Alcatel-Lucent's partnership with NEC to form a joint venture to produce a single product line of LTE products is not a cost-saving move, Paul Larbey, head of Alcatel-Lucent's LTE business, has said.

"Let's be quite clear about this – this is an offensive move on our part, and it's not about a sales channel partnership. By pooling our resources and knowledge we will produce a single product line that each group will then be individually responsible for selling," he said.

Larbey said that each group complements each other, because they have strengths in different geographic areas. Asked if this meant they would not compete against each other for the same contracts, Larbey reiterated the benefits of the combined approach to developing a single product.

"The difference from Evolium (Alcatel-Lucent's 2.5 and 3G partnership with Fujitsu) is that we have integrated a single R&D team on a single product. There's also a difference in timing, Evolium was late in coming to the market and suffered in terms of contracts. But we have been working on this jv for the past six months, working very closely together and have put a lot of effort into it."

The market for LTE will be "very competitive" Larbey said. "We know that, and that's one reason why we have worked on the jv, to make sure we have the scale and volume early, because getting significant market share early will be very important."

Alcatel-Lucent is involved already in Verizon's LTE plans, and Larbey said Alcatel-Lucent would have a "raft" of LTE field and customer trials going ahead in Western Europe as well as other areas.

In terms of how big the actual market opportunity is for LTE, he thought operators would deploy in different use cases, with one example of a mature operator with deep HSPA coverage adding extra capacity to areas such as sports stadia, music venues, and metro zones. Other operators might look for macro coverage, leap-frogging investment in WCDMA and HSPA networks. Spectrum would play a part too, with the ability to deploy in re-farmed 900 and 1800MHz wavelengths especially important.

Profitability “pathetic” – only three vendors left standing in five years

George Bailey, is general manager of IBM’s electronics industry, and as such is responsible for almost US$4 billion of hardware, software, and services business. He leads nearly 5,000 IBM employees worldwide who develop business and technology solutions for clients in the electronics industry. He led the integration of PricewaterhouseCoopers’s PwC Consulting with IBM’s services group to create the largest consultancy in the world with more than 180,000 professionals. He also works in partnership with many of the leading network equipment providers and carriers in the world.

So when he speaks about business change, it’s probably wise to take notice.

Over the past year, Bailey has had a team of researchers, led by Christian Seider, Senior Managing Consultant, looking at the future for the Network Equipment Providers (NEPs).

And it’s not good news – on the surface.

Bailey thinks that pressures on service provider business models, as well as competition from low cost players, will lead to further consolidation amongst NEPs. Although he didn’t comment on where he sees the winners coming from, IBM’s research shows Cisco, Ericsson and Huawei to be occupying top spots in terms of scale, operating margins and revenue growth.

“Consolidation will be beyond what we have seen, and it will be continued and dramatic,” he said. “In five years we could be down to perhaps three to five companies. Whichever, that’s a very small number,” he said.

“The current industry is not sustainable,” he said. “The levels of profitability are pathetic. Cisco is exempt from that, operating as it does at 4-5 times the industry average, and Ericsson has separated itself form the pack somewhat, but even these two are facing problems.”

So what’s the answer? Bailey said it lies in a company’s willingness to genuinely partner and collaborate with other players, to create more value all round.

“You may expect us to say that, as a systems integrator and consultancy, but we see the difference between companies who really understand partnership and those who are less fully committed. Make collaboration real, understand how to collaborate to get competitive advantage. It’s easy to say but hard to do,” he added.

If NEPs don’t partner, the only other route to success will be to become a complete end to end player, from the network access layer up to the services and applications layer, Bailey said.

The danger for NEPs in the new telco world is that even if companies enable a whole new business model, in which operators open up to a host of third party applications and services, it is as yet unclear who will extract the value from that.

“Where’s the value? You can do a whole lot of work, and investment, and get absolutely nothing back. Telcos hype value added services – take IPTV as a service, where they hype is way beyond reality. Now, I believe it will happen, but where’s the value and when will it arrive?” Bailey queried.

“The consumer electronics groups have a very different model of who captures the value. They think the subscription model is not sustainable and they want to disintermediate the telco.

So what can operators, and by implication their NEPs, do about this?

The answer perhaps lies in becoming trusted partners again, engaging in consultative sales that enable the operator to take advantage of their assets to make sure they extract value from the coming, new, services environment.

Seider added that although, in his opinion, NEPs frittered away a lot of trust operators placed in them at the time of the 3G spectrum auctions and developments, they can make a comeback in this area.

“Operators were disappointed at the level of advice they got from the NEPs around that time,” he said. “There is still room for improvement to sell in a consultative way, to become the trusted advisor in this space.”

Orange pilots TD-CDMA MBMS technology

A year and a bit after it finished a trial with Vodafone, Telefónica, and 3UK, Orange is having a further look at TDTV, the UMTS TD-CDMA-3GPP Multimedia Broadcast and Multicast Services (MBMS) technology.

The operator will this time partner with T-Mobile for the trial, which will take place in London, not Bristol, and will again use technology from the company formerly known as IP Wireless, now acquired and fully owned by NextWave Wireless.

John Hambidge, chief marketing officer for NextWave Wireless network products, said that the renewed trial takes the level of service and devices up a level.

"We're calling this a pilot, not a trial," he said, "because we really see this as on the path to real launch, so it's more than just a trial."

Hambidge said that the acquisition by NextWave, which also owns the former PacketVideo, gives the company a much greater scope of operation, rather than being merely an air interface provider.

Hambidge said that TDTV is likely to be attractive to operators for a number of reasons.

First, with a broadcaster having won DVB-H spectrum in Germany, and mobilkom having lost the DVB-H spectrum race in Austria, and spectrum allocations a long way off in other countries, it is still unclear what the value to operators will be of DVB-H, he said.

Second, operators already own TD-CDMA spectrum. In the UK, with forecasts of UHF spectrum sales reaching €300 million, that's a significant business advantage.

Third, TDTV, with its 10MHz of spectrum that UMTS operators already have under licence, supports 28 channels, he said.

"With DVB-H, how will they [the operators] differentiate, and can they drive revenues from a 8MHz band that supports only 16 channels, many of which are likely to be free to air," he said.

There would also be, with TDTV, no "third mouth to feed", Hambidge said. "Operators can get content direct form the provider, with no third party broadcaster."

Hambidge also claimed a range of technical benefits of TDTV, including sub-one second channel change times, and ease of integration with unicast services.

"There's no doubt if mobile broadcast TV is going to succeed it needs operators. They're the ones with the billions of customer relationships. But where's the business case for operators of wholesaling a broadcaster's product? If they're not part of the revenue case, why would it be a priority?" Hambidge said.

Foundation adds support

With mobile OS a hot topic at the moment, evidenced by Sony Ericsson's licensing of Windows Mobile and Arun Sarin's call for consolidation in the area, The LiMo Foundation was in bullish mood as it announced Orange and Access had joined the group.

Morgan Gillis, executive director of the LiMo Foundation, said there were now 18 "LiMO" mobile phones, with 15 of them commercial, two being reference designs and one a prototye.

The company also announced Release 1 of its platform, and had published all its APIs for public access on its website, Willis said, proving that the Foundation is about producing actual code for real phones.

"We are not a standards body," Willis said. Access joining the group, which already includes Motorola, means that the two biggest investors in the development of Linux based mobile OS are now under the LiMo umbrella. Both companies are estimated to have invested upwards of a billion dollars in platform development, and will be looking for a business model that offers them some return on that investment.

One operator member of the LiMo Foundation we spoke to said he was OK with that idea.

"We're in this because we want to see open standards and access at the application layer, to drive innovation and make development easier, and reduce our own platform support demands," he said. "If companies can differentiate and add value around their own IP, then that's fine too," he said. Willis said that he was sure Access would want to contribute elements of its ALP development to LiMo code and future releases.

Although LiMo talks about a consolidated, de-fragmented, mobile Linux platform, in fact phones can be called LiMo phones at the moment if they have included some element of the LiMo code. Full compatibility, with certified applications that can be developed once and deployed across the whole platform, will probably only arrive with Release 2, Mahesh Veerina, chief executive officer of Azingo, which makes Linux based platforms for mobile phones, said.

Veerina said that the goal of LiMo was to arrive at a consolidated mobile Linux platform, but that the landscape was still currently quite fragmented. He admitted that there would also be a Linux flavour under Android and the Open Handset Alliance but he contrasted the approach of the two groups.

"We have a management board, a set of rules and policies which all the players agree to. Where is the control in the OHA? It sits with Google – member of the OHA signed a thre page document agreeing to Google's terms and they are members. But the two approaches are very different."

Although many portray Linux development as a direct rival to Symbian -S60 and Windows Mobile, as well as Android, Veerina thinks that the real game lies in the mass middle market of phones, nearly all of which are developed on vendor specific, proprietary OS's.

"The bottom billion phones, which are essentially voice devices, will stay as they are, and the top 10% will stay with the likes of Symbian, Windows Mobile and some Linux, as well as Apple. But the two to three billion phones that sit in the middle, that's the opportunity for Linux, because it opens the mass market up to the sorts of applications that at the moment are only available at the top tier."

Veerina's argument is that it is the cost of developing and porting applications to so many different proprietary OS that is limiting the market, as well as placing strains on operators to support multiple OS.

Who knows where the customer goes, when the customer goes away?

Openwave, with its dominant presence in WAP and internet gateways, as well as accurate location technology, says that it does.

The browser and gateway company has developed an ad delivery and campaign management product that works by tracking where users have gone on the web, where they have gone in 'real' life, and what they do when they get there.

In theory, the product puts operators in control of what ads are being served to users, even when those users are browsing off portal.

The contextual ad service then fits users into one of many categories ­ such as Fashionista, Cricket Fan, etc. Ads relevant to that segment of user are then delivered to the user as he browses, moves around geographically and buys things.

Chris Goswami, director of product management, Openwave, said that because Openwave was already "in the data path in a large percentage of the world's operators", it was in a great position to pick up on data that reveals exactly what subscribers are doing, and how they are behaving.
The campaign management, inventory management, serving and brokering of the ads is not where Openwave is playing, said Goswami. Those functions will all be fulfilled by partners expert in those areas.

The aim is not just to produce a delivery of banner ads whilst someone is browsing, or send an SMS top a user when they wander into a particular location, Goswami said.

"That's a bit of a sledgehammer approach," he said, "this is about enhancing the whole mobile experience according the profile of the user." Goswami said the issue of whether users opt in or not could be handled by the operator, but in essence he said that if the targeting of ads was done in a sensitive and relevant enough way, consumers would not object and so would have fewer privacy, or spam, concerns.

Goswami added that operators could even use the technology to place ads on of portal sites that drive users back on-portal. For instance offering a piece of content relevant to a music site the user is visiting.

Operators have been confused by mobile advertising, Goswami said, because either they have not understood the agency and brand priorities, or they have tried to do everything. Three major requests for information had been torn up and thrown away by operators after the tender stage, Goswami said, after the operators had gone through the process.