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.
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.
Is the convergence push that you’re seeing with the carriers going to drive convergence in the enterprise?
No. The strategy will be that we offer a [Multimedia Communications Server] product to an enterprise. So if you happen to have a PBX, we could put this multimedia communication service capability on top of that, and call it 5100. If we go to 5200, the carrier will offer it as a hosted service. The service set could be exactly the same.
The multiservice edge is a red-hot market now. What are you doing to address this market?
We’re integrating [Multi-protocol Label Switching] onto our ATM [platform]. That same platform will be able to be migrated to MPLS. Then you’re saying, ‘But Frank, how are you going to take the multiple boxes at the edge and simplify it, right?’ The answer I’d give you is that it is a very high priority [at] Nortel.
What we did on (the Optical Multiservice Edge product) we collapsed three or four boxes into one, on a very scalable, flexible, capable product. So then you go into Layer 3 and Layer 7, and there are multiple boxes and we have to do what we did with OME at the Layer 2 and Layers 3 to 7. So we understand it, and that’s something that we’re focused on.
Regarding the broadband access partnerships you announced recently: Is that your strategy to address that market or do you plan to re-engage yourself internally in broadband access?
We need to be able to deliver capability without owning everything. Is it important to offer that capability now? Yes, we need to find a partner. The biggest issue is where are these inflection points? We’ve got to hit those inflection points. But to say let’s sit out of the market for two years and then hit the inflection point, our view is you lose a lot by not being in the market, not learning from your customers, not learning the challenges. So we’ll be in the markets, that’s part of that game, but the longer game is we’re going to simplify all of this stuff. And as everything collapses into simpler, more integrated platforms and so on, we’re going to be a player in that.
