Sandvine, Optenet partner to make broadband safer for children; analysts divided on revenue potential

Waterloo, ON-headquartered broadband equipment provider Sandvine, Inc. and IT security specialist Optenet, S.A. have signed a new partnership that moves parental controls off the desktop and onto the network itself. They are targeting wired and wireless broadband subscribers worldwide, although analysts have mixed opinions on the revenue potential. The new solution will allow customers to set up parental controls on broadband services without subscribing to a third-party security provider. It will combine application- and subscriber-awareness from Sandvine with threat analysis and content filtering from Optenet. By combining their technologies, the companies say they will make the internet a safer place for children and other broadband users. “I see this deal as being more beneficial to Optenet than to Sandvine,” says Sameet Kanade, an analyst with M Partners in Toronto. “For Sandvine it is an addition to their platform, but for Optenet it gets them into large North American carriers.” Optenet, a Spanish developer of hosted software for parental controls with US headquarters in Miami, has been around for 12 years, but most of its business has been in the European Union and Latin America. The company doesn’t disagree that there is value for it in getting access to Sandvine’s large carrier accounts. “Sandvine has done a good job of penetrating the carrier customers,” says Joel Silberman, Optenet’s VP for North America, speaking to Tech Media Reports from Boston. “Carriers have invested in the Sandvine platform, and have seen the value.” Silberman argues that the partnership will help open doors for both companies. Essentially, Sandvine can provide traffic management to direct carrier subscribers to Optenet’s software-as-a-service (SaaS) parental control solution. This removes a headache for both the carriers and Optenet, as it makes it easier to match those subscribers who have signed up for the solution. “At present most of the carriers are only offering cloud-based security services for email,” says Silberman. “There is a lot of anti-spam and anti-virus functionality, but not much for parental control.” Pricing can be either bundled through the carrier or on an individual basis; Silberman says the offering might run to about $2.50 a month per subscriber. The technology can use password IDs to vary controls by user, even if they are on one account, which would allow a household to adjust according to individual requirements. Sounds compelling, but some analysts don’t think there is much in this for Sandvine. “Sandvine needs big deals with big carriers,” says one analyst who asked for anonymity. “They need brand name, recognizable companies from around the world, because they have a relatively high cost structure. As a result, they need large volume revenue deals to help achieve profitability.” However, Sandvine argues that relationships like the one with Optenet are important to its future success, as they position Sandvine’s technology as a key enabler. Without Sandvine, it might be more difficult for carriers to deliver mass-market, SaaS-based solutions. “The Optenet relationship is good because it highlights our value,” says Tom Donnelly, Sandvine’s co-founder and EVP of marketing and sales. “It can be quite a challenge to deploy a new platform on a network, and service providers are always trying to consolidate functionality. When you look at value-added services, you can leverage the Sandvine platform without having to put a new box in-line.” In effect, as networks add more services – and as broadband gets pushed out on to mobile devices – the appeal of hosted solutions that are managed by the likes of Sandvine could increase. For Kanade, having Sandvine move into consumer-related solutions like those offered by Optenet might not be such a bad idea. “At present, 99.9% of Sandvine’s solutions are not catering to what you or I need as a user – they are for the Rogers or the Comcasts of this world,” says Kanade. “Having security or parental controls on the pipe and not the desktop is, in a sense, more effective. Most people don’t update or renew their desktop software. This is a decent market for Sandvine because it extends their platform.” It also puts Sandvine directly in middle of the value proposition, making the company’s platform an essential component for the rollout of more carrier services. Mobile devices require that more applications be hosted in the cloud, and providers are in need of improved traffic handling capabilities. In effect, SaaS solutions like those offered by Optenet could risk being orphaned unless they can go to carriers with a Sandvine at their side. “It’s inefficient to put all the traffic through the solution,” says Donnelly of Sandvine. “It could degrade the overall network platform. Now, if someone has Sandvine on their network they can simply add parental controls.” Good news, but some analysts don’t only want promising stories – they want results. “Last quarter Sandvine’s total operating expenses were 101% of revenue,” notes our media-shy analyst. “Companies that spend 101% of their revenue don’t tend to make profits. Sandvine needs some big bang revenue.”

Sandvine, Optenet partner to make broadband safer for children; analysts divided on revenue potential

News | January 4, 2010

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