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Telecom warning: Take steps to innovate, or else

Fri, 06/20/2008 - 8:50am
Jim Barthold

Telecommunications service providers and vendors should seriously rethink their current business strategies or face a future where innovation hits a wall, warned Jagdeep Singh, president, CEO and founder of Infinera, during a last-day keynote that brought a tinge of reality to the generally upbeat NXTcomm 2008 telecom trade show in Las Vegas.

Singh, who took pains to describe himself as an “optimist,” painted a pessimistic picture of a telecom future where there are too many applications, too much content and not enough network capability. While aimed specifically at the telco audience, Singh’s comments could translate well to the cable industry.

Telecommunications overall, he maintained, is driven by a “virtuous cycle” in which more bandwidth leads to more applications that devour the bandwidth and require more bandwidth for yet more applications.

But since 2000, the bandwidth portion of that cycle has been slowing almost to a halt, with 40 Gbps network cores still a rarity and 100 Gbps still on many whiteboards. At the same time, providers and content developers have continued to build new applications that require still more bandwidth that may not be available.

“We’re in danger of bottlenecking the growth of the Internet,” Singh said, calling for an “exponential growth in bandwidth supply. This is a serious engineering problem.”

The solution, he said, revolves around investing more in research & development (R&D) rather than less as the industry plateaus and competes in the new triple- and quadruple-play arena; stepping away from a “me-too” vendor development platform where seven vendors might offer the same standardized technology to a carrier rather than differentiating with an innovative offshoot or completely new suggestion; and returning, or perhaps even first stepping onto, a path where service providers take risks on emerging companies with new ideas by actually buying from those companies. The last suggestion, he said, could revive flagging venture capital interest in telecom, which has been sliding steadily to other, more revenue-ready industries.

“Every year has brought less R&D spending than the previous year,” Singh said. “It’s imperative that companies get healthy so they can invest in R&D.”

While the future is dire, Singh said he believes “these trends are certainly reversible” if carriers and vendors adopt a model demanding and rewarding innovation rather than keeping their heads above water.

“Find an unsolved problem where you can provide value,” he told vendors who have “mistakenly judged that participation in all segments was more important than leadership in some.”

And, he said, service providers and their key vendors should return to a model of building strategic components in-house.

“This means a return to the vertically integrated model of the past,” he suggested.

Singh’s talk was markedly different than other keynotes from industry leaders at Verizon, AT&T and Sprint, who saw a growing, vibrant, competitive industry. Even Singh agreed that there is tremendous opportunity for growth and public demand for applications and content that rides across broadband networks.

But, he said, “If you’re going to chase an exponential demand curve, you’ve got to employ an exponential supply curve. We need to see more companies taking on ambitious developments. The problems of bandwidth growth have solutions.”

More Broadband Direct:

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• Telecom warning: Take steps to innovate, or else

• Big Ten Network scores a deal with Comcast

• FCC to slap Verizon for retention practices

• CMC adds 4 more companies to HITS AxIS roster

• Harmonic celebrates 20-year milestone; gears up for Expo

• Survey: 51% of telecom execs say bandwidth will break Internet

• Motorola shares hit 5-year low

• Canada charges Nortel execs with '02 fraud

• Yahoo management in turmoil

• Broadband Briefs for 6/20/08

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