News

TollBridge's Fate on Hold,MSO Voice Trials Proceed

6/23/2002 8:00 PM Eastern

News that TollBridge Technologies Inc. has closed up shop after a failed round of funding may produce some static on the voice line for several cable players, but it's not likely to cut those incoming calls altogether.

Comcast Corp. and Cox Communications Inc. were in active trials with the telephony gateway systems provider. Both signaled that TollBridge's demise won't shut the trials down immediately, although it may require turning to other providers, depending on the company's final fate.

And while TollBridge has shuttered operations, it is still hoping to find either a buyer or the funding it needs to revive itself — but that hope is fading quickly.

The Santa Clara, Calif.-based Internet-protocol voice systems provider locked its doors June 14, according to vice president of marketing Kevin Woods.

"We thought we were in great shape, but we were in a funding round, and we didn't get the round done," Woods said. "So we literally ran out of money and had to shut down the operation."

Although operations are now idle, no decision has been made on whether to sell out completely or to try and reorganize. As a privately held company, TollBridge does not have to file for bankruptcy to oversee a reorganization or liquidation of its assets and intellectual property.

"The current effort is to see if anybody wants to buy the intellectual property of the company, and there is an effort under way to do that," Woods said. "Obviously, there is some effort under way to look at funding options, but that at this point is pretty unlikely."

TollBridge's shutdown comes shortly after a six-month voice-over-IP trial with Comcast in Detroit. The MSO had selected TollBridge to provide IP telephony equipment, and the Detroit trial was set to ramp up to a larger market test, Woods said.

A Comcast spokeswoman said it is still too early to gauge the long-term impact, but TollBridge's exit will have no immediate effect on the ongoing Detroit voice trial, where it is "business as usual."

OK IN OKC

Cox has also been testing TollBridge gateways in an IP voice technical trial in Oklahoma City. But that trial included several equipment vendors, so TollBridge's exit won't have any effect on the trial or Cox's future voice-service plans, according to a spokeswoman.

TollBridge also had completed IP-telephony trials with Adelphia Communications Corp. and was readying for a new round, Woods said. Adelphia had started to place equipment orders, but that would have likely been shelved anyway given the MSO's well-publicized spiral into financial scandal, he added.

In April, TollBridge struck a marketing deal with access-equipment supplier Arris Group Inc., which agreed to sell TollBridge's TB300 gateway as companion technology to its voice product. TollBridge's demise won't damage Arris' sales, said Stan Brovont, vice president of marketing for that company's broadband unit.

"Arris has not supplied any of the TollBridge gateways to customers for revenue-generating purposes," Brovont said "We are already making arrangements with the small number of trial customers to ensure continuity of their trials."

The agreement with TollBridge never prevented Arris from partnering with other companies that produce the same technology, he added.

Given that relationship, though, Arris might have some interest in picking up TollBridge products or intellectual property. Brovont said Arris company policy is not to comment on any potential acquisitions, but Woods said the two companies had been in discussions.

"We've been talking to them actually for quite some time as a potential suitor for TollBridge, but there has been nothing concluded at this point," Woods said.

Indeed, prospects for finding a "white knight" to buy TollBridge up whole are increasingly unlikely.

"I think that if somebody really felt that they could use the assets of TollBridge, they would have moved on it," Woods noted. "But you never know.

"Our intellectual property and our assets are going at a very good price right now, so it is possible that somebody might just say, 'Gosh, this is such a good deal. Why don't we just grab this?' But every day that passes, that becomes less and less likely."

SAD TELECOM TALE

TollBridge's story reads like that of many telecom startups. Founded in 1998, it initially provided voice-over-digital subscriber line systems. But when the competitive DSL market imploded, the company said it would shift focus to cable telephony.

Ultimately, the company's failure may be blamed in part on an industry switch toward softswitches. TollBridge's hybrid technology — which links voice-over-IP to the access network to a traditional class-5 circuit switch — wasn't catching fire with investors. They saw more revenue prospects from newer, IP-softswitch-based technologies, Woods said.

TollBridge was working on softswitch and media-gateway products, "but it would be many months before we would really see how our approach to that would play in the market," Woods noted. "There are lots of competitors."

TeleChoice Inc. analyst Pat Hurley said he was not surprised by the announcement, noting that fellow DSL voice competitor Jetstream Communications Inc. shut down in April.

"For all these guys, they have been waiting for a long time, and funding is an issue," he said. The VoDSL market "is sort of a nonstarter, and they were spending a lot of effort getting into the cable side of things, but I'm not sure how much traction they got."

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