Press Release

Oakland, CA — September 29, 2010 — Zhone Technologies, Inc. (NASDAQ: ZHNE), a global pioneer in FTTx network access solutions, today announced another North America Broadband Stimulus win with Yadkin Valley Telephone Membership Corporation, reinforcing the company’s commitment to the delivery of critical broadband service to the nation’s rural communities.

Over the next three years, Yadkin will use Zhone’s MXK intelligent Gigabit Passive Optical Network (GPON) solution, as well as its zNID optical network terminals (ONT), to extend high speed fiber optic connectivity to 5,783 homes, businesses and schools in the rural North Carolina counties of Yadkin, Davie, and Iredell – areas that were previously seen as a challenge to serve both economically and technologically.

Yadkin had been using Zhone’s MALC copper solution, specifically its ADSL2+ and POTS systems, to deliver high-speed data and advanced voice services to customers within its service region for many years but decided to upgrade to Zhone’s gigabit passive optical network (GPON) technology in 2007 as part of a FTTH rollout plan that would improve speeds and service reliability for all customers – not just those in the larger cities.

While Yadkin has already passed more than 16,000 homes and businesses – or 42 percent of structures within its footprint – targeted for this long-term project through internal funding, the recent $21.6 million award from the U.S. Department of Agriculture will enable Yadkin to more quickly and efficiently reach the rural communities using Zhone’s single line multi-service (SLMS) access systems.

“One of the initial goals for our FTTH project was to reach all customers within our regional footprint with fiber-based triple-play services by 2019,” explained Mitzie Branon, general manager of the Yadkin Valley Telephone Membership Corporation. “However, with the receipt of the broadband stimulus funding and the support of Zhone as our GPON partner, we will be able to overcome the anticipated cost challenges and time-to-market requirements for the rural fiber extension and complete our entire FTTH project by 2015 – which is four years earlier than initially planned.”

Both Yadkin and its subscribers benefit from the extensive system bandwidth capabilities of Zhone’s MXK platform, including utilization of up to one gigabit capacity in the home and the ability to support the extreme bandwidth demands of full high-definition television (HDTV) and high definition digital video recorder (HD-DVR) content. The future-proof design of the MXK, coupled with Zhone’s utilization of Home Phoneline Networking Alliance (HPNA) technology for deployment of the zNID GPON ONTs, will also minimize customer impact and installation time for Yadkin during the rollout of both current services and new advanced services that may be offered in the coming months.

“Zhone’s one-box-fits-all MXK and zNID system is really ideal for the fiber architecture and service models we’ve designed for our current footprint,” said Scott Rudolph, assistant general manager for Yadkin. “Zhone has been a proven partner since 2004 and we are thrilled that their MXK solution aligned so well with the needs of this critical broadband stimulus project. Zhone’s platform is the most capable of addressing the growing bandwidth needs, valuable service quality and reliability our customers expect while minimizing our operational costs at the same time.”

Zhone has leveraged deep experience in managing the complexity of multi-service access to build the industry’s most comprehensive portfolio of FTTx customer premise equipment and the zNID ONTs have been well-tuned to Yadkin’s specific field requirements to provide optimum cost efficiency and maximum service differentiation.

“As demonstrated by the momentum we’ve experienced for our MXK and zNID systems, this has most certainly been the year that FTTH and GPON have become the technologies of choice for service providers globally,” said Brian Caskey, chief marketing officer for Zhone. “In North America, Zhone has specifically seen the broadband stimulus initiative fuel an uptick in the number of fiber projects we have been asked to support, and we anticipate this trend will grow more as operators experience first-hand the increased speed, bandwidth and overall flexibility of fiber technologies, and our market-leading MXK GPON and Active Ethernet solutions in particular.”

Zhone’s MXK platform is a fully redundant, carrier-grade all-IP platform and the industry’s first terabit access concentrator. Featuring industry-leading density, scalability and switching capacity, the MXK provides non-blocking capacity of up to 3,600 100 Mbps GPON subscribers or 360 1G Active Ethernet subscribers.

For more information about Zhone’s MXK and zNID solutions, please visit www.zhone.com/products/MXK/ and www.zhone.com/products/ZNID-GPON/.

Press Release

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