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ADC, Alcatel Eye Huge Telephony Market

The recent decision by Minneapolis-based ADC
Telecommunications Inc. and Germany's Alcatel Alsthom S.A. to form a worldwide
alliance to jointly offer cable-telephony solutions is a global validation of that
business, both companies assert.

"Cooperation in other parts of the world becomes more
and more international because new operators want to make deals with end users," said
Manfred Langenbach-Belz, Alcatel's director of business development for hybrid-fiber
coax systems. "We want to offer our customers complete end-to-end solutions."

Added Ham Mathews, director of marketing for ADC's
cable-access systems division, "Our own telephony system is only a small fraction in
the world."

More collaboration between U.S. and foreign firms in the
cable-telephony arena is expected in the future.

Under their memorandum of understanding, ADC and Alcatel
will jointly offer cable-telephony infrastructure products, integration services and
access-and-transport systems. Concentrating their efforts on Europe, Asia and South
America, the companies will collaborate on marketing, sales and engineering to bring
international MSOs quick and cost-effective cable telephony solutions that allow them to
compete with traditional telephone-service providers and generate additional revenue.

Alcatel will provide cable-telephony infrastructure
products and full integration and support services for joint solutions. ADC will
contribute its Homeworx cable telephony system, which is a high-capacity platform that
delivers lifeline telephone service over hybrid fiber-coaxial networks. ADC will also
provide ISDN interface solutions based on the two companies' access platform.

One of the factors that set the stage for the alliance was
the breakup of Germany's Deutsche Telekom A.G., said Matthews.

"We're seeing Europe as a market that is opening
up pretty much across the board," he said. "The divestiture of the Deutsche
Telekom network is going to create quite an opportunity for cable telephony."

For its part, ADC will concentrate its European efforts on
breaking into the Spanish and German markets.

"We see these as two big hot spots of
opportunity," said Mathews. Spain has started to deregulate its telecommunications
market and Deutsche Telekom is selling off its HFC network.

ADC and Alcatel plan to have a final agreement within the
next 90 days. It is still too early to say how much revenue the alliance could generate,
as the companies are still investigating areas in which they can cooperate, said Mathews.

Cable telephony continues to emerge as a viable means to
deliver broadband services to the home and office. Next-generation cable infrastructure
spending worldwide is estimated to reach $27.8 billion by 2004, up from a $3.9 billion in
1998, according to the companies.