How We Read Earnings and MWC Tea Leaves

Continuing our media ramp-up to MWC, Ericsson announced it’s buying WiFi player BelAir, a step that follows a previous Alcatel-Lucent move in the WiFi direction.  As I said at the time, WiFi is a kind of collateral success, pulled through by a combination of bandwidth-hungry appliances like smartphones and tablets and the inevitable truth that cellular bandwidth isn’t going to be all-you-can-eat in the same sense that wireline’s bandwidth is.  The big change now is that WiFi has become an integral part of the wireless strategy, and in multiple dimensions.

In the WAN, WiFi is both a means of connecting data devices when you don’t have the spectrum or money to deploy micro- or picocells and an offload approach for when you have too much traffic.  In either mission, having the ability to “roam” between the two is important because it’s virtually inevitable that operators transition to support of simple VoIP.  Why?  Because users will transition to it, and because complicated voice services are just not going to sustain ROI.

In the enterprise, WiFi is a way to create a corporate information fabric that covers workers within any facility, and if there is a kind of auto-roam between facility WiFi and 3G/4G VPN services, you have a potentially global extension to the corporate WAN.  Here again pragmatics drives the operator; appliance players would be happy to manage this kind of seamless service interchangeability and in the process pull the WiFi traffic (that many plans still charge for) off the cellular operator’s bill.

What’s surprising to me here is that the data-oriented network equipment vendors didn’t see the opportunity from the other side, and push their own approaches to WiFi as a means of engaging in the mobility game without having to buy RANs and IMS elements.  The myopia is evidence of a general tactical illness, I think.  Nobody wants to take any step that’s not an immediate product hit, and an immediate sales gain.  As logical as making Wall Street happy with nice quarterly growth may be, the longer-cycle visionaries in the carrier equipment side may be able to use WiFi to do a kind of reverse strategy; engage the high-value side of enterprise networking without the need to deploy all the now-commoditizing LAN and branch products.  Could Alcatel-Lucent and Ericsson become de facto enterprise winners by playing the WiFi card?  I think they could, but who knows whether they will.

Operators in Europe are showing some stress cracks in their own financial-market images.  FT’s profits were down and DT’s CTO has left as the company undertakes a review of their technology direction.  Some of the problem in Europe may be their lagging recovery, but I think the greater challenge is that wireless there is more competitive and thus further ahead on the commoditization curve.  Something radical needs to happen here, but momentum to create that something seems hard to develop.  We’re told by lower-level visionaries that there are recommendations in place for transformation of operator business models in all three of the key market areas, but getting these from plan into launch and then into trial is difficult (see this month’s Netwatcher for details).  If that problem remains through 2012 it’s going to keep capex under pressure.


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