Business Week reference to ASND roll-out of VoIP on Monday.
" Ascend Communications Inc. is set to
roll out its voice products on Mar. 30,"
[Issue contains many good articles on data/voice networks]
businessweek.com
THE BELL-HEADS VS. THE NET-HEADS'
Converged networks are the next gold rush. Who will lead the
charge to build them?
John A. Roth is serious about the Internet. So serious that the chief executive of
telecommunications equipment giant Northern Telecom Ltd. sent a memo to his
73,000 employees last Dec. 3 hinting that their jobs could be on the line if they
didn't get Net-savvy--fast. True, Nortel was already working to bridge the gap
between the rival worlds of telephones and data networks. But, he said, ''it's
critical that we accelerate.''
That's a rallying cry heard throughout the $175 billion telecom equipment
industry. Titans such as Lucent Technologies, Siemens, and Alcatel have reason
to worry: Although the Net is used today mostly for sending data, it's quickly
becoming a vehicle for voice calls. Customers love the combo: Shifting voice
traffic onto data networks saves them big bucks on long-distance bills. By 2002,
predicts researcher Frost & Sullivan, some 13% of the world's phone calls could
be carried over Internet-type networks, instead of through old-style voice
switches.
Sensing the threat, phone equipment makers want a piece of the market for
voice-over-Internet gear. It won't come easy: Fast-moving Cisco Systems and
3Com Corp., which dominate the data networking business, are gunning for the
same big game. ''Call it the Bell-heads vs. the Net-heads,'' says Jayshree Ullal,
marketing vice-president of Cisco's enterprise unit. By 2002, sales of such gear
could hit $13 billion, up from $680 million this year, according to researcher
Killen & Associates. If data networking firms grab this market, their growth rates
could climb by 10 percentage points, predicts 3Com CEO Eric A. Benhamou.
Says analyst Paul Johnson of BancAmerica Robertson Stephens: ''This will be a
battle of the giants.''
NOW HIRING. It's too early to call a winner, but analysts give the edge to
telco equipment makers. Their sheer size--Lucent has three times Cisco's
revenues--and long relationships with phone customers gives them an inside
track. ''Lucent has something Cisco lacks: credibility in the telco market,'' says
analyst Amar Senan of Volpe Brown Whelan & Co. Even Cisco CEO John T.
Chambers concedes that he and his rivals must make data gear as reliable as
voice--a task he's confident he can accomplish. ''Cisco is in a position to lead this
industry,'' he says.
The Net-heads are certainly trying. On Feb. 4, Bay Networks Inc. sank $38
million into startup NetSpeak Corp., which makes a telephone gateway for
connecting voice switches to the Internet. Ascend Communications Inc. is set to
roll out its voice products on Mar. 30, while ''Cisco is hiring telecom people like
mad,'' says John Coons, an analyst for researcher Dataquest Inc. Data companies
argue that they understand networking better than the voice crowd. ''It'll be a
long, slow march for them to get into this world,'' crows Bay Networks Executive
Vice-President Steve G. Pearse.
Maybe not. Telecom equipment companies are rushing to add data capabilities.
On Mar. 18, Nortel spent $290 million to buy Aptis Communications, a maker of
speedy devices that connect users to the Net. And Lucent, AT&T's former
equipment business, has devoured a string of small networking firms, including
Livingston Enterprises Inc. ''We are going after the data business,'' vows William
T. O'Shea, president of Lucent's business communications systems unit.
Startup voice-over-Internet phone companies, such as ICG Communications
Inc., certainly aren't dismissing the old guard. ICG's network uses a mix of Cisco
and Lucent gear. That impresses analyst Senan, who says the deciding factor in
grabbing market share will be whether companies operate ''in Internet time or
telco time.'' You don't need to tell Nortel's Roth. He's got his troops marching to
a cyberbeat.
By Andy Reinhardt in San Jose, Calif.
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Updated Mar. 26, 1998 by bwwebmaster
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