opportunity for them to look at DZS differently. I mean, from my standpoint, I think we're on a very small scale, a mini version of Nokia with better products and better software.
Okay. I'm gonna hit you one more time with this. Out of the $125 million you have out there, how much is gonna roll off in the next year?
Of the $125 million?
Right.
I'm not gonna tell you that today.
Good try.
Well, good try. We do see the revenue that they have growing. I will say that, without us. Their outlook independent of DZS over the next three years is growing without us.
Okay.
I'm Mark Lambright with Trident Advisors. I'm curious, as you start adding in more software products, how does that affect your sales team? Are you selling to different folks, hardware and software, or is there a combination where you get them all together in one room?
Yeah, no, it's a great question. I would tell you that we are bringing over about 10 software specialists with the transaction that really understand how to sell software. I've had an opportunity personally to interview most of them. We're very excited about that, you know, software specialty that comes in to sort of overlay our account managers. Our strategy right now is to leverage the relationships and the account management that we have with our global sales team, and then leveraging Dave's team to come in over the top to provide that level of expertise. I think that we're beginning to.
I mean, there's essentially three companies that I believe in the world, we're now one of them, that has the complete solution that you know has the software solution in the home, in the core, the CPE products that are terminating fiber, that are providing Wi-Fi coverage inside the home, and the OLTs in the central office. Not excluding Huawei from it, but if I look at just us, there's two other companies, and one of them only has CPE products. If I look at a company like Airties, you know, they've got some capabilities that we represented today, but not nearly the complete portfolio. I certainly see Nokia as someone trying to provide the complete end-to-end solution. Certainly Calix has a portion of that as well.
You've got companies like Plume and others that specialize in stand-alone software solutions.
Thank you. Tore Svanberg from Stifel again. Misty, I had a question about gross margin longer term. You went through the slides a little bit quickly, so I'm not sure if I quite saw it, but is there a percentage that software is as a percentage of revenue to get to 40%+ gross margins? Will you update investors on that percentage over time?
Absolutely. Once we have this acquisition, we will start monitoring our software component of our revenue, and consider what reporting we wanna put around that. On a combined basis, I think we've looked at around 15% of software and services together.
Yeah, we've historically not, you know, communicated the software and services as a percentage of total revenue. I think that post-transaction it'll be meaningful enough that we'll start reporting on that. Okay. Well, we certainly appreciate everyone that made it to Dallas, and we certainly appreciate everyone that participated online. Selfishly for us, this was a great opportunity to tell the DZS story. It's certainly evolving, and we appreciate everyone leaning in and trying to get to know more about what we're doing. Thank you so much for being part of this today. Thank you.