NSN: Big Step or Half-Step?

Business changes in networking are often more significant than technical changes even though networking is ostensibly a tech market area, and that’s the case this AM in my view.  NSN has announced a major refocusing/restructuring that will cut about 17,000 jobs worldwide and concentrate company efforts on mobile broadband.  Obviously this is a big deal for NSN, and obviously it’s at least in part due to the company’s efforts to show a profit for its parents.  But there’s more to it, I think.  Is “mobile broadband” the anointed space, profit-wise, for vendors?

Probably.  In order for the “network of the future” to last into the future it has to show a profit, a return on investment at least on par with the operators’ current internal rate of return.  There are a number of notions on how this might happen, but my personal view is that it has to come through enhanced creation of service features hosted on IT devices and partnering with network equipment to form a service layer.  This partnership could happen for both wireline and wireless, though.  What makes the future of services more tied to mobile broadband than to fixed?  There are two answers.

First, you can’t make service-layer changes without making an investment, and the investment is easier to make where the services in place are still earning a decent profit on their own.  In mobile that’s still the case, but not so in wireline.  Operators who try to push wireline service-layer functionality today have to fight OTT competitors as well; there are plenty of OTT service-layer tools out there in the form of cloud elements and APIs from players like Google.

Second, wireless broadband is an always-with-you thing, and that makes it a force to transform consumer behavior to become broadband-centric and broadband-supported.  Life, in a sense, can become a reflection of an online reality because online activity and relationships can drive real-world behavioral changes.  This framework is fertile ground for the creation of valuable “service features” that would be much harder to socialize to buyers in fixed-line service frameworks.  There, the fact that the user is in a place, often the home, tends to fossilize behavior around past models.  Mobility means freedom, flexibility, opportunity.

For NSN, the key question is whether they see this connection and are prepared to exploit it.  The broadband Internet creates the same downward pressure on connection prices and the same risk of OTT disintermediation in the long term, regardless of whether we’re mobile or not.  Mobile will have more time to respond, more opportunities to exploit, but you can’t be a bit-pusher in mobile any more than in wireline.  The usage cap trend might even mean that bit-pushing will be less feasible as a vendor strategy in mobile over time.  Users don’t like to pay for stuff like capacity; they pay for features and experiences and not the delivery vehicles.  NSN has to be a feature giant to be a mobile broadband giant, in short.

For the rest of the vendors the NSN move should be a warning signal.  Alcatel-Lucent, for example, has a strong mobile broadband and also service-layer kit to exploit, but it also has a ton of other stuff whose future is far more problematic.  Should it think about shedding some of the big iron of the lower layers to focus on places were profit can be made for operators, and so then also for vendors?  How about players like Cisco and Juniper, neither of which really have much of a mobile broadband story?  Can they create service-layer value that is sufficient to give them a place in the evolution of mobile services when they can’t really play in the RAN, the critical part of mobile broadband infrastructure?  I think that we’re facing some major competitive changes in 2012, either because players get smart and proactive, or because they don’t and get sidelined.


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