Sorting through the vendors

There's an awful lot of network swapping going on. Last month Nortel Networks announced it would sell its UMTS division to Alcatel. Sounds innocuous, but let's take a look at some of the other entanglements that go along with it.

Nortel had partnered with LG Electronics for UMTS, using the Canadian vendor's base station portfolio in two major deployments in South Korea. Meanwhile Alcatel's UMTS business is fairly miniscule as is that of its merger partner Lucent Technologies. Nortel is by no means a global UMTS powerhouse, but its estimated 10% market share is nothing to be ashamed of considering the sheer number of vendors building a UMTS kit these days. The result will be a hodgepodge of three different UMTS kits, partially tied to the 3G portfolio of an independent fourth vendor — assuming the Korean deployments stay in the Alcatel fold — that add up to a global market share of less than 20%. Certainly a significant chunk of the market, but it's a hell of a way to build a business.

So Nortel will now continue on without a UMTS business but with its GSM/GPRS/EDGE portfolio intact to support its existing customers — selling to new customers might prove to be difficult without a 3G-migration path. The status of Nortel's OFDM research is also an interesting question mark. Nortel is offloading its UMTS/high-speed packet access portfolio lock, stock and line card, presumably including the high-speed OFDM packet access technology it has been developing for Long-Term Evolution (LTE). LTE will likely be a disruptive technology requiring entirely new networks, which might put Nortel right back in the UMTS game at the turn of the decade. Though, again, without a UMTS install base, it might find itself facing the hard sell. In addition, Nortel is holding onto its dominant CDMA business, and it will certainly want to use that OFDM technology and any associated intellectual property in CDMA's LTE equivalent, EV-DO Rev. C. I can't wait to see how Alcatel and Nortel sort out which gets what patent.

And let's not forget about WiMAX, where Nortel is certainly expected to focus more effort now that three-quarters of the world's 3G networks are beyond its reach. Nortel partnered with LG for WiMAX as well as UMTS, remember? That may necessitate splitting that joint venture down the middle.

Confusing? Well, just look at Cingular's network: The new Siemens Nokia will be building part of the radio access network along with an R4 switching core it has outsourced to none other than Alcatel, the same company that is merging with Lucent, which itself has a major piece of the Cingular radio access IMS core contract. Who exactly is building what?

TELECOM CAPEX SHOWS MODEST GROWTH

Telecom capex spending rose slightly in 2005, posting its third year of growth, according to Infonetic Research's “Service provider capex, revenue and subscribers” report. Capex spending is expected to balloon to more than $236 billion by 2009, and that figure is much lower than it would be if the industry wasn't busy consolidating, said Stephane Teral, principal analyst.