Setting a Course to Convergence: The Incumbents' Wireline Strategies
While the telecommunications industry as a whole is still in turmoil, the overall direction in which it is now headed has become clear: Tomorrow's telecommunications networks will be multiservice networks - networks that switch legacy and emerging services across a converged IP/MPLS layer, running over a high-capacity optical infrastructure.
In unique accord, all six of the West's leading incumbent equipment providers agree that the future belongs to converged multiservice networks. More importantly, the majority of service providers have bought into the concept. Most of the 50 service providers interviewed for this report are now fleshing out their strategies for implementing such networks and reorganizing themselves internally to reap the twin benefits that converged networks promise to deliver: lower operating costs and easier service deployment.
But that's where the consensus ends. The industry may agree on where it needs to go - but there is complete confusion over how best to get there, or which of the incumbent equipment suppliers is in the best position to help service providers realize their goals.
To find answers to these questions Heavy Reading has spent the last three months producing this 114-page report: Setting a Course to Convergence: The Incumbents' Wireline Strategies.
Over the past few years, the bursting of the telecom bubble has wreaked havoc amongst equipment suppliers. All of the big players have had to make agonizing decisions concerning which technologies they're going to continue developing and which ones they're going to scrap or put into hibernation. Now that the dust is clearing from the battlefield, it's become clear that some vendors have improved their overall positions while others have suffered permanent damage.
Getting a read on who's ahead isn't easy, but it's absolutely crucial for every sector of the telecom industry to do so:
Carriers need to put their suppliers through a health check, reevaluate their residual strengths and weaknesses, and examine their own visions of the future of telecom to make sure they are in alignment with the technological strategies of manufacturers.
Incumbent equipment manufacturers need to see how their strategies measure up against their opponents, so they can address their own problems and also exploit their competitors' deficiencies.
Startup equipment manufacturers need to know what the incumbents are planning, and where the gaps are in their product lines, in order to position themselves for acquisition and/or partnership.
Communications chip manufacturers need to know what their biggest customers are working on in order to anticipate future demand for their wares.
Investors require insight into which of the big equipment vendors will emerge to dominate the multiservice market.
Major findings of Setting a Course to Convergence include:
IP/MPLS is the DNA of tomorrow's telecom. Incumbents won't succeed unless they build or buy the technology – router partnerships and co-developments are a red herring.
Transport and packet networks will remain distinct layers for the coming decade. Vendors with product strategies that assume complete convergence will find sales to large carriers impossible.
Carriers are focused on the "cost of change" – the impact on existing revenues of shifting voice circuits and leased lines onto a converged IP/MPLS backbone.
Vendors are split over ATM's role in the migration to converged networks. Nortel is ATM's biggest proponent – a strategy that looks increasingly prescient.
Lucent is abandoning its own convergence products in favor of re-inventing itself as a service organization. It will fail.
Packet voice transport is happening slowly, posing a challenge for Siemens, which has staked its future on carriers moving to Class 5 replacement now.
Cisco defined the convergence market and currently leads it – but issues with ATM, OAM, reliability, and VOIP mean its position is not unassailable.
Success for incumbent vendors is in the timing, not the technology. Developing products that support convergence in sync with carriers' needs is the biggest challenge facing vendors today.
Alcatel's once outstanding broadband vision is in urgent need of repair. It now lacks, not only a broadband remote access server, but also a core routing platform.
The telecom industry will recover more quickly if one or two incumbents are superceded by either second-tier players in the US or incumbents in Asia.
Carriers are committed to MPLS but think vendors are dragging their feet on remedying its deficiencies.
Marconi's restructured finances and "hollow core" network architecture will count for nothing if it cannot re-establish its reputation with new customers.