Telcos' old habits die hard

Telcos are blinded trying to resolve their many short-term issues and don't see the big picture, says ZTE VP of wireless Sean Cai.

"Many haven't woken up to the long-term [threats] and are still focused on dealing with old challenges. These are Band-Aid fixes. Their current momentum and old habits are keeping them from focusing on the longer term."

Cai, who is based in San Diego, says that either they will change themselves or will be forced to change by others. "And it's always better to push your own change."

Since telcos no longer have the deep pockets they had a decade ago, they can't spend to change or replace in just two years, so he says vendors have to offer cost-effective upgrade paths to win deals.

"In the 'old days' telcos would say 'give me the best now', and two year's later they could replace it with something else because equipment costs were a small piece compared with their revenue and profit. Of course that's not true today and hasn't been for a few years."

While many telcos are still in a strong, profitable position, Cai points out that current indicators show that in five to ten years, if they continue with the same types of revenue and services, they'll be out of business.

"Providing just traffic type of revenue is not enough. You have to build in intelligence, so service providers can offer, for example, traffic on demand or some type of guaranteed quality of service."

He says telcos need three vital components to be successful today: spectrum, fiber and a great database. "We believe big data will be a gold mine for service providers."

All mobile operators are challenged by how to upgrade their networks to handle the surge in mobile data traffic, and he says equipment vendors need to rise to the challenge to enable them to have a sustainable business.

Like all the other major equipment vendors, he says ZTE is moving away from selling products to providing customers with end-to-end solutions. "Unit prices are coming down, and infrastructure pricing has become more like a commodity. We have to look a few years ahead, and we have to find better economies of scale to bring down our costs and be more cost-effective in the market."

For example, using a "blade-type" design ZTE is able to upgrade old base stations with increased computing power and functionality while reducing the cost-per-bit and power consumption. "This strategy allows us to improve base stations over time and still be cost-effective."

He still sees plenty of room for innovation and not all segments all commodities.

Instead of looking at the base station alone, "where there is only so much you can do over time and the competition is catching up, we're looking at the RAN level," Cai says. Now that everyone is doing SDR in the base station, ZTE is not benefiting as much when it first started SDR.

He said ZTE will demonstrate its innovations next week at the Mobile World Congress at the RAN level.

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