Ribbon Communications Inc. (RBBN) Earnings Call Transcript & Summary

Greetings, and welcome to the Ribbon Communications Tech Talk. [Operator Instructions] It is now my pleasure to introduce our host, Monica Gould, Investor Relations for Ribbon Communications. Thank you. You may begin.

Thank you, Diego, and welcome to Ribbon's Optical Tech Talk. Joining me today is Kevin Riley, Ribbon's Chief Technology Officer; Darryl Edwards, former CEO of ECI Telecom. And joining us for the Q&A session will be Rafi Leiman, Senior Manager for optical product. Before we begin, I would like to remind you that today's call may contain forward-looking statements. Actual results may differ materially from these forward-looking statements as a result of various risk factors, including those found in Ribbon's most recent 10-K and 10-Q and other documents filed with the SEC from time to time. All statements made during this call are made only as of today, and Ribbon undertakes no obligation to update any forward-looking statements. There will be a Q&A session following this call, where you -- we will poll live questions from the audience as well as the webcast. You can also submit a question by entering it into the chat window on your screen. We would like to state that this is a tech talk, and we will not be taking any financial questions on this call. With that, I will now turn the call over to Kevin.

Thank you, Monica. On behalf of Darryl, Rafi and myself, I would like to welcome everybody to our webinar today. We're looking forward to spending the next hour or so with you. So with that, let's jump in. So first, just a little bit about Ribbon and ECI, just to give -- to provide a brief background on the 2 companies. We completed the merger with -- Ribbon completed its merger with ECI on March 3. This merger represented kind of our next and most authoritative step on our journey to becoming a more data-oriented company, our previous data moves or data steps being preceded by the acquisition of Edgewater as an enterprise edge data-routing company approximately 2 years ago; and then Anova Data, a mobile data analytics company that we acquired just over a year ago. Ribbon is now 4,000 employees strong with customers in over 140 countries. And I think you'll hear as we talk about technology, we'll also complement that message with the global reach that we now have as a combined entity. So first, a backdrop on IP data landscape as we see it. If you look at the upper 2 boxes on the left and the middle, those graphics, it really shows that mobile users and devices will continue to grow year-over-year at a good rate for the foreseeable future. That being said, I view mobility as mostly mature and really an already integrated part of our digital lifestyle. I think the upper white box really highlights what is the next major disruption to come, which is available speed, which is going to increase over 3x -- or projected to increase over 3x between now and 2023. I'll note that, in practice, it will probably be even larger for users that move to pure 5G. The 43.9 megabits per second still reflects a -- probably a very healthy mix of existing 4G devices intermingled with 5G devices. But that being said, this increase in mobile speed is going to drive a significant increase in data consumption, as represented by the graphic at the bottom of the slide, a very, very healthy 26% CAGR increase in IP traffic growth between 2017 and 2022. 5G will be the primary driver of these increases. I think that's widely acknowledged in our industry. And I think it's worth noting that certainly our view and the view of many is that 5G is so much more than just a faster mobile data plan. It's really going to transform our digital economy by unlocking use cases that could not be realized with previous technologies. It's much more than just your mobile phone getting faster. It's going to affect the way that enterprises connect to the Internet and, ultimately, how customers interact and connect to their end users. So towards this end, 5G is expected to dominate mobile capital expenditure as we move forward. From the graph, as you see here, it's interesting. This year, 2020, is projected to be the tipping point in 5G CapEx starting to exceed non-5G CapEx. And by 2022, it's really starting to dominate capital expenditure. So a very material amount of this capital expenditure will be directed at network infrastructure and, in particular, optical network infrastructure. As the left graphic shows, metro and long-haul investment is projected to grow for the next 3 years and beyond that, it was just what we're showing from the study that we quoted from IHS. This is reflective -- really reflective of the never-ending increase in data consumption by end users, and it really reflects a really nice, stable base of data capacity growth, global data capacity growth that we feel that we're well positioned to go after as a company. The right graphic zeroes in on 5G-specific capacity build-out. This slide really highlights the market opportunity that we see in front of it, which is namely a year-over-year optical capacity increase in existing infrastructure and very strong optionality on 5G and backhaul, in particular, with future proofing, enabling low-friction migration between the existing infrastructure and next-gen infrastructure. We really believe that these companies stand to benefit in this industry that can address what we call brownfield or migrate existing infrastructure without a full rip and replace. Winning business -- non-5G business today with 5G future proofing, we feel, is a key setup or enabler for companies that stand to win as 5G starts to dominate network build-out and capital expenditure. So with that as a -- just a brief corporate and market backdrop, I'll hand over to Darryl to take you through kind of the next level of detail on the products and offers.

Thank you very much, Kevin. The company is focused into 3 key areas with our optical technologies, primarily in the service provider domain, which is the vast majority of our business, but also across defense and governmental departments and utilities and critical infrastructures. These are the 3 key areas that we are particularly focused on as a company, and all are growing -- are growth areas. When we talk about 5G particularly, let's not forget that today, these are huge markets in today's technology terms. And 5G will not only impact just mobile technology but also all verticals who will require services from 5G technologies that will bring, including latency and also functionality. The -- I'd just add that the business is very well balanced because if you look at the service provider, the defense and government and the utilities, you tend to find utilities and the government areas are less capital-constrained businesses as well. But the service provider is definitely the biggest growth area. We are relatively strong in all 3 areas here across with a very diverse set of customers against each of these verticals. From a technology point of view, the portfolio is made up of a series of technologies. We have our Apollo technologies, which is a DWDM technology suite. This is all about speed and capacity across the network, both from the access to the metro, metro to core. We then have the Neptune portfolio. This is all about packet technologies primarily in mobile backhaul environment. We also then have Mercury. Mercury is very much around our virtualization technologies. And then we have the management and application suite under our Muse branding, which is about control and applications. The Apollo product line is broken into 2 parts: access to core optical solutions and also with the ability to have OTN-switching technologies. Both are sold globally. Both are state of the art in terms of the capabilities. We have a complete dynamic optical layer, which is software provisioned. And basically, we have [ plug ins on plug ] capabilities in all the technologies. The metro aggregation is definitely from 100G up to 1.2. So today -- since August last year, we've been shipping 1.2-terabit systems, which is 2 times 600G. And we've been supplying a number of Tier 1s with these technologies, so we're very, very familiar with high-capacity technologies. And clearly, encryption is absolutely paramount in the layer 0, layer 1 levels. We use similar cards across all the portfolios, literally plug and plays. And you can see on the left of the chart here, this is the -- what we call the DWDM suite, pure flexible DWDM transport. And on the right, you see our OTN-switching capability. And as you can see, the switching matrix are already ready to scale by adding more cards as and when a customer needs to. The second portfolio is the Neptune product line, again access to core optical solution with the full capability there. The thing for us on this is -- sorry, the Apollo -- I'm looking at the wrong slide -- Elastic MPLS and IP/MPLS and MPLS-TP, this is dual-stack technology. What we mean is we can change the software loads to see a particular market on the type of services they want to deliver in the market. We meet both of those with dual-stack technology. This includes having the ability to offer what's called segment routing ready for 5G technology. The platforms are multiservice from level 0 through to level 3, and all are open and programmable solutions. From the conception of this suite of products on both the Apollo and on the Neptune, we've gone open standards from day 1. And both are 5G-ready for slicing and segment routing capability. We also have, within the Neptune range, the ability to offer virtualization as within the technology or separately as a -- effectively, a pizza box for multi-vendor networks to offer the same service level across those networks. And again, as you can see, if you look at these technologies today, already our 1022 technology, the 1250 and also the 1800 are 5G-ready technology. What that means is they already have the synchronization ready for 5G. All this technology is sold into mobile backhaul networks but also into utilities and governments where they require advanced services. The way I look at packet is a very intelligent suite of software built into this that also enables customers to migrate to more advanced services as and when they require it. So right, you will see the 2514 and the 2532. These are our new technologies that are dedicated for 5G at the high end, which obviously have much larger capacity capability in terms of switching matrixes. As we move to 5G and bandwidth goes up and the demand for that increases, then you need a bigger capability at the end of the network. Clearly, security is absolutely paramount, and most of the technologies are less than a few years old. And from day 1, we've built in a very strong security suite and encryption into the technologies. So when we talk about encryption, whether it's a level 1 -- or layer 1 or layer 2, we'll also have it built in ready for 5G. So if you think about hard slicing and soft slicing, for instance, as everything starts to go more to the cloud and you have much more data traffic coming onto the network, as Kevin just explained, then this encryption is going to be absolutely critical. So that's all built in, but it's also built in at the management layer and at the platform layer to make sure we have maximum security within the technology suite. So ECI is already -- prior to Ribbon acquiring ECI, we've already been winning significant customers around the world. We're not new to this game in any way, shape or form. We already have significant deployments with Tier 1 operators in the mobile backhaul technologies. One of the key things for us is the -- within the DNA is being able to migrate technologies from the previous generation to the next generation. This makes the technologies extremely sticky as you move between the different technologies. So let me give you an example. Some of our customers have migrated from 2G to 3G to 4G, and now they can upgrade with software to go to 5G we serve our customers. So you're protecting the investment that they've already made within the technologies and reusing a lot of the infrastructure. So mobile backhaul is a very key play for us, but we're also winning a lot of new business in the DWDM space as well around the world, and we're competing very fiercely with all the big guys that you can think of and adding many new customers. Particularly in utility markets, where we are -- when we go after deals, we typically -- we are winning 4 out of 5 deals that we tend to bid for ourselves in the utility and also in the government space. So we find we have a very good fit for that market as well as working with the telcos. So on the national research and education networks, it's very similar, where the demands are very high for advanced technologies. And already today with some of our leading national research and education networks, we're already trialing 1.2-terabit technologies over huge distances with them. So if you look at the picture, the global map, you'll see the purple parts. The company has been moving very much from the east and moving to the west. So we do have a very, very strong position within the Indian market with many Tier 1 operators. Our biggest growth market, however, is in the European theater, where we are -- where we have been growing at double-digit growth in past years. So this is a very strong growth for us, and we're now heading very much towards the U.S. market, where we feel there's a strong opportunity for us to grow -- continue to grow. Kevin, do you want to add a few words on the U.S. market?

Yes, I will. To piggyback on what Darryl just said, ECI competes very effectively in the theaters that they've been focused on. And what's been very attractive and we noted right away when we first engaged with ECI was that they win multiple ways. Some of the key points of differentiation on why they win include very cost-effective implementations. Their performance for the segments that they're focused on, which is primarily service provider and critical infrastructure, is really, in many ways, quite superior to the competition. Their power efficiency is very, very compelling, which creates a very nice, ongoing cost savings for the technology and once it's operationalized in the network. As Darryl mentioned earlier, common cards are used across multiple chassis, which creates very nice platform modularity and being -- and the ability to rightsize the products for the right place in the network. And then lastly, really just confidence in the team's ability to execute. Much like Ribbon, ECI is -- was a midsized company that really has a culture and a mindset of partnering closely with their customers to ensure their success. So as we move into the U.S., we think all of these technology points of differentiation will carry into our theater. I'll also recognize that we do have to go battle against incumbents in the United States. And with -- the sales strategy is really around -- really centered around 3 prongs, which is ECI is already here and proven in this sphere. So there is -- there are referenceable accounts in this theater that we can cite and leverage as we look to grow the business. We -- the relationships that Ribbon has with the Tier 1s are not to be discounted. We do believe very strongly that those relationships will give us the opportunity to compete. Basically, in short, we feel like we'll be given the at bat just based on our relationship with the Tier 1s, many of the service providers and large enterprises and in our federal space here in the U.S. But at the end of the day, we have to show up with a very skilled sales team, very skilled sales engineers and go in the labs and prove the merits of the technology. So a second prong of our sales strategy is to augment the existing sales team very significantly. It's built into part of our Dealogic to augment in -- to start to augment -- most primarily to start in U.S. and Japan to build up those teams so that when we get the at bat, we can show up and compete very effectively in the lab. And then lastly, the third part of the sales strategy as we expand into North America is really centered around our services offer. I think Ribbon is known in the United States for having a superior services offer with their customers. It's very high touch. It's costly for us, but it's what makes us sticky and really carries the day as customers make vendor decisions, right? Part of it's based on technology. Part of it's based on how we -- how they're going to be supported for the next 15 years in the network. And that recipe, that framework and that philosophy ports directly onto the ECI product portfolio. So we feel that -- when you mash up the technical merits of the portfolio, the relationships that we have, the investment we're committed to making to the sales team and then wrap that with our services offer that we stand a good chance to grow this business here in North America and then also move over to Japan.

So we think from a portfolio perspective, we're pretty well placed with the Apollo, Neptune and Mercury. These are scalable technologies, state of the art, using the latest form factor, using the latest component technologies whilst also being developed from an open perspective. Already today, we're involved in the open ROADM initiatives and various open initiatives going on today, and we feel that this portfolio is a very strong portfolio in the industry today. And like any technologies, you need to have the management platforms, and you need to have the applications that go around that. And that's an area where we're also seeing some strength for us going forward. We feel that this is a portfolio that will absolutely continue to grow as we go forward there with the opportunities we have as we enter into the U.S. market but also other markets with Ribbon, and we leverage the capabilities that Ribbon has today in many customers around the world. So on that note, I'll hand it back to Kevin.

Yes. So I'll add a little more color on top of what Darryl added. It's interesting in that I think a lot of the transformation that's going on at the packet-optical edge of the network is similar to transformations that classic Ribbon has gone through, living deeper in kind of the IMS core of the network and the voice core of the network in that as these large inflection points occur in the industry, having solutions that are engineered to protect migration and protect investment becomes a very significant competitive advantage, and that's something that ECI has engineered into their platforms. It's multiple platforms that already have the hardware modifications engineered in them to support some of the 5G timing requirements that are necessary as we move forward into that world. So they've kind of future-proofed on that front. They've embraced openness, which, as we know, as you look across carrier networks, carriers are looking to drive increasingly higher levels of automation, programmability and flexibility into the networks. And in doing so, they're demanding their vendors that adopt postures of having open APIs so that they can connect back into their service orchestration layers. ECI has been at the forefront of that. You can either resist that movement or you can embrace that movement, and ECI is absolutely in the latter bucket with open support of open ROADM. They've been partnered or worked very closely with a large Tier 1 on prototyping, open programmability into their network product -- Neptune products and really positioning themselves as embracing what is going to be the new edge network architecture. Another thing that jumps out that really should be noted is that when you think about these disruptors -- 5G is the obvious disruptor we're talking about here. But also orchestration, automation, that's kind of a second one that's top of mind. A third one that's top of mind is really edge computing and applications disaggregating and moving closer to the edge. And this is an area where ECI, again, I feel, is ahead of their peers in that they've embraced NFV in orchestrating workloads, whether it's their own organically grown applications or partner applications that they bring in to host at that optical edge in their infrastructure, being able to kind of low deploy, manage and scale out applications on COTS, fully orchestrated and chained into their optical -- packet-optical service flows. I think it's a very attractive part of the architecture. I think it aligns with where the network architecture is going or the network architecture of the future. So again, it's another positive. As I see, it's not -- we don't aspire to be a MEC company or MEC replacement, but we also recognize that having the optionality to ideally place workloads in the network, one of those placement points being the optical edge, is a competitive advantage when you marry that up also with the SDN openness initiatives that the product line is now supporting and then also the 5G future-proofing. So we feel that the technology is -- it's perfectly well positioned to compete today on data capacity increases. It's embracing new features and new state-of-the-art features that are starting to come into the networks. Whether it's flexible Ethernet, segment routing, these are all moving into the product set now to enable customers to just kind of evolve their packet-optical cores, but then also aligning with these disruptors around hosted applications at the edge, SDN, 5G really gives the portfolio excellent optionality as we move forward with customers. And then the other part I'll add is something that I've learned in this industry as we move forward. It's that these services are becoming increasingly more complex. The products, by definition, and the products are becoming more complex. And just as important as the core platforms are the applications and tool chains that support those platforms, and that's really been a particular area of focus by ECI with their Muse product suite. I think this slide kind of shows them surrounding the Apollo, Neptune and Mercury core, but they're not to be discounted just based on the size of the circles there. I think ease of operationalization, deployment and maintenance and scaling of the solution, once it's in network, is absolutely critical. I think a key differentiator for vendors throughout the carrier networks now is going to become whose products are easier to deploy and run in network. And I think ECI has been particularly focused on platforms or surrounding componentry to deliver advanced management, network planning, automation, analytic insights and, as I said earlier, NFV hosting. So when you take this all bundled in as a complete offer, we feel that at the -- whether it's the optical layer, the packet layer, the products having superior performance and features at those layers or when you consider the bundling of the tool chains now that we can marry around them, and then furthermore now starting to bundle and marry them up with Ribbon's investments in analytics and automation and NFV, we think we're set up to have a nice, complete offer as we kind of continue to ride the build-out of existing data capacity networks but also now transition into the big pivot investment into 5G and, in particular, mobile backhaul. So with that, I'll turn it back to Monica if we want to segue into questions.

Yes. Diego, please, if you can open the line up for questions.

[Operator Instructions]

And we have a -- our first question is from the web. What is the emerging Ribbon-ECI sales and marketing strategy? Are Ribbon personnel training to sell ECI gear and vice versa to drive cross-selling?

Short answer is yes. We're enabling cross-selling for both the ECI team to go out and sell the Ribbon portfolio and then have also -- have already gotten some great initial doors opening for us as it would relate to our SBC product portfolio. But also in the United States and Japan, we've been aggressively training our sales teams and SEs to be able to explore sales opportunities for the ECI portfolio. What I'll add is we're not aspiring to train our sales teams and SEs to be packet-optical experts, day 1. We are going to have a combination of leveraging our existing account relationships so that our sales teams are trained not to go in and broker that initial conversation and explore the initial opportunity but then bring in expertise behind that to go deeper and explore the next layers of the conversation or sales opportunity. That will initially be done using the ECI sales team that's already currently in countries. They'll be brought in as an overlay. And in parallel, we'll be making the investment to augment and scale that team so that, that overlay becomes much stronger. My expectation is that, over time, after enough of those interactions and engagements, that the frontline sales team starts to become more and more skilled on selling this technology. But to start, we'll be using a combination of training our existing staff to explore an opportunity if we feel there's an opportunity there, come up with an overlay team of experts, some that's already on staff. We've already hired some ahead of the deal close, more to be hired in the pipeline right now.

Thank you. And our next question from the web. You have an 80% win rate in government and utility. What is the rate in service providers? Is there a product enhancement or addition you can see as critical going forward? What have been key tech partners in the past for ECI, if any? And how often is the buyer within a service provider the same for SBCs and optical?

So I'll take the last part, and then I'll hand the optical piece back to Darryl. So they will be different cost centers. But to my point on sales strategy, where we'll be able to leverage our SBC wins is that our relationships that our customers extend all the way up to the C-level at the Tier 1s -- at all Tier 1s in the United States and with the vast majority of our customers. So what we will be able -- what we're very confident is that up at that C-level, we'll be able to leverage our SBC wins should be given an opportunity based on the reputation of Ribbon and then go compete for packet-optical business. Are these going to be new faces and new people that we engage with? Absolutely. But we will be able to leverage our C-level relationships at these companies to open those doors, and all I can ask is that our relationship just gives us an opportunity to compete. And I'm confident that it will be given that once you get to the C-level, it all rolls up to the same person.

Regarding the win rate on utilities, yes, the win rate is very good. On service providers, it takes a bit longer. We are adding new service providers to our mix. Some of those service providers are existing service providers who may be buying backhaul technologies, who then decide they want to buy our optical technologies, and some of those service providers, Tier 1s primarily, applying our optical technology who are now looking to buy our packet technologies with IP/MPLS on them. So the -- it is more -- it does take a little bit more time on the service provider domain to increase our win rates, but the penetration is starting to take effect. Because if you look at a service provider, he has multiple vendors in each layer of the network from a point of view of access, metro and core. And so we have multiple opportunities of entering into the service provider domains. And then you've also got types of technology, whether it's straightforward DWDM or whether it's OTN switching. So today, we have many, many opportunities that we're pursuing today to expand. When you're coming into the U.S. market, today, we have a number of customers in the U.S. already across all 3 verticals for us, all 3 focus areas, which is the utility and government, the NRNs and also in terms of the service provider domain. So we already have customers in that space, and we're now starting to get at bats with Tier 1s in the marketplace as well. So we're quite excited by that opportunity of entering into the marketplace for those technologies.

And there were a couple of other parts to that question, including if there's any critical enhancements that we need to add going forward and who are -- who have been our key tech partners.

So critical enhancements for us is I think we're already where we need to be from a technology point of view. I mean we compete every single day against all the big guys in the world, and we are winning and adding new customers. So we know we've got great competitive technology with the right bells and whistles on it. Some areas, we have a lead on in terms of some of the technology we have, and capacity is always going to be in demand going forward. As I've already mentioned, we feel we have a very good position today with 1.2-terabit technology, 2 times 600G. And I think that alone, from a point of view of driving the market for us, is very good. I think that we have some leadership there today. And in the metro space particularly, I think we've got one of the best products in the market in the metro domain. And again, we're having a lot of success in the metro layer, mainly driven by, as Kevin said earlier -- I mean because the technologies are all new, using the latest form factor, the latest componentry and software techniques, for us, we're driving a lower power consumption, which is becoming more and more important with operators. So we feel we are in a very good position on the metro product line as well.

And the last part to this question is does ECI garner much revenue from China or has a material amount of their supply chain in China?

We do not have any significant revenues from China at all. It's not a focus market for us. But like any manufacturer or any vendor, we do have sourced some componentry from the Chinese market, and we do have some capabilities down there that we use.

Our next question from the web is what are the technical obstacles involved in merging the 2 firms, the target, the different customer type? And is there a tech difference with U.S. utilities than those in international markets?

I'll take the utility piece first. I think the short answer to that is no. ECI has already won in the United States with utility companies, and they've done it with the existing product set. So that I think -- the proof point show that the portfolio is globally ready to address utilities and also service providers. So there are -- there is no planned short-term investment to unlock any of the market segments that Darryl talked about as he went through the slide deck. The first part of the question was?

Apologies. Let me go back to that. And the first part is what are the technical obstacles involved in merging the 2 firms to target the different customer types?

Really -- there's really not a lot of technical obstacles, I would say. We're primarily a service provider, federal and large enterprise-oriented company. Service provider is 70% of our -- of Ribbon classic's current business. So this company is already built to serve the service provider. I think where we actually have an advantage or a part of the way Ribbon classic was built that will help accelerate something -- some parts of market that ECI wasn't really built to go after is that large enterprise, that large campus business. We sell to many large Fortune 500s. In many ways, they look like carriers. And our carrier model and engagement model has served us well with those types of enterprises, and I think that's something that's directly leverageable now with the ECI portfolio. So in terms of the technical challenges, there really aren't many or any I can think of. It really comes down to scale, feet on the street and getting the story out.

[Operator Instructions]

And we'll move on to our next question from the web. Is it important to be vertically integrated in this industry as it evolves over the coming years?

Well, if that's okay with you, Kevin, I'll start and I'll pass it to Rafi Leiman, who can give a better answer than I probably could. But just to start off the question, I don't think it is important to be vertically integrated. If you look at the industry, where we came from in the '90s, when optical really started to take off, you didn't have the component base to build advanced optical systems. Over the last 25 years now, there is a very good supply chain out there for optical technologies. And the world is going open standard and disaggregation. And therefore, to have the ability to be flexible in your selection of optics and technologies, to me, is a major advantage. That's -- in my career, I've never had a single customer once ask me, "Darryl, are you a vertically integrated company?" Because typically, they don't care to be honest with you. All they're interested in is the system. Can you deliver the capacity? Can you hit the right cost point? And does it do what it says on the tin? But Rafi, please, can you add to that, please, Rafi?

Yes, sure. So basically, I think you touched most -- the major points here. We have seen that in the past and probably people are talking a lot regarding this vertical integration to make the solution more effective, mainly talking about the transceiver part. So we have seen in the -- a few years back, we have seen that several companies were trying to develop their own proprietary technology. And we see that this trend is changing to something which is going into more common technologies and consolidation. This is mainly because of huge investments in developing a proprietary technology. So today, we have many sources of this technology coming from various vendors. And those vendors also trying to do as much as possible in internal integration to make their solutions cost effective as much as possible. So I think we are in a very, very good place, where maybe a few years back, there was only one company that could offer transceivers with a good integration. But we see that this trend is much more stronger, and I think it will drive us to run a very good solution into this new, challenging 5G era.

So I'll just add just one more point on top of that. I think one of the things we've looked at carefully as we were discussing, coming together with ECI, was this notion of disaggregation. And so -- and is this -- can we align? Or do we believe that there's a strong enough supply chain out there to fit this model? And we completely agree with Darryl's point that the supply chain is healthy. There are good options out there if you want to go outside your company and not own this technology for yourself, which is a very significant investment donut for yourself. But with that, what I thought would -- what is also important to recognize here is that the ECI architecture, they built their products with this in mind, and they can integrate different vendors with -- I won't say zero overhead but greatly reduced overhead. They already support 2 vendors in their platform today. So these platforms have all been built in the last 5 years, give or take, and they were architected to support a varying supply chain over time, which has set them up perfectly to pick the best-in-breed vendor and also support disaggregated architecture as we move forward, which I firmly believe is going to become an important architectural component with service providers as we go forward.

Great. Our next question from the web is, could you provide an update on the progress of the Ericsson partnership?

We have a very good partnership with Ericsson, who -- an important partner of ours. We have other partners as well. Ericsson is, as they've announced, they are using the technologies we have as part of their 5G go-forward plan they announced in September 2018. We are engaged with a number of customers with Ericsson for 5G technologies, Tier 1 operators, not just for 5G but also for straightforward optical technologies. So the partnership is a close partnership and an important partnership for us.

Great. And our last question is also from the web. How do you see optical networks evolving as 5G rolls out?

You take the first one.

Maybe I'll answer that one. Look, 5G, in my view, was a big era by the industry and calling it 5G. It's -- it should have been called 5,000G because it's not really an evolution of the network. When you went from 2G to 3G to 4G, you use very similar topology in the network, a very similar optics and mobile backhaul technologies. 5G is quite radically different. If you think of yourselves and your devices, whether you're in London, New York or Paris or wherever you are in the world and you're walking through the city today, you're probably -- if you're lucky, get 15 to 20 megs of download speed. When 5G comes along, you'll get maybe 100 meg or more download speed. To deliver that 100 meg to the device, you need a higher density of network within that area. So if you look up at the top of roofs, you see base stations on the roofs as you're walking through in New York. Well, you'll need a factor of maybe 3, 4x the number of base stations. You need a much denser network. In the old days, you do the mobile backhaul using microwave radio back to what's called an eNodeB central location. But when you're talking this sort of high-capacity delivery to individual users, you need to go what's called fiber deep. So you have to invest a lot in fiber networks going out to the base stations. So this is going to help support driving capacity going forward. So the network has to go deeper, so you need more optical gear, but that's not enough. The 5G demands low latency across the network. Typically across a network today, it's 48 milliseconds across the network. When you go to 5G, you've got to be sub-10 milliseconds across the network. To do that, you need different synchronization. So this is not something you can just evolve the network like we've done on 2 to 3 to 4G. 5G, you've got to completely put new synchronization in there, and that's not something you can upgrade in the field. So it's a multiple -- multitude of things that change here in 5G. Firstly, the fiber deep. You need more equipment. Secondly, the low latency synchronization, going to class C, class D synchronization. And then on top of that, you've also then got the service layer within that. Typically, optical networks have been the result of services driving onto those networks. With 5G, you can actually now do segmentation in the network, offering advanced services to customers, to verticals to generate new revenue streams. So when we talk 5G, for me, the average person on the street thinks this 5G is an evolution of the network, and it's absolutely not an evolution. It really is a revolution. And this is what a lot of companies, a lot of operators today, they're looking at this huge investment not only in fiber but also in technology. And some operators, mainly in Europe, they're looking to share networks to share the investment. This is a massive global opportunity. It's not if. It's when, and it will need major, major investments into new technologies. And this is why Ribbon-ECI are putting a lot of focus on our 5G portfolio, which is we believe we're leading the market today in our 5G technologies, offering soft slicing and hard slicing. We can also evolve our existing network as we work on this basis of reusing our technologies. So therefore, you're protecting investment. So it's very, very important that the analysts on this call, one, they know that we've got extremely great technology today that competes in today's market, where I think we can take a leadership position in 5G transport going forwards.

Yes. So yes, I'll piggyback on that just to reinforce what Darryl said. I think the part that really resonated with me was -- is really that this service layer associated with 5G is going to permeate every layer of the network architecture. Packet-optical is not just bit hauling as we move forward and we go into 5G. It is an active participant in the service layer. Granular SLAs need to be delivered from end to end through the network, right? Whether it's IoT with hyperscale device connectivity, ultra-low latency applications or applications that just need a massive amount of throughput, that SLA needs to be secured and assured all the way through the packet layer domain. We're going to move to new models of networking on demand, and I'm very confident that the elastic networking concept and DNA that's built into the ECI portfolio will compete quite favorably in that world. And to Darryl's point, we have to think a lot about multi-tenancy. Whether it's segmentation with a soft slicing or hard slicing, the concept of multi-tenancy is going to extend from the core of the network all the way down to the premise. And again, these capabilities need to be engineered all the way down through the network, which is ECI has invested ahead of the curve to set the portfolio up to be able to deliver that. So to me, the biggest kind of macro-level change or driver that will come with 5G is that this service layer is going to permeate down and through every network layer and reach end to end to work down through the network. So with that, I'll now turn it back to Monica.

Thank you. Thank you, everyone, for joining the call.

Thank you. This concludes today's question-and-answer session. I'll turn the call back to Mr. Kevin Riley for closing remarks.

So I'd like to thank everyone for their time, and thank you for joining. And I'd just mention that we would be happy to support any off-line follow-up as needed, and we'll welcome the engagement. So thank you for your time today.

Thank you. This concludes today's conference. All parties may disconnect. Have a great evening.