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February 21, 2005
LONDON -- Large incumbent fixed line operators have little option but to build next generation converged networks now that the IP "toothpaste is out of the tube," reckons senior BT Group plc (NYSE: BT; London: BTA) executive Paul Reynolds.
Fresh-breathed Reynolds, CEO of the U.K. carrier's wholesale business unit, told the 21st Century Communications World Forum event in London on Monday that the world's major carriers have no choice but to follow BT's lead in building a new, open, standards-based IP network if they are to survive in the telecom business. (See BT Urges IP Love-In, 21CN on Track, Says BT , and BT Moves Ahead With Mega Project.)
One of the drivers behind BT's planned migration from multiple voice and data networks to a single all-IP network is cost, said Reynolds. He told a meeting room packed with hundreds of telecom executives that much needed efficiencies could be attained from a single, converged network.
He said market conditions are getting tougher, and that a lot of value has been eroded from the industry in the past 10 years. He noted that in 1996, WorldCom, now MCI Inc. (Nasdaq: MCIP), acquired the modestly-sized MFS for $14.6 billion. Now MCI is being acquired for less than half that amount (see Verizon Wins Tussle for MCI).
And Reynolds added that BT's traditional revenue base is being cut by £250 million ($474 million) each year because of price reductions and competition. "If you're an equipment vendor in the audience today, you can guess why we're pressing for ever lower prices. We all have to share the financial pressure this industry's under," said Reynolds, who reminded those equipment firms that 21CN hardware frame contracts were due to be awarded in the coming six weeks or so.
Being a large incumbent operator is no longer a guarantee of success, he added. "Some other operators have decided to hunker down, cut back on investments, and wait to see what happens. We considered that approach and decided it wasn't an option -- it's a doomed strategy," said Reynolds. "Those that sit back and wait will be relegated to commodity players," he added, flashing his gleaming smile at the audience.
"We decided that the only way to survive is to be aggressive and innovative, and we have had to commit our strategy and investments" into the 21CN, a new £10 billion ($19 billion) converged IP-based network that is set to replace BT's current public switched telephone network (PSTN) by the end of this decade.
One of the end results of building 21CN will be a much faster turnaround in the development and delivery of new services. Reynolds said the time from inception to market launch will be cut from the current 18 months -- "that's far too slow" -- to just 6 months once the new IP network and its unified back office systems are up and running.
And with that, Reynolds rushed off to fire up his toothbrush and squeeze a bit more minty-fresh paste out of the tube.
— Ray Le Maistre, International News Editor, Light Reading
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