Dunn discusses comeback of Nortel

After free falling for three years, Nortel has stabilized, and landed some big deals, including a VoIP coup with Verizon. CEO Frank Dunn recently discussed the state of his company and the industry with Network World Editor-in-Chief John Dix, Managing Editor of The Edge Jim Duffy and Senior Editor Phil Hochmuth.

What's the business climate look like in terms of capital spending?

Our assessment is the [capital expense] spending profile in 2004 vs. 2003 will be up in the low single digits. Within that, enterprise [spending] will be a little more robust than service provider. There will be huge growth in certain segments, and quite a contraction in other sections. You're going to see a big growth in spending on 3G wireless, and you're going to see the market shrink for GSM.

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After free falling for three years, Nortel has stabilized, and landed some big deals, including a VoIP coup with Verizon. CEO Frank Dunn recently discussed the state of his company and the industry with Network World Editor-in-Chief John Dix, Managing Editor of The Edge Jim Duffy and Senior Editor Phil Hochmuth.

What's the business climate look like in terms of capital spending?

Our assessment is the [capital expense] spending profile in 2004 vs. 2003 will be up in the low single digits. Within that, enterprise [spending] will be a little more robust than service provider. There will be huge growth in certain segments, and quite a contraction in other sections. You're going to see a big growth in spending on 3G wireless, and you're going to see the market shrink for GSM.

In the enterprise, people are going to spend on convergence, spend to drive costs out of the network, and spend on things like business continuity, storage-area networking, and driving capability back into the network.

What about in terms of wireless vs. wireline spending?

When you look at the carrier businesses it's been on the wireless side. And there is going to be a continued migration and a demand for mobility. No one wants to be tethered to a phone. But you [also] will see spending in wireline, because they have to adjust to a data services business model, and to do that you're going to have to transform the network; not a rip and replace, but a transformation of the network. They need to be able to offer multimedia services, and to do that you have to spend a bit of money. Verizon, Bell Canada, MCI and Sprint - they're all moving in that direction.

Speaking of Verizon, how is the carrier handling the evolution to a full, softswitch architecture? Do they have a timeline in place?

Our solution in the enterprise space and the carrier space is you go at your own pace. So that's why there is no big bang. You don't kind of build a packet network. You start implementing. Verizon has a different timing strategy than Sprint and MCI, than Hong Kong Broadband, and China NetCom. We work with each of them. The pace will be predicated on the success.

What's holding optical back? Why is the market not growing any faster than it is?

What's holding it back is the access. As people are connecting to DSL they're starting to use the Internet more often, they're starting to drive traffic. When you start getting wireless data, when everybody is sending pictures and videos around, it's going to chew up bandwidth.

Secondly, in the backhaul network there was so much bandwidth put in.We have enough for a while. So we just have to wait out this lull, and I expect it to start to turn around: Maybe not in the next six months, but it's coming.