Nortel & 3G Interview>
From the September 13, 1999, issue of Wireless Week
Assessing The Next Generation At Nortel
Nortel Networks, then Northern Telecom, started the wire-less rush to the Internet a year ago when it acquired Bay Networks.
To find out how that integration has proceeded and how Nortel's Internet protocol vision is developing, Wireless Week Data/IP
Networking Editor Brad Smith interviewed Pascal Debon, president of Mobility for Nortel's Wireless/Carrier Solutions.
Debon, a native of France, moved to Texas in January when he was appointed to his current position after serving as president of
the GSM Solutions sector. In his new job, Debon is charged with developing Nortel's next-generation wireless business as well as
having overall global responsibility for the company's GSM, CDMA and TDMA product business units.
Wireless Week: A lot has changed at Nortel Networks in the past year. Along with the merger with Bay Networks, there has
come a name change, an ad campaign to give the company a higher public profile, several big contracts and a stock split. Plus, you
have been given the new job as head of the Wireless Solutions Mobility business. How is Nortel coping with all this change and
will it continue?
Pascal Debon: I moved from Paris to Dallas in January and have found Dallas to be absolutely fascinating. In Europe, we don't
have the same perception of this new wave of information technology. To summarize, in terms of the business, here the Internet
and all the paradigms of Internet are a reality. In Europe it is not there ... Europe right now is missing something in terms of new
economic opportunities. Here in the U.S. there is a lot of entrepreneurial spirit around the Internet and what I call the information
technology, and it's not there in Europe. For me it is absolutely fascinating to touch a reality that I was not able to see in Europe.
I was making a presentation about the Internet a while ago and was making a comparison between Gutenberg, who invented
printing, and the Internet. Our civilization had been built on the book, on writing, the past few centuries. That's the way we have
been educated; that's the way we are thinking; that's the way we transmit information and knowledge. Now, with the Internet, all
those paradigms are going to change. In the next 10-20-30 years all the fundamentals of our way of education will completely
disappear.
The Internet creates a new world and a new way of working, of living, of thinking. What was the battle of the last century? It was
access to information. Now, information is there. The problem is no longer access to information; it is what can you do with it.
The combination of wireless and the Internet is certainly one of the important growth areas in the next few years.
WW: Where do you see Nortel in this competitive mix? Nortel was probably alone a year ago but has competition now.
Debon: What companies are leading the IP market? First you have Nortel, but we are not alone. We recognize that we have
competition in North America. But you don't see any European companies because the market is not there. In the U.S. the market
is driving us to go full speed to this new paradigm.
If you integrate all the changes that the market is leading, which is through IP, through the Internet, it will bring huge changes in
the next few years. The networks will go from switching technology to packet-based technology. There is no more debate about
that; it will be a massive change. Then you have all this integration of voice, data and wireless, which is Nortel Networks' vision of
Unified Networks. Then you have millions of applications on the Internet. That is how the world is evolving. The business case for
our customer--the value model--is drastically changing. We have to adapt our organization, our process, to this new world. Take,
for example, the last change we have done, to combine all our structure working on wireline and wireless to be able to propose to
our customer a single solution to whatever he needs.
Basically we are working with a moving target. It is difficult for an organization to be flexible. But that is the way Nortel is
evolving, to have the possibility of adapting to the new conditions. The definition of a good organization in the '70s and '80s was a
rigid and fixed structure. Now a good definition is an organization that is flexible and adaptable, and also by the speed at which we
can react.
WW: "Wireless time" hasn't been as fast as "Internet time." Do you see those two different kinds of time converging?
Debon: With the Internet, all notions of time can disappear because you can have information worldwide. The next challenge for
Nortel is to combine the wireless and Internet worlds. That is what we are doing by taking some leadership in what we call 3G/IP,
but [which] includes GPRS, 1XRTT, EDGE, [high-speed standards for GSM, CDMA and TDMA technologies]--everything which
can go at speeds of 100 kilobits per second to 2 megabits per second over any network.
WW: Is the integration with Bay Networks complete? If not, what remains to be done? Was the integration more or less difficult
than envisioned?
Debon: We can now see that integration of Bay Networks has been a real success. It has been an accomplishment in two ways.
First it is an achievement in terms of people. Each one [Nortel and Bay] has brought something, new ways to work, new ways to
think and new ways to manage opportunity. In terms of people, we can really see the integration. In terms of products, taking as
an example GPRS and 1XRTT, we are working a lot with the help of what Bay has done and they did bring us a lot in terms of
IP. I would say they have given us the ability to build better IP architecture; the work that they have done gives us the possibility
of starting not from zero but from an established knowledge base.
WW: Were there any bumps on the road to success?
Debon: There are always issues but that is just day-to-day work, nothing important. I think the merger has been so positive.
WW: In your new position you are responsible for developing a third-generation strategy. Realistically, how much interest is there
now among your carrier customers in 3G? I assume the interest is more intense in Europe?
Debon: In terms of evolution, you get from the wireless point of view two components. You get the backbone, the network, and
you get access.
In terms of backbone we have two strong fundamentals. One is to evolve the backbone to packet switching. That is what we are
doing with our Succession Network architecture line today. That can be for wireless and wireline. The second fundamental is a
Unified Network. Now when we sit in front of a customer, if it is a wireless customer, a wireline customer or a combination, we
approach the customer with a global integration solution. The things that we have in front of us when we address a customer are
going from circuit-switched to IP through our Succession line. We are going to see the project, the customer's network, in terms of
integration of wireless and wireline. That is our vision.
The second thing is access. Everybody speaks about 3G and you know we have a leading position in 3G. But in the next four or
five years you will have more people on GPRS and 1XRTT than on 3G. So we have a very strong focus on what we call
two-and-a-half, which is basically the first step of the data evolution for wireless. When you see that the network will be able to go
at speeds of 144, 170, 384 kilobits per second, you really are reaching new paradigms in the wireless industry. This evolution to the
data world, this evolution to the wireless Internet will go first to GPRS, 1XRTT and EDGE, and that is where we are taking a
leading position. If you establish yourself in the U.S. market that will be the drive. 3G in Europe will be there sooner, because it is
being pushed also by the politics of Europe, which wants that particular technology. It will take some time.
The next question is, what are you going to do for applications?
The trend will be what I call business applications. I think wireless data will explode in all business applications. I speak of
business applications vs. the Internet, which is the consumer market. Data will be led by the needs of the business community.
That basically is Nortel's position. First, the network. It is fundamental that if you don't evolve your network to IP you cannot have
the bandwidth to do the Internet. The second is to be able to access the speeds and the third one is to provide the applications.
WW: Do you see a role for Nortel in developing applications?
Debon: I see a lot of possibilities for Nortel to work through partnerships and alliances. That goes back to what I said earlier about
the evolution of the business model for our customers and for ourselves, which is to the service and application work.
WW: Can you provide any examples?
Debon: One is the work we are doing around the concept of the mobile office. Basically it is the vision of what the businessman
needs in terms of wireless for the mobile office. A lot of things will be there very quickly. Take GPRS as an example--and we will
deploy GPRS next year--it is a data network that is an overlay on the voice network. So you have an IP network that is built as an
overlay of the switch. That is one of the things that we want absolutely to develop for our customer, GPRS being an overlay of
data. So let's go build the IP network and one day you will be able to put voice on it. It will take some time because we need to
work on mobile voice-over-IP.
WW: When you talk about GPRS deploying next year, are we talking about the U.S.?
Debon: We have several orders, including one from Omnipoint. Nortel has GSM leadership in the U.S. so we are working with
our customers to deliver GPRS next year. It will be the same with CDMA with 1XRTT. It will be a little later for 1XRTT, but we
are working very closely with our customer base. (Nortel has announced a 1XRTT contract with Telstra in Australia and also has
demonstrated the faster CDMA data standard, 3XRTT.)
WW: Some analysts have described Nortel as "skeptical" about the initial market for 3G services and therefore is concentrating its
efforts on delivering data ability in the backbone, which would have cost benefits for both voice and data services. Can you
elaborate on this?
Debon: I would not put those words in my mouth. Yes, 3G will be the evolution of wideband wireless. Having said that, we today
have a strong focus on our customer needs in coming years. Nortel is one of the leading suppliers in 3G. We have announced
market tests with France Telecom, with Microcell Telecommunications, British Telecom, etc. We are working, as you know, with
Panasonic, which is one of the main suppliers of NTT DoCoMo in Japan. The reason we are working with Panasonic is, first, that
Japan will be first to market and we wanted to have contact with this reality, and second, we will also with Panasonic have an
end-to-end solution.
I believe the next wave of wireless growth will come with data and data applications. For me, its more important to provide
tomorrow my customer with IP evolution and with GPRS, 1XRTT, EDGE because that is how they will make their money by
enhancing their actual networks. 3G will go and we want to be first, but it will take some time to be implemented.
WW: There was a Nortel study that said wireless carriers spent 37 cents in operating and depreciation costs to deliver 1 megabit
of data and that Nortel's goal is to bring that cost down to 4 cents by 2004. That sounds aggressive. Is it attainable?
Debon: You have to come back to the market evolution. Today in most of the advanced countries, the penetration rates of mobile
is between 20 to 30 percent. Three or four years from now, where will we be? The penetration rate that we envision is above 50,
around 60 or 70 percent. It's millions and millions of people. They are going to have access to the Internet. The carriers will have a
massive number of bits to carry. When you have that paradigm in mind you understand that that can happen only if you drastically
cut your costs. I'm not talking about improving the costs of network 10 or 20 percent by changing the way that you manufacture,
etc. We are speaking about a drastic change and that basically is packet-switching technology.
WW: Packet switching will bring that kind of change?
Debon: Yes. And in terms of investment and also in terms of operation. Once more, this is a fundamental evolution. It will be in a
consumer market. As the market explodes the costs will go drastically down. It is what we call elasticity of demand vs. price.
WW: You're speaking of some very dramatic changes ahead.
Debon: To conclude, there are two fundamentals that need to be understood. First, the business model, the value model of our
customer will change, and our business model will change.
The second is this evolution to IP. If you look at the data evolution on wireless, you get some projections that it will be 15 to 20
percent four or five years from now. But if you look at some industrialized countries you will have a rate of 40 to 50 percent. You
will be able to get that data on your network only if your network has this new IP-based technology. I will say all the elements are
there, but now you have to jump to assure your success.
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