Calls to cut costs and increase revenues are the two most common
imperatives echoing around the boardrooms of major corporations.
This is hardly surprising, as the profitability of any organisation
rests with these two fundamental metrics.
Within the telecoms community these calls have taken on a new
urgency. After years of positive performance and near-hysterical
market sentiment the telecoms industry is into a period of
retrenchment.
The days of soaring stock prices fuelling acquisitive strategies
are over. The industry has had to accept the "back to basics"
concept of reducing debt and building real shareholder value.
Expansion strategies have been replaced by survival plans.
No part of the telecoms industry has escaped the setbacks. Solid
blue-chip companies have seen their valuations fall dramatically,
while more fragile organisations have disappeared entirely.
Senior managers of telecoms service providers have begun to address
key business issues and this has already started to reshape the
industry. The David and Goliath battle of the new entrant versus
the incumbent has shifted in favour of the heavyweight. The more
immediate issue of short-term return on investment has superseded
long-term vision.
Many of the major names in the network equipment market have seen
tough times over the past year. But this is not because demand for
telecoms services has evaporated overnight. Indeed, underlying
demand is probably as strong as ever.
Ironically, the rapid growth in data services and the subsequent
Internet dotcom boom that did so much damage to the industry will
be its saviour.
Voice has never been a high growth service - apart from the mobile
telephony market, and even that is showing signs of saturation -
and many multimedia services have failed to take off due to
inherent lack of bandwidth or business need.
How many times has videoconferencing been described as the
broadband "killer app" that will render air travel unnecessary?
Even at the end of the dotcom boom the real success story of the
past five years has been the way the Internet has seeped into every
pore of corporate life. It is too well entrenched for anyone to
take it away.
Part of the problem rests with identifying the profitable services
that will drive real revenue growth rather than user statistics.
Carriers face a tremendous challenge as they try to make money with
commodity Internet services such as basic connectivity or access.
However, business customers, especially those that want to
outsource networking infrastructure, will pay a premium for
business-quality Internet protocol (IP) services.
Demand for value-added business and enterprise data communications
will continue to fuel service provider growth. It will be data and
Internet services, such as transparent local area network services,
IP virtual private networks, frame relay, broadband access,
co-location services, content delivery and management, wholesale IP
and Web hosting that will provide opportunities for growth well
beyond what could be achieved with voice-only services. They will
require investment in key areas.
High capacity multiservice core infrastructure will be needed to
transport data with reliability rates taken for granted in the
voice world. Broadband network access has to be available using a
variety of physical access technologies from copper to fibre to
fixed wireless.
The real innovation exists in mapping the needs of the users to the
network resources through increased intelligence at a service
control layer capable of optimising resources and guaranteeing
quality of service.
The right moves now will define the architecture for rebuilding the
telecoms industry.
Hari Haran is chief technology officer at Lucent
Technologies