Moving up the value chain

Nortel president and CEO Mike Zafirovski says operators understand the future will be very different than the past and that they have to be marketing machines to drive the experience and deliver value Why are many operators now pursing a multiple technology network platform‾

It's smart. It really shows an increase in sophistication in many of the operators. In the past they have referred themselves as 'accident marketers', and they've been working diligently to change that. They have to become marketing machines to be driving the experience. So smart companies look at what technologies are best suited to deliver real value. Using Vodafone as an example, they've looked at what technologies can be there to drive the VodLife experience.

How are you advising operators to navigate this new world‾

First of all, quite of few of the top operators globally are doing quite well today. They also are understanding the future will be very different than the past. As a company we are looking forward to providing the enablement for operators to drive their business models; and we're looking to move from being a hardware company to more software services and solutions. Quite a few of our customers are also thinking in the same way.

One example is IMS, which is really providing the platform to be able to drive the applications for wireless and wireline companies. For the past three for four years most of us really thought that to simply deliver the IMS platform would be where we could bring benefits to carriers. But we're realizing from the industry and customers that bringing the platform itself is only half the accomplishment. So we're spending a disproportionate amount of our time right now not only providing the platform but also thinking about the applications and content that we can bring to our customers. That's where most of the CMOs from our customers are spending their efforts. They're looking obviously at Google, Yahoo, eBay - there are all kinds of business models out there - with a view of finding similar models.

What does the ITU's adopting Wimax as a standard do for the technology‾

It's great news. In general we are very much in favor of open standards. The huge success of GSM, or the internet for that matter, is because it drives common standards globally. The more that Wimax is adopted as a standard the bigger chance it will be a major success. It means at a minimum an accelerated review and appraisal by potential customers.

Your Wimax head noted almost a year ago that you have a review of your Wimax strategy every four weeks. What has this led to‾

First of all, it has forced us to prioritize which suppliers, partners and customers to work with in trials. Second, it has helped us drive our eco-system and adjust our resource allocation. New technologies move at the speed of the laggard, whether it's a device, whether it's an application or whether it's a standard. We're now doing a much better job of talking to the chipmakers, talking to the device makers and application makers to make sure that all the prerequisites move at the same space, as opposed to what happened to UMTS when the networks were ahead of everything else.


It's probably an overstatement to say we're reviewing our strategy every for weeks. Our goal is to have a market share in the teens and to be a significant player in the Wimax. The reviews are to see if we're doing what we said four weeks ago, what course corrections may be required and to review deals.

How do you respond to Wimax critics who say the business case for the industry is on thin ice‾

Technology promises have typically come true, but most of them have been somewhat delayed - from a few months to a few years. So only time will tell where Wimax will be. Quite a few operators have said Wimax will be complimentary to their activities and they are testing it. It's a very exciting technology, and I think the sky is the limit in terms of the ecosystem being able to deliver real value to consumers or enterprises. We don't see Wimax being an enemy to China Mobile or Vodafone.

We sold the UMTA business because we didn't have market share. We like the mobile space, which will be important to providing an end-to-end solution. The nice thing about Wimax is it's based on OFDM and MIMO technology, which is also the foundation of LTE. So as we make investments in Wimax, it's also positioning us for LTE as well.

Where do you see the major growth and how are you positioned to profit in those areas‾

We're doing a much better job analyzing what's going to grow and taking a more strategic approach to the business. We're also taking more at bats with technologies within the same R&D umbrella. Over the past couple of years, we've done a good job of looking at our how are R&D funds are spent by three segments: emerging, core and legacy. Until 2006 we spent a disproportionate amount of R&D dollars on legacy technologies - 55% used to be spent on legacy products, now that's down to 20%. Only 10% of R&D was based on emerging technologies, now that up to 20%. Spending on core as gone from 35% to 60%.

We're investing significantly in unified communications, SOHO platforms and applications, LTE and in the 40-Gbps and 100-Gbps optical space.