Telephony LIVE: Megacarrier RFPs loom large over tech innovation

DALLAS--Major carrier consolidation is adding both price and time pressure to equipment suppliers, raising questions about the prospects for technological innovation, according to attendees here at the Telephony LIVE show.

During a panel discussion here this week, one audience member asked about the fate of innovation in a world in which new telecom products are designed by the specific express needs of two companies--AT&T and Verizon--in a request for proposal (RFP) process. Robert Pullen, Tellabs’ senior vice president of global services, said it forces equipment vendors to get involved in the RFP process early.

“By the time the [request for quotation] goes out, it’s too late,” Pullen said. “If you didn’t help write the RFQ, it’s too late.”

Carriers often select two vendors to supply gear for major initiatives, but when the pie is divided up three ways, Pullen said, at least one vendor will suffer.

“Being second is okay,” he said. “Being third is terrible. You don’t get a return on your [research and development] investment.”

When pressured by carriers to lower their equipment prices, Tellabs typically revises those products, removing non-essential features from the original design, he said.

Tellabs was the primary equipment supplier for the initial phase of Verizon Communications’ fiber-to-the-premises buildout, taking the lion’s share of that business and sharing the rest with Motorola. When Verizon began migrating to gigabit passive optical networking gear, or GPON, Tellabs became one of three suppliers, along with Alcatel and Motorola.

Two years ago, Tellabs won a contract to supply Verizon with Ethernet-based reconfigurable optical add/drop multiplexers, but recent reports have suggested that Verizon may now be looking to other larger vendors for the next generation of optical transport gear.