What is interesting to me is that all of this is coming to a head right now, and why might be the most interesting thing of all.
The reason is mobile 4G services and the fact that these services are being driven by appliances – smartphones, tablets and even e-readers. Mobile disintermediation via appliances is a real risk, and 4G bandwidth levels mean that there is truly an opportunity to create a new model of the user’s relationship to the network. The risk that the new model might end up being a reprise of the over the top (OTT)-dominated wireline broadband market is very real now. Further, 4G deployment offers operators a chance to reset the pricing and service relationships, to a point. Operators either have to take the opportunity and level-set 4G differently, or they have to avoid 4G investment, regarding it as something unlikely to pay off for them in terms of return on investment (ROI).
This is Alcatel-Lucent’s issue here. Companies like Alcatel-Lucent have arguably been most successful in the wireless arena, and an operator trend toward stagnation of wireless investment would be a major barrier to Alcatel-Lucent’s future profitability. But the truth is, the company isn’t the only one with a stake in the 4G game. With the exception of Cisco, whose ambitions for revenue growth are spreading to markets adjacent to networking, every one of the major network vendors is a slave to wireless capex growth because wireline growth will not sustain even their current numbers.
It is clear to me is that everyone in the broadband game realizes that 4G is the watershed issue — the place where we either get control of network evolution in an economic sense, or admit we can never control it. In the latter case, it’s clear that we’ll see sharp capex declines beginning in 2012 (according to our model), as ROI pressure on operators constrains network investment. In the former case, we could see the very thing that Carter says we need — immersive broadband that touches all of us in all aspects of our lives because it can profitably be made to do so. It’s not a glamorous vision for the U.S. market because we want to believe everything is free. It’s not simplistic, like Cisco’s vision of driving infrastructure investment simply by forcing more traffic onto the network, regardless of the ROI. But it’s a true vision, and Alcatel-Lucent is perhaps the best in the industry in articulating it.
But can they deliver it? The principles of application enablement are surely relevant to creating what Carter hopes for, but they’re not a sufficient condition as they stand. There are too many holes in the story of the “European way” when the rubber actually meets the road. In a way, the potholes are a bigger threat to ROI than the current disorder, because without a clear path to invest, everyone will hunker down and look ahead to when that path becomes clear, which could hurt capex even earlier.
Four vendors (Alcatel-Lucent, Ericsson, Juniper and NSN) have the assets to build the kind of future Carter talks about, and not just for Europe. Which one will come through? We’ll likely know by spring. Carter’s speech is proof that the issue is too acute to be ignored any longer.]]>