| ID Number: AV-21-6250 |
Predicts 2004: Public Network Infrastructure
8 December 2003 Peter Kjeldsen After some frantic capital expenditure adjustments, the telecom industry is cautiously looking at the larger picture in addressing future revenue opportunities.
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In the post-bubble telecom industry, a series of ongoing, painful adjustments have had a sobering effect on what was formerly a triumphalist outlook. The industry appears to have aligned its viewpoint to conform with market realities. Having gone through a phase of frantic capital expenditure (CAPEX) reductions that were required to survive in the short term, most players are now taking a more comprehensive view of their costs, including both CAPEX and operating expenditure (OPEX) in total-cost-of-ownership (TCO) considerations. With costs coming under control, some players have the strategic maneuverability to seriously address future revenue opportunities. But the industry still fears that anything more than a steady increase in investments could tip the delicate balance of what they have achieved. This climate of caution also has an ominous side. A fear exists that one or more players could break away to exploit conditions, if they think they know better than the others. This sets the stage for the six individual articles in this Predicts 2004 Spotlight on public network infrastructure. They paint a picture of what path the telecom industry will take in coming years. In addition, actionable recommendations for 2004 to the players in the industry are described in relation to each prediction. The following are highlights of the predictions made in these articles. Prediction — BSS and OSS Will Play a Critical Role in Migration Business support systems (BSS) and operations support systems (OSS) will enable the migration from today’s hybrid networks to NGNs, facilitate the introduction of advanced services and become an integral part of successful NGNs. Vendors should enhance interoperability between their products, legacy systems and third-party products. For details, see "Telcos' Success Depends on Efficient Support Systems." Prediction — Vendors to Build Ecosystems and Partnerships — or Else Vendors must offer references, provide network simulation, and verify performance benchmarks and interoperability with third-party vendors through independent third-party testing labs to establish credibility in the carrier market. Vendors that cannot provide everything for every client must establish “ecosystems” that include suppliers, software and applications providers. For details, see "Next-Generation Switching: Full Steam Ahead." Prediction — Presence and Location Service Will Be Major Drivers of NGN Signaling Protocols Presence and location-based mobility services hold great promise. These capabilities allow a new class of instant messaging services that can be delivered over a PC or a phone (mobile or not). However, they place significant new demands on signaling networks. Vendors and service providers must adopt next-generation network (NGN) signaling protocols to provide presence and location-based services. For details, see "Signaling Market to Return to Steady Growth in 2004." Prediction — Slow, Steady Growth Through 2007 for Vendors That Can Adapt The public network infrastructure market enjoyed a decade of strong growth from 1992 to 2001, but the global recession hit this segment very hard and previous overbuild has damaged growth. The economic decline will change the business models of telecom carriers and infrastructure vendors from 2004 through 2007. For details, see "Public Network Infrastructure Market to Grow Slowly in 2004." Prediction — No More Boxes; Access Systems Will Become a Software Play The amount of software content, and, more important, the strategic value of software in access solutions, will increase, because this is the way to enable product flexibility and effectively lower OPEX. Carriers, therefore, must give more weight to the software capabilities of solutions vendors when choosing technology and vendors, placing particular emphasis on reliability and security. For details, see " 'Megatrends' Will Change the Telecom Access Market in 2004." Prediction — Chinese Vendors Will Double Optical Transport Market Share Because cost-sensitivity will remain to be an important carrier concern, the low-cost base of Chinese vendors will allow them to win additional business in coming years — within and outside their home market. Western vendors must ensure their strategies are adapted to a cost-sensitive market with tough price pressure, and they should consider partnership or local production in China while maximizing the benefit from their installed base. For details see "Optical Transport Market Faces Major Changes, But Will Grow." Bottom Line The predictions and recommendations from the articles in the Public Network Infrastructure Predicts 2004 Spotlight clearly demonstrate the multidimensional challenge that operator and vendor organizations face in 2004 and beyond. When viewed in unison, the predictions made in the Spotlight leaves no doubt: Reactive change has run its course. A well-informed, proactive and collaborative approach is necessary, bringing together the varied concerns of users, service providers and their suppliers. Features "Telcos' Success Depends on Efficient Support Systems" — Business support systems and operation support systems will play a critical role in migration to NGN. By Verne D. Anton and Norbert J. Scholz "Next-Generation Switching: Full Steam Ahead" — Vendors that cannot provide everything for every client must establish “ecosystems” that include suppliers, software and applications providers. By Bettina Tratz-Ryan, Lily Yu and Jennifer Liscom "Signaling Market to Return to Steady Growth in 2004" — Presence and location-based mobility services hold great promise. By David L. Fraley "Public Network Infrastructure Market to Grow Slowly in 2004" — Carriers will gain more by streamlining their processes than by pushing ahead with new technology. By Frank Fabricius and Bhawani Shankar " 'Megatrends' Will Change the Telecom Access Market in 2004" — Carriers must recognize the potential of broadband and sharpen their vertical market focus. By Jouni Forsman and Patti A. Reali "Optical Transport Market Faces Major Changes, But Will Grow" — Chinese vendors will double their share of the optical transport market. By Peter Kjeldsen

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