Forbes article. Lucent in the Way and IP Revolution
forbes.com
By Jeffrey Young
If you believe what the analysts say, San
Jose-based Cisco Systems (CSCO) is set
to dominate the future of networking. The
only company squarely in the way of Cisco is
Lucent Technologies (LU), the AT&T spinoff that
incorporates most of the equipment manufacturing
side of the former company, as well as the crown
research jewel, Bell Labs, with 100 years of
captive experience. (Click here for more on the
Lucent/Cisco rivalry.) Since Lucent was set free
Oct. 1, 1996, it has seen a fast runup in its stock
price. In the past 12 months Lucent's stock has
risen 116%.
For all its vaunted Bell
Labs connection, Lucent
faces the new challenge of
Internet protocol.
It will need every penny to be competitive.
Lucent's key strengths today include: essential
knowledge in optical wave division multiplexing
where it was one of the inventors of key
technology, and is still one of the market leaders;
a strong set of products for wireless infrastructure
and carrier gear, the fastest growing sector of
telecommunications (and a big opportunity as
Motorola stumbles); a leadership position in voice
PBXs and related premises equipment; ditto for
big, and small, carrier circuit switches; and
economic clout enough to offer very attractive
financing to cash-strapped service providers if it
wants.
For all its vaunted Bell Labs connection, Lucent
faces a new challenge: that of Internet protocol
(IP). Critics warn that the kind of cerebral and
reflective pace that brought about the invention of
the transistor, lasers and optical transmission gear
is unsuitable in the new frenzied environment. The
market is coalescing so fast that there is little time
to dither, no time to make mistakes, barely any
room to maneuver.
Seize the moment
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IP revolution
By Jeffrey Young
Telecommunications market will topsy-turvy
in the next few years for the simple reason
that most telephone traffic of all kinds is
going to be delivered over the Internet, or
Internet-like networks that make use of the robust
Internet protocol (IP) to move everything from
your call to the Home Shopping Network to the
video on your television.
Internet protocol (IP) is far-and-away the best
way to send data around because it is simple,
ubiquitous, will work at whatever speed the
connection supports, and can go at varying
speeds along its route. This last factor is crucial to
the swift uptake of the Internet, and the future
demise of the phone networks. No longer is a
highly specified, highly controlled end-to-end
telco-maintained pipe required. IP data works
better in that world, but it does just fine in a
heterogenous, chaotic, ever-changing network of
peers, too. The prime example is the Internet.
Fax and E-mail already start out as data, and get
converted into not-quite-as-good signals for the
voice world; voice mail is almost always
manipulated and stored by a computer. Add web
browsing and surfing, and E-commerce as it starts
to finally catch on and the world turns upside
down. By some estimates as much as
three-quarters of all telephone traffic now could
already be more easily handled as data. Today it
increasingly makes sense to pass everything as
data and strip out the voice, which will feed a
joint voice/IP gateway equipment market for a
while. But then it will all be data from end to end.
Here's how to see what's at stake: Twenty years
ago there were 100 million E-mails sent each
year, versus 135 billion pieces of first class mail.
Last year the two reached parity: about 190
billion each. Many of those E-mail messages
would have been voice calls without the Internet.
Imagine a minute each, at 15 cents a minute, and
that is $20 billion in lost voice revenue due
directly to today's data networks.
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