The New (Telecom) World Order

In shadows I see shapes, shapes of the future

Last week, many probably did not notice, or did not care that British Telecom, a company as old as Ma Bell announced list of vendors who would supply gear for its ambitious all IP network, the BT 21st CN. The $19 billion order was going to prove to be a windfall for some, and end of the road for others. It was also a road map of the future of telecom/broadband industries and it would define the future leaders.

One of the most interesting aspects of the announcement, was that Marconi, the venerable British telecom giant had been left in the cold. Alcatel, the French telecom giant that has been on an afterburner lately, is not getting any part of the access dollars either – surprising that it had so long dominated the access equipment business. Nortel was nowhere to be found as well. Instead it was names like Cisco and Juniper (via a Lucent Technologies link-up) were prime contenders, along with some bits and pieces for the usual European suspects – Siemens and Ericsson. In the world of IP, there seems to be no room for old timers.

The biggest surprise was Huawei, the Chinese upstart, which in my opinion is going to cast a long dark shadow over the old telecom equipment leaders, replaced it. So much so that there is speculation that Huawei might buy Marconi. Huawei’s inclusion sends a clear enough message: if its good enough for British Telecom, then its good enough for SBC, Verizon and every other PTT which has made the old timers like Nortel, Lucent, Marconi and Alcatel, fat and happy for so long.

In lower cost economies like India and rest of Asia, Chinese vendors like Huawei, ZTE and UTStarcom have become solidly entrenched and are using that base to learn about scale and using that scale to offer gear at prices which are far below the offerings from the old world equipment provider. In other words, the bloated cost structure of 20th century leaders puts them at a disadvantage.

At present, smart money says that Huawei’s of the world are being used a bully pulpit by carriers to squeeze dollars out of old school equipment vendors. I noted in my previous piece, the Huawei Factor, which the Chinese vendors are going to be a deflationary force that is going to force other vendors to do irrational things. I see it happening sooner than later.

Alcatel has responded by going up the food chain and offering network integration services at its unique selling point. How long can it maintain that role? Wouldn’t IBM want a piece of that? How about the newly resurgent AT&T with a deep pocketed and every willing parent, SBC?

The industry is going into the second phase of what I like to describe as self-immolation, and when it ends, there will be new leaders, and they will have strange Asian names.

Shall we say, a new telecom world order!