Why Nortel chose LTE over WiMAX

Cross WiMAX off the list of hot growth markets Nortel plans to tackle in the coming years to boost its fortunes.

The company all but exited the WiMAX market this week with its intentions to scale down development of base stations in favor of a relationship with Alvarion. At the same time, Nortel told financial analysts at a Toronto gathering that it’s placing its wireless bets on LTE, or Long Term Evolution,  a 4G successor to the 3G cellular infrastructures now deployed by Verizon and AT&T.

The WiMAX market is not developing fast enough for Nortel to invest in both it and the rapidly emerging LTE market, says Chief Strategy Officer George Riedel. (Compare WiMAX products.) 

“The WiMAX market relative to where we thought it would be 18 months ago has probably moved out not once but twice in terms of the size of the opportunity,” Riedel says. “LTE has shifted in,” Riedel says, in terms of technology and standards development, trial implementations and subsequent purchases.

Another reason is that WiMAX was a niche technology and opportunity, Riedel says.

“It was a different segment,” he says. “WiMAX to us ultimately becomes the underserved broadband segment: people in markets where broadband capacity doesn’t generally [propagate]. They want something sooner rather than later.”

Nortel would not disclose how much it invested in WiMAX over the past several years. But the company is moving on, now fixated on seven strategic markets where it feels it can achieve double-digit growth going forward.

“Think of it as a set of product-related opportunities with attendant services, most of which all have fairly substantial growth rates,” Riedel says. “The numbers we’ve seen from the ‘08-’11 time frame is somewhere between 35% and 40%.”

In addition to 4G, those Magnificent Seven target markets are:

* Unified communications products and services – Nortel’s leaning heavily on its alliance with Microsoft for desktop applications but is also targeting the back-office or business process phase, which links UC with SOA and Web services (Compare Unified Communications products). Nortel expects to work with a broader collection of partners for this effort, Riedel says.

* Metro WDM – Developing products for carriers to expand fiber capacity in cities. One such product is Nortel’s OME 6500 metro core transport system.

* 40G/100Gbps metro and long-haul optics – Verizon and AT&T are two carriers going to 100G long-haul now and Nortel expects these bandwidths to reach down into metro areas before long.

* Carrier Ethernet – Lots going on here. Analysts have this pegged at about a $4 billion market now with substantial growth in the years to come. Verizon just selected Nortel’s ERS 8600 switch as a candidate to expand its Ethernet service footprint. And Nortel is pumping up its Provider Backbone Transport/Bridging implementations as complements or alternatives to MPLS for scaling metro Ethernet.

* Carrier applications – Voice call continuity, fixed-mobile convergence and others “agnostic of people’s hardware,” Riedel notes.