Shifting Gear

The telecoms industry, like any community, can be defined by the balance of its various internal powers and by the tensions between it and other communities. During a closed-door press briefing at Mobile World Congress 2014, Alcatel-Lucent CEO Michel Combes positioned the industry very much in those terms, looking at the relationships between networks and devices, between Europe and the US, between traditional telecoms and IT vendors and between operators and internet service and application players.

While the rise of the smartphone has meant that the device has occupied centre stage in the industry’s recent history, power is now shifting back to the networks, Combes said.

“A decade ago the intelligence was in the network and the devices had no intelligence at all,” he said. “But in the past ten years, thanks to the [smartphone] operating systems, all of the intelligence was pushed to the devices. I have a sense that we are now at the beginning of the rebalancing of this power from the device to the network. Tomorrow our cloud based networks will manage devices and content and will be agnostic to the operating system, which will allow the same experience to be delivered on any device,” he said.

“I don’t want to be the prisoner of one ecosystem—in Apple I cannot move to Android and in Android I cannot move to Apple—and that is where this rebalancing might help.”

The shift of emphasis from network to device was accompanied by a geographical shift in influence to the US, Combes said. Where the OS market was once dominated by Europe (Nokia/Symbian) and Canada (Blackberry), it is now ruled by Apple, Google and, to a lesser extent, Microsoft. This evolution, Combes suggested, results in part from a unique US “vision” of the market that enabled the US sector to “unlock the digital ecosystem”.

This was illustrated in a keynote presentation delivered by FCC president Tom Wheeler on the opening day of Mobile World Congress, in which Wheeler flagged the Obama administration’s aim of freeing up an extra 500MHz of spectrum for wireless communications. “That’s an industrial vision,” said Combes, before addressing the divide he perceives between the US and Europe.

“In the US today you have a virtuous circle. There is a very strong digital ecosystem, service providers that are competing on services, applications and quality rather than just pricing and end users who are ready to pay because they have clearly differentiated services. So the service providers make money, are profitable and can invest further,” he said.

In Europe, where the highest profile regulation in the wireless sector tends to focus on pro-consumer issues like roaming charges, the circle is vicious rather than virtuous, Combes said.

“Here there is a lack of investment, a weak digital ecosystem and competition based mainly on price because of the fragmentation of the operators, which means low margins and therefore no investment,” he said “This cycle has to be broken and I know that the [tier one operators] share this point of view and have decided that they should reignite investment. But we need friendly regulation in Europe to unlock that investment.”

Competition for the fruits of that investment is intensifying as operators look to new paradigms along the lines of the “cloud-based network” that Combes referenced in his observation that networks are once again becoming more important. Incumbent telecoms network vendors, of which Alcatel-Lucent is one, albeit much changed, now face additional competition from IT specialists that have cut their teeth virtualising enterprise IT functions.

Spanish incumbent operator Telefónica, the de facto host operator of Mobile World Congress, chose the first day of the show to announce bold and wide-reaching plans for virtualization, presented in combination as Project Unica. And comments made by senior Telefónica executives in a closed-door briefing attended by the week ahead of the show reflect a desire to use Network Functions Virtualization (NFV) to drive greater performance from their vendors.

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Understandably, not all vendors are pleased, said Cayetano Carbajo Martin, planning and technology director for Transport, Core, Platforms and Mobile Devices at Telefónica. “We are doing this [NFV project] to break vendor lock-in,” Martin said. “The traditional [telecom] vendors don’t like this. But if you force them to compete, if you define your reference architecture and say that, in Telefónica we will not have any network functions that do not conform to this reference architecture, sooner or later they will come to you.”

Alcatel Lucent has one of the best virtualization stories of the traditional network vendors and is among Telefónica’s partners for Unica. When put it to Combes that the move to NFV, for Telefónica at least, is about easing its dependency on suppliers like Alcatel-Lucent, he said he had never heard Telefónica list this as a “first priority.” But he acknowledged that competition will intensify as virtualization takes hold.

For Combes, however, telecoms expertise does not become devalued in this new network environment.

“I strongly believe that the most critical skills in Network Functions Virtualization [relate to] network functions and not to virtualization,” he said. “Virtualization techniques have been in datacentres for ages. But network functions are different because you need to have a clear understanding of the way the network operates, the specific features you need, the latency of the applications, the speed of the applications and the different SLAs that different applications need. So we are talking about carrier grade datacentres rather than regular types of datacentre virtualization.”

In Combes’ view the primary benefit of NFV for service providers is related to the need to enhance their competitive position in relation to OTT players and internet application developers. This is more important than improved network TCO, he said, which itself is more important than better supplier management.

“Service providers need to embrace a brand new world which is [characterised by] an amazing acceleration of new services,” he said. “When you ask them what they are looking for it is velocity in their ability to roll out new services, scalability in the new services they launch and the ability to compete in a proper manner with the OTT guys.”

Alcatel-Lucent is the global market leader in IMS, Combes said, and number two in packet core. As these are two of the first network elements that operators will look to virtualize, he said, the firm is well positioned to take advantage of the NFV trend. A virtualized RAN product should enable the firm to continue to “disrupt” in the wireless access space while it seeks to exit the market for legacy RAN technology upgrades.

“For the first time ever,” he said, “we really have the right portfolio.”

Network Virtualization and SDN World will take place at the Millennium Gloucester Hotel, London, May 27 – 30.

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