How Alcatel-Lucent Is Driving Next-Gen Networks

Posted by: Jennifer L. Schenker on February 14, 2010

It’s no accident that Alcatel-Lucent will showcase its “LTE connected car,” which brings cloud computing to moving vehicles, at the industry’s annual Mobile World Congress in Barcelona from Feb. 15 to 18. This year marks the start of the “LTE decade,” a new epoch in which the mobile industry will graduate to the next generation of faster, higher-capacity wireless networks known as Long-Term Evolution.

But to make LTE a success, gear makers must help drive the creation of money-making mobile Internet services or there will be little return for carriers on their multi-billion dollar network investments. LTE can’t just be a faster way to do the same old things: It has to kick off whole new ways to use wireless communications.

Up to 19 LTE mobile broadband technology commercial launches are planned by the end of this year, with 36 expected by 2012, according to the Global Mobile Suppliers Association. What’s prompting operators to consider spending money on LTE gear, despite the global downturn, is a veritable tsunami of data traffic, says Berge Ayvazian, a veteran telecoms analyst who recently joined Heavy Reading, the research arm of consultancy and publisher Light Reading.

Devices like the Apple iPhone and netbooks are causing demand for mobile data services to skyrocket. For example, the U.K.-based O2 reported that its mobile data traffic in Europe doubled every three months in 2009; Telecom Italia announced that its mobile traffic grew 216% from mid-2008 to mid-2009; and AT&T has reported that its mobile traffic increased 5000% in the past 3 years.

The latest Visual Networking Index Global Mobile Data Forecast for 2009-2014 from networking giant Cisco Systems, predicts that mobile data traffic will grow globally at a compound annual growth rate of 108% between 2009 and 2014. Video will be responsible for the majority of that surge. Overall, mobile data traffic is expected to grow to 3.6 exabytes (an exabyte is a billion gigabytes) per month by 2014, according to the Cisco forecast—and over 2.3 of those exabytes will be due to mobile video traffic.

The runaway growth in mobile data traffic leaves operators with a conundrum: How to justify the required investment in network capacity and optimization while lacking an adequate mechanism to monetize mobile data services, says Heavy Reading's Ayvazian. Operators have to create revenue streams beyond monthly data subscriptions. "They need to figure out ways of using the vision they have of their subscribers and to get between subscribers and anyone else who wants to do business with them," he says.

In the hopes of selling more gear, equipment makers like Alcatel-Lucent are focusing on helping operators do just that. "Assets in the network can be leveraged far more aggressively than they are today," Kenneth Frank, executive vice president of Alcatel-Lucent and President of Solutions and Marketing, said in an interview with Informilo. "That is why we are sponsoring partnerships between the operators and the developer community."

Alcatel-Lucent recently unveiled products to help service providers open their networks to applications developers and content providers to speed the creation of innovative, next generation services. The company's so-called "application exposure suite" lets carriers make services in their networks, such as billing or customer location, available through a "secure exposure layer" to application and content providers in a way that can enrich Web-based services and create new mash-up capabilities. The hope is that after doing the math, carriers will embrace these kinds of mash-ups to increase their return on investment in new networking gear.

Alcatel-Lucent also has launched an Open API service, which brings developers and carriers together to support the rapid creation and secure testing of new services, and a support service to aid carriers with the transformation to more open business models. To better plug into the developer community, the gear maker is planning to attend this year's South by Southwest, a hip music, film, and technology conference that takes place each March in Austin, Tex., Frank said.

The Paris-based equipment giant also is enlisting the help of a range of other companies, including network and consumer electronics firms, in a multi-industry organization called ng Connect that aims to develop and deploy the next generation of broadband services based on LTE and other ultra high-bandwidth technologies. Founded in 2009 by Alcatel-Lucent, the group also includes Hewlett-Packard, Samsung Electronics, QNX, and others.

The LTE connected car, which will be on display on Alcatel-Lucent's stand at the Mobile World Congress, one of the largest annual meetings for the global mobile industry, was developed through ng Connect. Services being demonstrated in the car include a variety of driving tools, such as geo-specific traffic, weather, and accident information. It also features more entertaining capabilities such as restaurant and friend locator services, streaming music, downloading of on-demand of films, TV shows, multi-player games, and on-the-go access to YouTube, social networks, and other Internet sites. Click here to see a video about the LTE connected car.

Alcatel-Lucent plans to bring such services not just to car consoles but also to mobile handsets. "One of the critical advantages of LTE is latency improvement, allowing more cloud applications to work across handsets," says Alcatel-Lucent's Frank. Alcatel-Lucent executives believe that the uptake of such services, as well as other novelties in the company's portfolio, such as a software-defined radio system and transport solutions that merge IP and optics, will help improve the company's bottom line. They also point as proof of traction to last year's high-profile win of LTE business from Verizon and to the Feb. 10 announcement that AT&T has selected Alcatel-Lucent as one of two equipment suppliers for its planned deployment of LTE mobile broadband technology.

But the company' stock plunged 12% on Feb. 11 after it lowered its profit margin targets for 2010, and industry analysts say they are not yet convinced of better times ahead. "Management talks about developing solutions rather than point products, but this is true for all major vendors in the sector," said a Feb. 12 Nomura Securities research note. "The fact remains that Alcatel Lucent has lost share for most years in the past decade."

To turn things around, Alcatel-Lucent is going to have to launch more innovative solutions and prove that carriers are willing to embrace them, says Nomura Securities. The same could be said for Nokia Siemens Networks and Ericsson. They have stronger market positions than Alcatel-Lucent but are among equipment providers to have reported losses or declining profits in recent quarters. Analysts say the onus will be on all of the suppliers at this year's Mobile World Congress to help carriers develop new business models that will drive the whole industry forward.

Guest blog post from Jennifer L. Schenker.

This blog post was adapted from www.informilo.com. Click here to read the original posting, provided courtesy of Informilo.