Optical/IP Networks

Nortel CEO: We Blew It on DSL

Nortel Networks Ltd. (NYSE/Toronto: NT) CEO Bill Owens regrets Nortel's exit from the DSL market, one of telecom's major growth areas, he told a European press conference today.

While answering questions from Light Reading about the company's absence from the DSLAM market, Owens said: "I wish we had been there for DSL. We made a decision not to stay, and I'm sorry we missed it, though we didn't miss others," he added, referring to the vendor's developments in CDMA and GSM-based wireless networks (see Nortel's Pretty Penny).

Nortel decided to exit the DSL business in 2001 -- now it's one of the hottest markets in telecom as the world goes broadband crazy (see Nortel Outlook Degrades, F&S Reports on DSL, IP DSLAM Revenues Jump 20%, and DSL Adds 10M in Q1).

While Nortel has a partnership with ECI Telecom Ltd. (Nasdaq: ECIL) to add a DSL string to its bow, Steve Pusey, the vendor's EMEA (Europe, Middle East, and Africa) president, says it's a bit late to get back into what is now a highly competitive market. "If you can't be number one in the market, why enter late and be third?"

Clearly, though, Nortel executives wish they had DSL gear as part of their armory. "Would I like to have an IP DSLAM? That's a 'Yes,' " says Peter Newcombe, president of Nortel's optical and wireline business in EMEA.

DSL equipment isn't the only thing Owens is missing. Nortel is still without a CTO, having parted company with no fewer than three chief technologists in the past year (see Nortel COO Resigns , which also covers the CTO's departure).

"We need a CTO," says Owens, "and we'd like to have the strongest candidate in that post. We're interviewing now -- it's a very important role for us." Anyone who can fill a chair for more than four months in a row might think about applying.

Owens also took the public appearance as an opportunity to weigh in on Nortel's competitors. "There's new competition in the market, especially the Chinese companies, Huawei and ZTE," while "Ericsson and Lucent have had good business in the managed services market, and we've learned from watching them."

Siemens Communications Group, meanwhile, has been very strong in Russia, a key emerging market for Nortel, said Owens. Pusey stressed the importance of that region by adding, "If you're not in Russia, you're not in EMEA, and that's a fact." Facts, as we know, should never get in the way of an aggressive positioning statement.

What of India, where Nortel has been criticized by analysts for being too aggressive on its pricing to win business (see Nortel's Numbers Disappoint and BSNL Selects Nortel)? "You can't help but get very excited when you're there," said Owens. But conquering India brings on a challenge: Making a profit. Owens says the ARPU (average revenue per user) levels there are "less than $5" per month. He says senior executives -- such as Nortel's global services president, Sue Spradley -- are spending more time there looking for ways to cut costs.

Owens also waxed lyrical about China, and the "exciting opportunities in Korea," where Nortel has teamed up with local vendor LG Electronics Inc. (London: LGLD; Korea: 6657.KS) to take on Samsung Electronics Co. Ltd. (Korea: SEC) in a head-to-head battle for domination of the telecom equipment market (see Nortel, LG Sign JV).

Owens also hinted at enterprise router developments, giving the impression that a global partnership is in the works to challenge the dominance of Cisco Systems Inc. (Nasdaq: CSCO). Owens did lose the plot a bit, though, when talking of the opportunities with business customers, as he referred to "our partnership with Avici" as one of Nortel's existing enterprise strengths. Owens may have meant the trend of enterprises building and managing their own networks -- a situation that requires some to procure core routers (see Avici, Nortel Get 'Strategic').

For clarification, we'll fire some questions on enterprise network evolution at Nortel's CTO. Someday...

— Ray Le Maistre, International News Editor, Light Reading

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