Redback Networks Announces New Architecture for Optimizing Dial Access.

SUNNYVALE, Calif.--(BUSINESS WIRE)--Oct. 26, 1999--

PSTN Off-load Architecture Creates Significant Benefits

for Carriers, Service Providers, and Internet Users

Redback Networks, Inc. (Nasdaq:RBAK), announced today a new network model for its Subscriber Management System (SMS) that allows carriers to transparently reroute dial-based Internet access traffic from local Central Offices (COs) to downstream Internet service provider (ISP) points-of-presence (POPs), thereby freeing up capacity on the Public Switched Telephone Network (PSTN) for lucrative voice calls.

The new feature, called PSTN Off-load, provides a highly cost-effective, secure, and scalable means for carriers to accommodate the rapidly increasing tide of Internet access consumers without overburdening voice circuits on the PSTN.

Redback's PSTN Off-load architecture also allows ISPs to outsource modem management to carriers, increasing overall network efficiency while reducing their maintenance overhead. For end users, PSTN Off-load makes Internet access easier by reducing congestion that can thwart successful sign-on to ISP networks.

"Carriers have faced double jeopardy trying to accommodate the rapid growth of Internet access traffic," said Larry Blair, vice president of marketing at Redback Networks. "First, they have seen the duration of primary-line calls increase to 30 to 45 minutes, while capacity models are based on three-minute calls. That means the network is under-engineered for bread-and-butter revenue. In addition, consumers are more frequently using second phone lines for Internet access, cutting the carrier out of the market for premium call features, such as call forwarding and call waiting, that help build margin. Redback's PSTN Off-load functionality restores voice capacity to its primary purpose. And it allows carriers to offer modem outsourcing services to their ISP customers for additional revenue, which in turn allows the ISP to focus its resources on more strategic business services and issues."

"oz.net decided to implement Redback's PSTN Off-load solution to both lower our costs and improve the quality of our dialup Internet service," said Jared Reimer, network administrator at oz.net Internet Services, a leading Seattle-based ISP. "We found the architecture easy to implement, especially given that we have successfully been using the Redback SMS platform in our DSL deployment efforts, and quickly realized the benefits of this solution. Our costs have decreased, we are eliminating remote points of presence, and our customers have reported increased connection speeds and session stability. Furthermore, the cost to expand our dialup operations has been reduced greatly with this solution, as the telephone company absorbs the costs associated with modem pool expansion and backhaul from remote cities."

The PSTN Off-load Architecture

Redback's PSTN Off-load architecture uses the SMS to split traditional remote access server (RAS) functions to provide a more efficient delivery model for Internet access. In this model, the modems that establish the dial sessions reside in the carrier's CO, as close as possible to dial-in users, and are integrated into a Remote Modem Concentrator (RMC) device, which sits behind the CO switch. RMCs typically are about one-sixth the price of tandem or CO switches, which carriers otherwise would need to purchase to accommodate incremental growth of dial Internet access traffic.

When a user dials into an ISP access number to establish a data session, the CO switch directs the call to the RMC. The RMC terminates the line signaling, extracts the packets encapsulated as PPP frames, and initiates a Layer 2 Tunneling Protocol (L2TP) tunnel. It then funnels dial traffic to the Redback SMS at the carrier data center.

The SMS aggregates multiple PPP sessions and sends them as a single tunnel to multiple downstream ISPs using L2TP. The L2TP tunnel securely isolates data traffic specific to one ISP from that destined for another ISP; the L2TP tunnel also transports the Internet access sessions as packets over the carrier's data networks, instead of using PSTN circuits. The SMS dynamically binds the individual user sessions to the correct ISP downstream tunnel using a functionality known as L2TP tunnel switching.

At the ISP central POP, the Redback SMS performs all subscriber management and termination functions. The SMS extracts PPP sessions from each tunnel and terminates subscriber data streams, grooming them for ISP Internet backbone routers.

"The PSTN Offload architecture is a natural extension of the SMS's scalable support for broadband access," continued Blair. "Once a carrier has adopted an SMS for broadband users, it can then integrate dial-up users into the same architecture."

Modem Outsourcing -- A Win-Win for Carriers and ISPs

One significant advantage of PSTN Off-load for ISPs is that it allows them to outsource the purchase and management of modems to their local carrier. Today, RAS equipment represents one of the major cost areas for ISPs, averaging about $9 per month per modem (given a 36 month depreciation schedule). In addition, ISPs must pay an additional facilities cost to house each modem, which brings the overall monthly RAS cost to roughly $10. As more subscribers sign on, ISPs must increase RAS equipment levels, which adds to their costs.

For carriers, modem outsourcing also represents a major source of incremental revenue. Using the RMCs deployed in its COs, a carrier can offer a "virtual modem" service to small, medium, or large ISPs, as well as large corporate customers, charged on a monthly basis.

"01 Communications is taking an innovative approach to supplying outsourced modem resources in California. We are leading the way in providing wholesale modem capacity directly to the ISP," said Max Seely, senior vice president/general manager, of 01 Communications (Sacramento, Calif.). "We are installing Redback SMS 1000s in 13 of our POPs across California, from Sacramento to San Diego, to aggregate data traffic from our modem banks and wholesale it to our ISP customers. The Redback SMS is a key element of our wholesale modem offering, and enables us to deliver a compelling value proposition to our customers, allowing them to focus on their core business initiatives."

Improved Access Bandwidth Efficiency, Lower ISP Costs

Another major advantage PSTN Off-load offers ISPs is greatly improved bandwidth utilization. In the traditional dial access model, the ISP receives a DS-0 circuit to support each of its modems. While the minimum required throughput for that modem might be as low as 6-10 kbps, ISPs must pay for a full 64 kbps circuit. This inefficiency grows more significant as the number of subscribers increases.

Because Internet access traffic travels over the PSTN and must be delivered as whole DS-0 circuits, there is no way to more efficiently allocate or use this bandwidth. A single DS3 can handle at most 672 DS-0s, which means 672 dial-up user sessions. That means the ISP is paying for 45 Mbps when the DS3 is carrying only about 3.36 Mbps worth of traffic.

With Redback's PSTN Off-load, ISPs can now provision the minimum amount of throughput required, instead of dedicating a DS-0 circuit to each active modem. Thus, each T1 or Primary Rate Interface (PRI) line an ISP leases from the carrier can support approximately 200 modems using PSTN Off-load, versus 24 modems under the existing model. Consequently, the monthly access bandwidth cost per modem drops dramatically. The SMS can support as many as 8000 user sessions per DS3.

Finally, though facilities are not a major component of overall monthly modem costs, implementing a PSTN Off-load solution provides a significant percentage savings in facilities costs for ISPs by eliminating space requirements and monthly facilities charges for RAS devices.

Improved Subscriber Experience

Redback's PSTN Off-load solution also delivers benefits to end-user subscribers. Average Internet access consumers have problems dialing in during peak hours, which last from 6 PM to 10 PM. The following problems are typical:

-0-

--   Not enough modems -- ISP problem resulting in a slow busy signal

--   Not enough capacity in the network -- carrier problem resulting
     in a fast busy signal

--   Not enough capacity at the originating CO -- carrier problem
     resulting in no dial tone

-0-

PSTN Off-load alleviates these problems. Subscribers experience greater call quality, including less hold time and easier log-on.

Pricing and Availability

Redbacks PSTN Off-load functionality is available today for Redback customers using AOS (Access Operating System) version 2.2 or later. PSTN Off-load functionality also requires Redback's L2TP software feature set, which is available for $9,995 for the SMS 1000 and $4,995 for the SMS 500.

About Redback Networks, Inc.

Founded in 1996 and headquartered in Sunnyvale, Redback Networks, Inc., is a leading provider of advanced networking solutions that enable carriers, cable multiple system operators (MSOs), and service providers to rapidly deploy high-speed broadband access to the Internet and corporate networks.

The company's Subscriber Management System (SMS) connects and manages large numbers of subscribers using any of the major high-speed access technologies such as Digital Subscriber Line (DSL), cable, and wireless. The SMS received Best of Show honors for WAN and remote access equipment at NetWorld+Interop, Las Vegas, in May 1998, and was honored by Telecommunications Magazine as one of the Lucky 13 hot products in telecom at the SUPERCOMM '99 show in Atlanta.

Customers wanting more information about Redback products can visit its World Wide Web site at http://www.redback.com, or contact the company at 408/548-3500.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 The statements contained in this press release that are not purely historical are forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended, including statements regarding Redback Networks' expectations, beliefs, intentions or strategies regarding the future. Forward-looking statements include statements regarding future sales and business opportunities. All forward-looking statements included in this document are based upon information available to Redback Networks as of the date hereof, and Redback Networks assumes no obligation to update any such forward-looking statements. Forward-looking statements involve risks and uncertainties, which could cause actual results to differ materially from those projected. These and other risks relating to Redback Networks' business are set forth in documents filed by Redback Networks with the SEC, specifically the most recent reports on Form 10-Q.

Note to Editors: Redback and the Subscriber Management System are trademarks of Redback Networks, Inc. Other trademarks, service marks, and trade names belong to their respective owners.