Ethernet First Mile Solutions Over Bonded Copper Show Enormous Growth in New Customer Survey; New EFM Standard Delivers Scalable Ethernet Bandwidth over Existing Copper Loops.

OAKLAND, Calif. -- A survey by Infonetics Research shows continued expansion and market growth potential for Ethernet Over Copper in the First Mile, as service providers offer an increasing array of bandwidth-intensive services and applications. Zhone Technologies, Inc., (Nasdaq:ZHNE) the BLC market leader and the first company dedicated to building total-delivery solutions for voice, data and content services worldwide, announced the survey results which further validate the market for Ethernet over Copper.

Infonetics Research reported in September 2005 that the worldwide total Ethernet Access Device segment quadrupled between 2004 and 2005, and is forecast to jump from $91 million in revenues to nearly $682 million by 2009.

According to another Infonetics Research report issued in April, 2006, Ethernet services are expected to generate more than $5 billion in U.S. service revenues by 2009. With IP-based voice, video and network-based content services providing new revenue opportunities for service providers, the ability to offer Ethernet-based access services that can accommodate innovative, high-value application services is critical to income growth.

Despite an ever-growing need for bandwidth, only 11.7% of commercial buildings in the U.S. with 20 or more employees have access to fiber, according to Vertical Systems Group (www.verticalsystems.com). With Zhone's extended rate Ethernet over Copper solutions, service providers can significantly reduce the need for trenching and installing expensive fiber connections while capitalizing on the latest 5.7 Mbps per pair capabilities.

Not only is Ethernet increasingly at the core of nearly every business network - no matter the size - it is also the foundation transport technology for higher layer application services (voice, video, and more) based on TCP/IP. Small and medium-sized businesses as well as corporate branch offices are seeking a way to make the WAN like their LAN and extend their Ethernet (and IP-based applications) infrastructure to connect to customers, business partners and the corporate home office.

The recognized leader in the rapidly growing Ethernet over Copper market, Zhone Technologies just announced its new EtherXtend(TM) solution, which delivers cost-effective, high-bandwidth Ethernet services over existing copper loops throughout a carriers' serving area. Zhone's EtherXtend offers the broadest range of scalable EFM solutions in the industry, with support for T1, E1 or DSL connections, providing up to 5.7 Mbps per copper pair. By combining multiple copper pairs using Zhone's copper bonding technology, carriers can deliver data rates over 45 Mbps over existing copper loops. Zhone was the first vendor to deliver products in the fast-growing bonded Ethernet over copper market, and Zhone still leads that market today.

About Infonetics Research, Inc. (Infonetics)

Infonetics is the premiere international market research and consulting firm specializing in data networking and telecom. Infonetics provides a complete view of the market through constant interaction with equipment manufacturers, service providers, end-users, chip and component manufacturers, sales channels, and the financial community. Infonetics offers quarterly market share and forecasting, end-user and service provider survey research, and service provider capex analysis. Infonetics is respected in the industry for its objectivity, accuracy, and ability to deliver on time all the time.

For more details on research services, including study excerpts, prospectuses, sample data, press releases, tables of contents, etc., please visit www.infonetics.com

About Zhone Technologies, Inc. (www.zhone.com)

Zhone designs and manufactures network equipment for network operators worldwide. Zhone's products allow network operators to deliver a rich array of voice, data, video, and entertainment services over their existing networks while simultaneously retooling for converged packet based voice (VoIP) and video (IPTV) over copper or fiber access lines.

Zhone's advanced networking solutions include the Single Line Multi-Service architecture (SLMS(TM)), Multi-Access Line Concentrator (MALC(TM)), Raptor(TM) ATM/IP DSLAMs, Zhone Residential Gateways (ZRG(TM)), EtherXtend(TM), GigaMux(TM) Optical Transport Systems and Zhone Management System (ZMS(TM)). With deployments at over 600 carriers including among some of the world's largest networks, Zhone has enabled network operators to reinvent their businesses.

Zhone, the Zhone logo, and all Zhone product names are trademarks of Zhone Technologies, Inc. Other brand and product names are trademarks of their respective holders. Specifications, products, and/or product names are all subject to change without notice. Copyright (C) 2006 Zhone Technologies, Inc. All rights reserved.

Forward-looking statements 

This press release contains forward-looking statements that are subject to the safe harbors created under the Securities Act of 1933 and the Securities Exchange Act of 1934. Forward-looking statements include, among others, statements that refer to anticipated growth and trends in Zhone's business or key markets, including growth in the Ethernet market. Readers are cautioned that actual results could differ materially from those expressed in or contemplated by the forward-looking statements. Factors that could cause actual results to differ include, but are not limited to, fluctuations in demand for network access products and general economic conditions as well as those specific to the communications, internet and related industries. In addition, please refer to the risk factors contained in Zhone's SEC filings available at www.sec.gov, including without limitation, Zhone's annual report on Form 10-K for the year ended December 31, 2005. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date on which they are made. Zhone undertakes no obligation to update or revise any forward-looking statements for any reason.