LRTV: I’m here today with Mike Quigley. He’s the president and COO of Alcatel. Mike, what are some of the bigger trends in the telecom industry right now?

Mike Quigley: It’s clearly the explosion of IPTV. It’s now gathering momentum on a worldwide basis. There are obviously a lot of big things happening here in the U.S., but also on a worldwide basis. There’s a lot of interest from many of our telco customers, so that’s obviously a very big mover following on the heels of what’s been a very rapid growth in a mobile area in the last several years.

LRTV: Mike, you’ve chosen to forge a partnership with Microsoft on IPTV. Tell us how that came about.

Mike Quigley: Well, the partnership that we have forged with Microsoft was done after some reflection on our part. We did in fact have quite a sophisticated video middleware solution, which was part of our overall end-to-end, triple-play solution, so it was no easy or obvious move for us to partner with Microsoft. But we took a view of the long term and said to ourselves, what is it that will really drive this industry forward in IPTV -- that’s the right answer for our telco customers. And clearly the coming together of two large companies such as Alcatel and Microsoft really could have a major effect on driving the industry forward, so it was from that sense we thought it was the right move to make at this point in time.

LRTV: Were you scared of competing with Microsoft on software?

Mike Quigley: No. We’ve in fact had been competing with Microsoft for some time and we’ve had some 20 customers on a worldwide basis, so it wasn’t the competitive issue that was the driver for us. It was how we could in fact move to a new way of working. Our belief was, in order to get cost down for IPTV, in order to get standardization, in order to get everybody working together so that we could drive the market forward, it was better to cooperate. And we bring in fact quite complementary skills -- Microsoft’s obviously building consumer software and we have a deep knowledge of telco infrastructure and operations and clearly, we knew quite a bit about video also.

LRTV: So, Microsoft is making quite a big push into the telecom industry. Tell us what you think Microsoft’s role is in the industry so far.

Mike Quigley: I think Microsoft’s role in the telco industry is quite clear from the applications area they’re doing a lot of work in -- in putting platforms for middleware. They know a lot about consumer software and I think they’re choosing partners that can grow the whole, like the whole eco system, together. So we believe both Alcatel and Microsoft will be working together in the future, not just on IPTV, but in other areas. It’s just that we’re doing in call center technology.

LRTV: There seems to be some intense competition between the cable companies and telecom companies right now. Is it a winner-take-all proposition?

Mike Quigley: Yes, it’s quite clear there is growing competition between cable companies and telcos, where obviously the cable companies started from video, adding high-speed Internet, and then, coming into telephony. The telcos started in the other direction of telephony and then into high-speed Internet and now into video, so I think there’s a natural progression of a competitive stance. I think we’re going to see some interesting competition in the years ahead. The stance that we’ve taken in Alcatel is really to push towards increased personalization in services, which is why we think IPTV’s got a very important part to play in the future -- giving end users the service they want when they want it.

LRTV: What do you see as the impact of some of emerging wireless technologies such as WiMax?

Mike Quigley: As we think about our new wireless technologies in the telco industry, I think there’s the recognition there’s going to be a lot of wireless technologies that will have an important impact. You’ve got all the usual GSMs, CDMA technologies going to UMTS. But some of the 4G technology I think will have a part to play. It’s quite clear that WiFi’s had an impact in localized access points; many homes now have wireless cells that they operate their PCs on. We believe that WiMax technologies will be quite important and will complement the fixed wireline access technologies in which Alcatel is in fact leading. We have ADSL, ADSL 2+, Media Cell 2, GPON technologies… WiMax is another important access technology.

LRTV: A lot of these wireless technologies and wireline technologies are coming together. Can you tell us what the future of fixed/mobile convergence has for the industry?

Mike Quigley: I think the convergence of fixed and mobile is now just beginning to play out. It’s been talked about for many years. We have IMS architectures that are just coming into play now, a lot of work going on in the standards bodies… And we’ve yet to see I think the real, real benefits – we’re at the very beginnings of the growth of that. There are some important solutions now just starting to play out, including what we call intelligent mobile redirects -- they have a hybrid GSM/WiFi phone, which can then either pick up a GSM cell or it can pick up an access point in the home, and then use either the GSM network, wireless network, or the wireline network. So I think we’re going to see more of those hybrid-type solutions coming into play.

LRTV: You’ve been with Alcatel for more then 20 years. Tell us how you started your career in Alcatel.

Mike Quigley: Well, I started in Alcatel as an intern straight out of high school, went though college as an employee of Alcatel, spent many years in R&D. Then it was a company called ITT, which was bought by a French company CGE to form Alcatel. So I continued through the company through those years and ended up in the U.S. in the very end of ’99 to see what was a very exciting market going in the upward direction and the downward direction. So it’s been a lot of fun.

LRTV: So, you started in Australia and ended up working for a French company. Tell us how this came about.

Mike Quigley: I started in what was ITT back in 1971 as an intern. I spent my first six years with ITT, going through college and working in the company during vacations. ITT, which was a large telecom vendor, was bought in 1987 by a company called CGE that formed Alcatel. So I’ve been with the company through that period and a lot of my time in R&D starting off, but then in other positions around the company and almost all of the areas of technology that we deal with and ended up at the very end of ’99 in the U.S. in what was a very interesting period. Things were absolutely burning at that time, but just a short time later the storm hit. So it’s been an interesting time in the telco business, I can say, over the last 30 years.

LRTV: So how’s your French?

Mike Quigley: My French is non-existent at this point in time, but I am about to start an intensive nine-day French course, 12 hours a day. So hopefully by the time I’ve finished that I’ll at least be able to converse.

LRTV: So, there’s been some rumblings since you were promoted to COO that you’re the next CEO of Alcatel. Do you see yourself as the next CEO?

Mike Quigley: Clearly, as COO, I’m in a position in which I obviously get to know a lot more about the companies operations at that level. Up to now I’ve been running our North American business together with our fixed communications group business. But the decision on the next CEO of Alcatel is a decision that will be made by the board.

LRTV: When do you see the decision of the next CEO being made?

Mike Quigley: Well, I think as our current chairman and CEO has made very clear, he will be stepping out of the CEO’s role into a non-executive chairman’s role at the latest by May of next year.

LRTV: So does the board expect you to learn French?

Mike Quigley: No, the board certainly doesn’t expect me to learn French. The reality is that the official language of the company is English and it has been for many, many years, so when we’re in meetings we speak English. Remember, this is a very international company -- we’re in 130 countries around the world -- but the group that I led until very recently, the fixed communications group, had Belgians and Canadians, two U.S. folks, Australians, French, Italians, Germans... so it’s a very international company.

LRTV: Mike, how’s your GPON?

Mike Quigley: Alcatel has a complete range of access technologies and we have in fact been supplying BPON into the market for some time, so GPON was a natural evolution for us to take. We’ve been working on GPON technologies for quite some time and, in fact, the product that we developed, the 73-42, can in fact house -- as well as the GPON -- it can house our BPON and can provide in excess of 100 Mbit/s down to end users up to 200, just depending on how the latest statistics work out. So it was an actual evolution. We’ve got everything from ADSL through VDSL. We’re obviously into PON technologies both BPON and GPON, and what’s important also is making sure you’ve got enough bandwidth now at the back end of these machines so you can really provide a good video service.

LRTV: Did this product come about because customers told you they needed to accelerate this technology?

Mike Quigley: I wouldn’t say that the product development of our 73-42 GPON platform came about because customers were accelerating. It was more we had a view some years ago that both DSL and PON technologies were going to be used by customers on a worldwide basis, just depending on how much copper they have, how much, how long the copper loops are, whether it’s aerial or buried. So we wanted to make sure in Alcatel we had the full range of access technologies available.

LRTV: Tell us a little bit about your core router strategy.

Mike Quigley: In Alcatel what we’d been working on for some time is edge routing. We were internally developing a core router. We stopped that sometime ago and it was one of the first things I did when I got into the fixed communications group. I had to make that decision about what was the right direction to head in, in IP technologies. Our decision was there was really only one place in which you can develop good IP routing products and that was on the west coast of the U.S. at that time. So, we looked for a company that would have a good service edge router that could do two jobs for us: One, it could be part of our overall triple-play solutions; it had to have all of the quality of service and the granularity you needed to provide good triple play. Remembering this is part of a triple play, so there’s high-speed Internet, IP video… it has different requirements on the traffic parameters. The other part was to make sure that we can provide both Layer 2 and Layer 3 VPNs, so we looked for a product that was on the edge, because we believed that was where the next development was going to take place and we wanted to intercept the routing marking when new service routers were coming into play.

LRTV: So, do you see any other important acquisitions coming soon?

Mike Quigley: In Alcatel we’ve always had a policy of looking at acquisitions as part of what we do. We spend a lot of money in fact on internal developments. About 13 percent of our revenue goes on R&D -- we have 16,000 R&D people on a worldwide basis now. That’s a lot of internal work we do, but still you can’t cover everything, so we do from time to time acquisitions -- TiMetra, an IP service edge router was one. More recently we’ve acquired a company in Dallas which was in the mobile switching space -- Spatial Wireless -- and we are now providing mobile soft switching technology to the three biggest GSM players in North America, which are Cingular, T-Mobile, and Dobson.

LRTV: Competition is quite brutal these days. Tell us about pricing and how that’s affected your profits.

Mike Quigley: Pricing has always been with us in the telco industry, and if you look at the average price decrease year over year, it usually runs in the 10 to 15 percent per year functionality. The good news is we keep building in more functionality into the telecom platforms and products so that we manage to drive down cost per bit relentlessly year after year and increase functionality. I think what’s important for us to do at Alcatel is to make sure that we keep providing the types of products we have been providing and increasingly end-to-end solutions, so what we’ve done in triple play is putting all of the pieces together to provide an end, and end-to-end solutions is for us one of the keys to ensuring our products do not get commoditized.

LRTV: Mike, thanks very much for speaking with LRTV today.

Mike Quigley: It’s a pleasure.