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Tuesday, May 03, 2005

Om Malik Spots A New Telecom World Order

Om Malik writes aboutthe new telecom world order.The recent BT 21st CN network opportunity selection may be seen as a road map of the future of telecom/broadband industries and it would define the future leaders. Traditional vendors like Marconi, Alcatel, Nortel did not make it to the shortlist. The list has Cisco, Juniper, Siemens, Ericcson besides Huawei. Om says if Huawei is found to be good for BT,then its good enough for SBC, Verizon and every other PTT which has made the old timers like Nortel, Lucent, Marconi and Alcatel, fat and happy for so long. In lower cost economies like India and rest of Asia, Chinese vendors like Huawei, ZTE and UTStarcom have become solidly entrenched and are using that base to learn about scale and using that scale to offer gear at prices which are far below the offerings from the old world equipment provider.The bloated cost structure of 20th century leaders puts them at a disadvantage. In response to this pressure, Alcatel is trying to move up the food chain and offering network integration services at its unique selling point. Om raises the issue rightly that it would face competition from the likes of IBM , or the new AT&T. The industry shall see new leaders, and they will have strange Asian names.
Ronald writes thus far,
Huawei was picked for areas that have already been commoditized due to very high competitive pressures
. These low-margin LOBs include broadband access and optical networking. However, other areas such as softswitching, network intelligence and routing are apparently safe thus far for western vendors. New entrants in a market begin attacking the bases of older, more established vendors - first with the low-margin products, and then, moving up the value chain.He adds that Vendors such as Huawei, UT Starcom, and ZTE, among others are buying assets (CommWorks, and now even perhaps Marconi), partnering (3Com) and now winning bids in major tier 1 accounts (such as BT). Their threat to western vendors is real and has finally arrived. They represent formidable competitors that have great resources (human and capital) at their disposal and predicts that Huawei may begin to win delas in the North American markets. No doubt - am aware of atleast half - a dozen big deals in Asia where Huawei has won or is almost close to winning.A major churn is definitely happening in the telecom sector - influenced in large measure to newer and disruptive technologies, several carriers skipping the technology ladders and going to the latest technology directly,aggressive priceplay by the chinese - all make the telecom place more and more competitive - in the process some would lose - perhaps those with heavy cost structures and newer entrants with more moderate cost structures and with good technology would emerge winners.

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