The Hindu Business Line : Riding the Nortel wave

The senior management of Nortel passionately believes that the IT/telecom industry is poised at a series of inflection points that will trigger the uptake of broadband (with video as a key driver) and connectivity between a plethora of IT, mobile and consumer electronic devices. In order to capitalise on this opportunity and emerge as a key player in the convergent era, Nortel is consciously focusing on fourth generation mobile technology (loosely built on WiMAX), building its enterprise solutions strategy through its alliance with Microsoft and positioning itself as a key player in the services arena.

In an e-mail interview with Nortel's Chief Technology Officer, John Roese, eWorld sought greater clarity and understanding on these aspects of Nortel's strategy. Excerpts:

Can you elaborate on the contours of the deal that Nortel signed with Verizon Wireless recently?

Nortel has secured an estimated five-year $2-billion supply agreement with Verizon Wireless. The deployment includes Nortel CDMA wireless infrastructure equipment.

This deal is significant to Nortel in that it extends our long-standing relationship with Verizon Wireless and is a testament to our CDMA technology leadership. Nortel has been a leader in CDMA since 1995 and has designed, installed and launched CDMA networks for more than 65 operators in 17 countries.

This deployment will enhance Verizon's nationwide 3G CDMA network (branded as `Wireless Broadband') voice and data network - currently the largest, with 57 million subscribers.

Verizon Wireless will leverage Nortel equipment to increase subscriber capacity, drive reduced networking costs and increase data speed required for delivering advanced, high-bandwidth mobile broadband services such as video, gaming, music, etc.

What is your perception of the growth in the CDMA market vis-à-vis GSM, with signs that the CDMA market may be slowing down?

There is significant evidence within the wireless industry that CDMA2000 remains a growing and viable operator technology strategy. Today, CDMA2000 is the most widely deployed 3G technology, with 180 operators in 76 countries, including 52 CDMA2000 1xEV-DO systems, serving more than 300 million subscribers. Counting 2G cdmaOne{trade} subscribers, there are more than 350 million CDMA users worldwide. CDMA2000 has become the technology of choice for cdmaOne, TDMA, analog and greenfield operators, and is deployed in the 450, 800, 1700, 1900 and 2100 MHz bands. Nearly 1,460 CDMA2000 devices from more than 85 suppliers have been introduced to the market, including more than 350 1xEV-DO devices.

Nortel itself is a leader in CDMA2000 and 1xEV-DO development with over 10 years of commercial CDMA deployment experience. In addition, Nortel currently supplies commercial 1xEV-DO Rev. 0 and Rev. A equipment to 21 of the 37 operators who have launched 1xEV-DO.

Regarding CDMA2000 1x terminals, market analysis indicates that CDMA2000 1X handsets cost significantly less than all other 3G handsets, having a proven three-year cost curve and economies of scale advantage.

Regarding CDMA terminals that support global roaming, the total number of WorldMode global roaming devices has reached 22 and the number of manufacturers supplying these devices has increased to 10. The WorldMode phone manufacturers include Amoi, CeCT, Daxian, Hisense, LGE, Motorola, Samsung, UTStarcom, Yulong Telecom and ZTE. WorldMode devices allow CDMA2000 subscribers to roam on inter-standard services, providing seamless coverage in countries where CDMA or GSM systems are available with the use of one multi-mode, multi-band, device.

To support the continued evolution of CDMA, the development of the next standard release of 1xEV-DO has been initiated. This standard, formally termed 1xEV-DO Rev. C, has been named by the CDMA industry as the Ultra Mobile Broadband (UMB) standard. The Ultra Mobile Broadband standard is expected to be published early in the second quarter of 2007 with commercial availability expected on a global basis in early 2009.

With the ability to support peak download speeds as high as 280 Mbps in a mobile environment, Ultra Mobile Broadband (UMB) represents a major breakthrough in the delivery of next generation mobile broadband services. The technology will deliver packets of data at speeds that are orders of magnitude higher than what is currently available, and will do so within the entire cell edge coverage area.

For WiMax or 4G to take off, the two legs of the transaction appear critical: one, bringing established players into this 4G ecosystem and two, the large scale migration of GSM players from 2G to 4G. What kind of milestones have you set for yourself to see whether this plan is working or not over the next year or two?

Personal mobility is highly valued by consumers. The ability to deal with information and entertainment needs on an immediate basis is highly attractive, and WiMAX is the first 4G technology squarely aimed at that existing desire. Beyond that, the economics of using wireless technologies where fixed infrastructure is limited simply make for a better business case. Cellular has proven that.

The question for the industry is not `if', but `when' 4G grows to eclipse the current cellular industry in terms of number of users — and the number of devices each user has connected — and in the value that the industry generates. We believe the answer is `sooner, rather than later', and thus we are preparing to be a major player in this emerging market.

The other critical question we all face is how do we ensure the digital world is available to all? Nortel is committed to a vision of Next-generation networks as a force to shape the quality of our lives, and has been instrumental in launching the digital revolution; extending its advantages across the globe. Nortel is deeply involved in the next phase of accelerating the digitisation of the world - a process that will help bring affordable connectivity to those who currently have nothing.

Nortel plans to lead the 4G evolution and play a key role in the mass market adoption of mobile video and multimedia services. Next-generation mobility is not just about higher speeds and greater reliability but also about sound economic logic for mobile operators.

The focus of Nortel's wireless strategy is to provide solutions that improve network efficiency and minimise total cost of ownership while enabling operators to maximise their average-revenue-per-user by speeding the introduction of broadband, multimedia services. Nortel has a strong leadership position in OFDM-MIMO, which is the foundation technology for its 4G investments, including WiMAX, CDMA EV-DO Rev C and LTE.

As part of its ongoing mobility business, Nortel will continue to develop and support solutions for the evolution of GSM Access and Core, GSM-R, GPRS and EDGE technologies as well as CDMA Access and Core and UMTS Core. The company will continue to lead the industry in transitioning to wireless VoIP in all technologies.

What is the thought process that surrounds the services leg of your strategy? As the senior management has claimed, it is an after thought in your overall strategy, but how do you plan to make it work through SOA-enabled services, given the stranglehold that entrenched players (especially, enterprise solution players) have in this space?

Services and Solutions is one of Nortel's three strategic focus areas for growth. We have made the bold commitment to our shareholders that we will double this business in the next 3-5 years. Our plan includes growing services at better than the market average of 7-8 per cent in 2007, while making the required investments in strategic growth areas to lay the foundation for much larger growth after 2007.

Looking out to 2009, analysts have predicted the services market to be larger and growing faster than the telecom equipment market. Four key trends in communications services include the following:

Multi-vendor services

Outsourcing, Managed and Hosted services

Unified Communications

Software: Services-Oriented Architecture (SOA), Software as a Service, and Web Services

To achieve our growth targets, we will address these and also focus on specific areas growing much faster than the market average, including network transformation, multimedia communications and industry vertical solutions.

In the Network Transformation area, we will continue to leverage our leading product position in

Carrier VoIP with related network transformation and IMS services. We will take advantage of 4G wireless market growth with our related services and solutions offerings.

We will attack the Multimedia Communications opportunity with a new applications services focus. Estimates are that in two years, 50 per cent of all Enterprise software purchased will be Web services-enabled (Gartner). 38 per cent of large enterprises already have SOA initiatives today, and this will rise to 70 per cent in the next two years (Forrester). We can now collaborate with our customers in developing custom web applications and with our partners in complementing their SOA architectures to provide a more stable environment for these applications.

We will leverage our security and mobility competencies to develop industry vertical business solutions. Worldwide Security Compliance and Control is a large opportunity across industry verticals -- the largest segment is Security Compliance Services, but Content Control is the fastest growing segment. Enterprise mobility continues to grow as evidenced by the large number of wireless access hardware shipments.

How is the Innovative Communications Alliance with Microsoft structured? How will you derive your share of benefits from this alliance?

Nortel and Microsoft have formed the Innovative Communications Alliance, which will deliver innovative Unified Communications Solutions and services to accelerate the transformation of voice, video and data communications into a single Unified Communications platform running on a high-performance data network that together offers the highest Quality of Experience (QoE), low TCO (Total Cost of Ownership) and delivers immediate business value. Lower TCO is achieved through common platforms, integration with data center software management and application-aware networking.

By combining Nortel's world-class network quality and reliability with Microsoft's software ease-of-use, the Alliance will accelerate the availability of Unified Communications - an industry concept that uses advanced technologies to break down today's device and network-centric silos of communication (e-mail, instant messaging, telephony and multimedia conferencing) and instead makes it easy and efficient to reach colleagues, partners and customers from the devices and applications workers use most. Taking a decisive step further, Nortel and Microsoft will transition traditional business phone systems into software. This software-centric approach will provide the easiest transition path for businesses, enabling them to reduce the total cost of ownership and protect current and future investments. It will also more quickly enable the creation of new, innovative applications.

maverick@thehindu.co.in

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