October, 2009

Nortel loses another arm as Hitachi steps in for LTE bits

Continuing its bankruptcy-ignited fire sale, Nortel announced that it has struck a deal with Tokyo-based electronics heavyweight Hitachi to part with a piece of its Long-Term Evolution (LTE) business — specifically, “certain assets associated with the development of next generation packet core network components,” according to a press release — for $10 million. Not that it’s trying to be cryptic or anything.

Of course, Hitachi will face lots of LTE competition from other vendors. Despite that, the insolvent Toronto-based vendor said:

Under the agreement, the assets include software to support the transfer of data over existing wireless networks and the next generation of wireless communications technology, including relevant non-patent intellectual property, equipment and other related tangible assets, as well as a non-exclusive license of certain relevant patents and other intellectual property.

Nortel said the agreement excludes legacy packet core components for its global system for mobile communications (GSM) and universal mobile telecommunications system (UMTS) businesses. Its GSM and GSM-Railway businesses are slated for an open auction on Nov. 9.

While Monday’s announcement did drop some new information on the asset front, the song remained the same for Nortel’s embattled shareholders.

FairPoint falls to bankruptcy, forks over ownership to lenders

Northern New England telecom operator FairPoint Communications filed for Chapter 11 bankruptcy protection, promising to cut $1.7 billion in debt by converting much of it into equity, essentially giving its lenders ownership of the company.

The move comes “barely 18 months after becoming northern New England’s dominant telecommunications company, fulfilling critics’ predictions that the company wasn’t up to the task,” the Associated Press reported.

FairPoint also just invested $85 million in 368 miles of fiber into its core network across Maine, New Hampshire and Vermont. Ouch. I imagine they feel a little like I did after shelling out for a new radiator on my car, only to find there was a transmission leak a month later — but they’re probably much, much more irritated, huh?

The Charlotte, N.C.,-based carrier is best known for its operations in Maine, New Hampshire and Vermont, where it bought Verizon’s wire lines and Internet network for $2.3 billion in 2008. FairPoint sells wire line, broadband, data, Internet and TV in 18 states. The provider also just invested $85 million in 368 miles of fiber into its core network across Maine, New Hampshire and Vermont.

According to the AP, FairPoint has struggled “under a large debt and falling revenues, as well as customer-service, billing and other problems since switching over to its own computer systems in northern New England nine months ago.”

As expected, the company is promising the fallout won’t affect company operations or customer services. Uh-huh.

“The day-to-day operations of our business will not be impacted by today’s actions,” said FairPoint CEO David Hauser. “We want to assure our customers, employees and vendors that we remain committed to continuing to provide reliable, uninterrupted service to all of our customers. Today’s actions represent a critical and positive step in our efforts to reduce our indebtedness, strengthen our financial condition and position FairPoint to compete more effectively in a dynamic marketplace.”

Huawei and mobile infrastructure: Taking on the heavies

Didn’t we discuss Huawei just last week in the optical arena? Yes we did. Now everybody’s talking Huawei in mobile infrastructure, and not just as the low-cost Chinese telecom equipment purveyor category. Huawei did its time as the low-priced spread, and now grudging respect, even fear among competitors is growing.

The most recent Infonetics Research report on mobile and LTE equipment asked service provider decision-makers in Europe, the Middle East and Africa (EMEA) and Asia-Pac what criteria they use when choosing a mobile infrastructure vendor. The bottom line is that Huawei is on everyone’s radar for good technology and good value for the price, and ZTE is on the rise, too, according to Stephane Teral, Infonetics principal analyst for mobile and FMC.

Infonetics notes that Huawei is overtaking Alcatel-Lucent on many fronts and is nipping at Nokia Siemens Networks’ market position in the mobile infrastructure space. It’s true, however, that the service providers all named NSN in their top three mobile infrastructure vendor lists, and that Ericsson got the highest ratings for service and support (nice news for two vendors that had disastrous quarters).

Verizon CEO comes out swinging against net neutrality

I gotta say, any trade show that opens the ceremonies with some trash talkin’ has my attention.

After giving up a little hip-hip-hooray for Verizon’s long-awaited 4G network (ready for 60 devices thus far and expected to be in 25-30 markets next year) at the opening keynote of SuperCOMM 2009 on Wednesday in Chicago, CEO Ivan Seidenberg shelved his warm and fuzzy feelings there.

The Federal Communications Commission was on the cusp of releasing its proposed net neutrality regulations — a hard sell for the SuperCOMM crowd, to say the least.  Seidenberg pretty much stopped short of calling the net neutrality proponents (and their sympathizers on the FCC) lefty wingbat commies.

“If this burdensome regime of net regulation is imposed on all parts of the Internet industry, it will inject an extraordinary amount of bureaucratic oversight into the economy’s main growth engine for the future,” he said.

Seidenberg said his main beef with net neutrality proponents was their suggestion “that network providers like Verizon and applications providers like Google, Amazon and others occupy fundamentally different parts of the Internet ecosystem — a binary world of ‘dumb pipes’ on the one hand and ’smart applications’ on the other.”

Verizon Wireless and Google — who has been at the front of Team Net Neutrality — are partnering to release a smartphone that runs on Google’s Android system.

“This is a mistake, pure and simple: an analog idea in a digital universe,” he said. “We can’t create smart economy by dumbing down our critical infrastructure.”

Apple’s record-setting quarter and what it means for telecom

Telecom is a hard-knock life sometimes, like this week when Apple announced its most profitable quarter EVER. No small part of that smashing success is the 7.4 million iPhones sold in the quarter. Of course, in the U.S., AT&T benefits from those new iPhone users since they use AT&T’s 3G wireless network.

And then there’s Google. Last week the Android-backing company also crowed about increasing its net profit for the third quarter, declaring the recession almost over.

Meanwhile back at the network, while things are looking up, those in traditional telecom circles are talking about how to stem plummeting cost per bit and wondering if they can make a buck deploying 4G LTE networks.

So what does all of this iPhone success mean for wireless operators? For starters, Verizon hasn’t negotiated to also sell the iPhone, apparently, because its new ads are promoting the “Droid,” an Android 2.0 phone that may be supplied by Motorola (one of the Android mobile operating system’s original backers). And so we may be in for a new season of handset wars, which can be dangerous business, according to our telecom guru Tom Nolle. The weakness with the iPhone is the stress it’s putting on AT&T’s 3G network, Nolle reminded us. When Verizon moves to 4G LTE and introduces the Droid, both Apple and AT&T could face more heat.

Alcatel-Lucent ranks high in optical survey; Huawei and Nortel make surprising showings

Alcatel-Lucent may be the leader in the optical equipment market, according to a new Infonetics Research optical equipment survey, but its pricing is a bit much for the service provider purchasing decision-makers asked for their opinions.

Representing major market change, Huawei stood out in open-ended questions about leading optical equipment vendors in the Optical Equipment Vendor Ratings: Global Service Provider Survey. Andrew Schmitt, directing analyst for optical at Infonetics, was surprising because most of the carriers interviewed are based in North America and EMEA where Huawei has little presence, he said. Huawei kept packing on surprises, particularly by receiving the third-highest average rating for service and support, which Schmitt said is usually Huawei’s weakness.

Then in the ironic results category, Nortel came out as the top vendor in an open-ended question about 40G and 100G technology leaders – which will benefit Ciena or a vendor to be named later that wins Nortel’s optical equipment division.

The survey asked service providers which of eight optical equipment vendors they have installed and which ones they are evaluating for future purchases, which they consider the top optical equipment vendors, which they consider leaders in 40G and 100G technology, and their familiarity with and ratings of optical equipment vendors.

The usual suspects included in the survey included Alcatel-Lucent, Ciena, Cisco, Ericsson, Huawei, Nokia Siemens, Nortel and Tellabs. They were ranked on technology, product roadmap, security, management, price-to-performance ratio, pricing, financial stability, and service and support.

Other vendors recognized on the open-ended 40G and 100G technology list include ADVA, Infinera, Mintera, NEC and StrataLight/Opnext.

Cisco to compete for 3G and 4G mobile multimedia delivery with Starent acquisition

Wall Street and the analyst community think Cisco’s acquisition of Starent Networks will be $2.9 billion well spent in order to seriously vie for 3G and 4G mobile gateway business from service providers delivering more and more multimedia traffic that needs to move from wireless networks to IP networks via someone’s packet gateway.

The packet gateway is Starent’s niche, and soon will be Cisco’s. Among the many takeaways from this announcement, other telecom equipment vendors must take serious note of Cisco’s focus on mobile. And in case there’s any confusion, that means Juniper, Alcatel-Lucent, Ericsson and Huawei, to name a few.

If all goes well, Starent will become Cisco’s official Mobile Internet Technology Group when the acquisition is completed in the first half of 2010. “Cisco is all about IP, but Cisco doesn’t have that kind of heritage on the mobility side. So this acquisition has a big upside,” said IDC Wireless and Mobile Infrastructure Research Manager Godfrey Chua. “This is the segment in the mobile infrastructure market that is growing faster than the others.”

A niche player but a survivor (through the dot-com and the telecom crashes from early in the decade), Starent already has marquis clients – including Verizon Wireless and Sprint, to name two big ones, and one assumes Cisco will inherit Starent’s client list.

Starent Networks enables wireless operators to deliver multimedia (data, video, wireless TV, games, etc.) on wireless devices. Starent’s technology is positioned to help operators deliver that content over 2.5, 3G and 4G networks. Starent’s role will be to play on Cisco’s video and IP strengths in mobile infrastructure solutions that will extend quality multimedia experiences to mobile subscribers on 3G and 4G networks.

“Starent already has a good client base in terms of service providers, so it gets Cisco into the mobility discussion more and paves the way for more discussions as more carriers look at LTE,” Chua said. “Now it will be natural to include Cisco at the table.”

New report declares WiMAX a “niche technology” in emerging markets

A couple of years ago, WiMAX was going to be the winner in emerging wireless broadband markets…so said the pundits. Now a new Ovum research report is relegating WiMAX to “niche” technology status. Why niche? Ovum analyst Angel Dobardziev says it’s a combination of technology cost, coverage, vendor support and service provider choices.

The key stumbling block is the cost of customer equipment, which will limit WiMAX use outside business customers, he said.

“WiMAX will play a role, but it will be a far smaller one than many WiMAX players would accept today, WiMAX will fall short of the grand hope of being a mass market broadband technology in emerging markets,” Dobardziev said, estimating that WiMAX will account for less than 5% of the 1.5 billion fixed and mobile broadband access connections in the emerging markets in 2014.

The original hope was that in areas with little existing infrastructure, WiMAX would be the logical Greenfield choice for wireless broadband, but Ovum questions whether there is a really big market for WiMAX in emerging markets. A full two-thirds of the world’s WiMAX networks will be in emerging markets in Africa, Asia, Eastern Europe, the Middle East and Latin America, but they will have low uptake, Dobardziev said.

“On a non-subsidized basis, it is currently priced and positioned as a broadband option only for businesses or wealthy consumers,” he said. “The cost of customer equipment (CE) remains the key stumbling block for WiMAX operators, where both DSL and HSPA outperform WiMAX with significantly greater economies of scale.”

C-Level convergence: It’s getting lonelier at the top

We’ve talked and talked about it, and the convergence continues. High C-level positions are biting the dust or being combined with other high C-level positions. Next-gen industry change is finally moving up from the lower levels, the place where employees are used to reorg after reorg. We wonder if “rightsizing” feels any better at the top than it does at the bottom?

Verizon Communications is just one of many providers tweaking at the top. Verizon Chairman and CEO Ivan Seidenberg this week said Verizon is eliminating its chief operating officer (COO) position as part of a broader restructuring effort (and it has had many). Recently, BT got rid of its CTO position, and Global Crossing combined its CTO/CIO position into one powerful slot.

The bigger news is that Verizon’s consumer and business landline operations will now be in one big landline pot. Why now? Verizon said it wants to speed up the process of bringing products to market. Maybe. But it takes a lot of time to move a ship that big.

The lines between consumer and business divisions used to be hard and fast. Verizon Business was a combination platter of MCI’s and Verizon’s business customers, which in the old days a couple of years ago, would never be seen in public with the thin-margin consumer business. But landline services have been hit hard by the economy and wireless migration, and now they’re just plain old “landline.”

Note from the ledge: Stop the change or I’ll…

Change has been the constant of the U.S. telecommunications industry for the past 20 years, which has made it a highly interesting yet volatile industry to belong to. Spinoffs, acquisitions, mergers, financial ruin, executives in handcuffs, reinvention, network changes, layoffs, “right sizing” and so on. So if you can’t handle change, the telecom industry isn’t for you.

Personally, when I’ve been one change over the line, I’ve threatened to throw myself out my first-story office window (the one with the sill 6 inches from the ground). People just laugh and tell me to go back to work, so I don’t even get to the taping a note to the glass.

Not so at France Telecom, where it seems the words suicide and telecom are inextricably linked. Workers and the public are in an uproar that working conditions – meaning reorganization and change – are driving stressed workers over the edge, literally. Harvard Business Publishing looked at this issue in Why are France Telecom workers committing suicide?

Maybe this is a case of extreme cultural differences. Years ago when the Bell companies started downsizing, employees who planned on being with the same company for their entire careers might have felt the same way. And at France Telecom, the public outcry is loud enough that the head of the company’s modernization program has resigned. Yet the deal for workers at France Telecom doesn’t sound nearly as dire as it does at other companies. Does it make sense that being faced with retraining to work in wireless rather than wireline could make someone suicidal? Is the mandatory 35 hours a week just too much? Maybe I’ve become so used to change that I no longer stop to smell the fiber optic cable.