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Mikkelin Puhelin Oyj Selects Zhone's Ethernet Extension Platform for Enhanced Service Delivery in Finland

EtherXtend Access Solution Delivers Cost-Effective Ethernet Services

Oakland, CA — May 10, 2006 — Zhone Technologies, Inc. (Nasdaq: ZHNE), the first company dedicated to building total-delivery solutions for voice, data and content services worldwide, announced today that Mikkelin Puhelin Oyj has selected and deployed Zhone's EtherXtend™ products to deliver Ethernet service to businesses in its serving area.

Zhone's EtherXtend Ethernet in the First Mile (EFM) over copper solution provides a cost-effective and elegant method for service providers to offer scalable Ethernet-based access services to a large and growing base of business customers. These products deliver scalable Ethernet bandwidth over ordinary copper loops. By bonding pairs of copper, service providers can quickly deliver up to 45Mbps of manageable bandwidth.

According to Infonetics Research, Ethernet services are expected to generate more than $5 billion in service revenues by 2009 in the U.S. alone. However, fiber touches only 11% of the more than 5 million small and medium-sized business locations. IP-based voice and video as well as network-based content services provide new revenue opportunities for service providers. The ability to offer Ethernet-based access services is critical to service provider growth.

As a leader in the industry, Zhone is uniquely well positioned to capture this market. Zhone is the only vendor that can claim:

• First to market with Ethernet over bonded copper its Net to Net products deployed since 1998,
  
• "Number 1" market leader in EFM over copper in 2005 according to analyst firm Infonetics,
  
• "Number 1" market leading broadband loop carrier (BLC).
  Zhone has a unique position in the Ethernet market as not only being the market leader in the coveted BLC market but now also offering the only BLC that supports EFM Ethernet access. With over one million ports deployed at carriers around the world, Zhone's ability to offer a common platform that supports DSL, POTS Fiber and now EFM is a significant benefit to carriers. Zhone offers the broadest range of platforms from large systems to a full line of smaller devices.
  

Zhone's EtherXtend products are standards compliant with the recently ratified IEEE 802.3ah specifications to provide point-to-point Ethernet connectivity over the WAN. Ethernet is already beginning to be deployed everywhere within homes and business and even within the carrier's own infrastructure, but has not been made widely available as an access solution.
Zhone's EtherXtend product family allows carriers to utilize existing copper services to quickly turn up Ethernet connections over SHDSL or T1 and E1 circuits, resulting in simplified network integration. By combining multiple T1/E1 and SHDSL copper loops service providers can deliver up to 45Mbps -- enough to deliver ample Ethernet bandwidth to satisfy most businesses growing service requirements. This copper-based solution provides an attractive alternative to burying fiber optic cable and dedicating valuable fiber strands to long-haul Ethernet.

"Mikkelin Puhelin Oyj is offering business customers the shortest service interval and highest quality Ethernet experience in Finland," said Pekka Nurmi, Network Manager at Mikkelin Puhelin. "Zhone's EtherXtend products allow us to utilize our existing copper facilities to deliver high bandwidth Ethernet services over existing copper loops to our business customers. This allows us to quickly and cost-effectively extend our service reach and to add new services that subscribers want."

About Zhone Technologies

Zhone Technologies is a worldwide leading supplier of communications network equipment for telephone companies and cable operators. Zhone is enabling enhanced services by allowing network operators to offer broadband services over their existing networks today while simultaneously retooling for packet-based VoIP and IPTV over both copper and fiber access lines.

By utilizing Ethernet and IP technology, Zhone's products simplify network operations by consolidating multiple services onto a single access line. This convergence of services and networks simplifies provisioning and operations, delivers quality and reliability, and opens the door for delivering exciting new services.

Zhone pioneered this new category of products now commonly referred to as Broadband Loop Carriers (BLCs) which are regarded among the fastest growing segments of the multi-billion dollar DSL market. According to industry analysts, Zhone is first in broadband loop carrier market share. Zhone is also first in Ethernet over bonded copper market share and Zhone's products were awarded top ranking among BLCs.

With corporate headquarters in Oakland, California, Zhone operates development centers across North America and has sales and service facilities and customers spanning the globe. With deployments at over 600 carriers including some of the world's largest networks, Zhone has enabled carriers to reinvent their businesses.

About Mikkelin Puhelin Oyj

Mikkelin Puhelin Oyj (MPY) is operating telecommunication networks in Southern Savo and Mikkeli. MPY is a member of the Finnet Group, with extensive experience in providing telecommunication services. The professionals in Mikkelin Puhelin are active in all areas of telecommunication services including wireless telecommunication, voice and data services.

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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.

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 and quarterly report on Form 10-Q for the quarter ended March 31, 2006. 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.