A Year in Review (You'll Only Feel a Pinch, We promised!)

By: Paula Bernier

The phrase has been overused since it joined the popular lexicon during the Clinton era, yet I feel compelled to use it yet again: It’s the economy, stupid. (Or, as some might more accurately apply this sentiment to our current situation: It’s the stupid economy.)

As most of us are painfully aware, the recession was the story of the year. Sadly, this holds true for businesses, organizations, individuals and governments across pretty much all verticals, demographics and countries.

Certainly, some companies in communications and beyond have been able fight the current to grow revenue, profit and/or market share. As Joe McGarvey, principal analyst for IP services infrastructure with Current Analysis (News - Alert) notes, Acme Packet and Metaswitch Networks are two companies that fall into this category.

But no one has been immune to this economic tsunami, which has seen credit tighten, spending constrict, job loss flourish and uncertainty take hold.

On the upside, however, many in the know seem to believe that we are at or near the bottom of the downward spiral. Couching their comments with the caveat that nothing is certain in this kind of environment, bullish number crunchers and business leaders say the economy is on the road to a gradual, but probably bumpy, ride back to health.

So, beyond those lovely sentiments, what else did we experience in 2009 and what does it mean for our industry going forward? Let’s take a look.

Biting the Apple (News - Alert)

The move to mobile and the deployment of higherbandwidth wireless networks clearly got a lot of attention this year. After a huge buildup, Clearwire (News - Alert) launched its first WiMAX networks in 2009. Meanwhile, Verizon Wireless this year pledged allegiance to LTE, which it expects to roll out in select markets (up to 30 of them, the company says) starting next year. Surprisingly, however, AT&T, Apple’s exclusive U.S. service provider partner for the iPhone, doesn’t expect to begin LTE (News - Alert) testing until next year with commercial launches in 2011 at the earliest.

While WiMAX has gotten a head start, conventional wisdom says that LTE will be the winning 4G technology in the not-too-long-term future due to economies of scale resulting from the large carriers’ planned use of the gear.

As Ronald Gruia, program leader and principal analyst at Frost & Sullivan (News - Alert), adds, IMS – which many folks thought had been left for dead – got a bump this year from Verizon’s commitment to LTE, which is an IP-based technology centered on the IP multimedia subsystem architecture. In announcing its LTE vendors, Gruia points out, Verizon Wireless tapped Alcatel- Lucent and Nokia (News - Alert) Siemens Networks as its IMS equipment suppliers.

These 4G efforts, as well as moves to pump up capacity on 2.5G and 3G networks, are a response to growing pressures on the wireless network as more rich media applications go mobile.

McGarvey says the explosion of mobile data networks is “basically the second coming of the Internet boom that the fixed world experienced several years ago.”

Closely aligned with the wireless broadband movement were efforts by various service providers and equipment companies to form ecosystems in an effort to drive the creation of new applications both for mobile users and devices, and for communications at large.

All of that, of course, was heavily influenced by Apple’s AppStore and the iPhone (News - Alert), which also has sparked a large amount of activity in the smartphone space.

“In the end, the goal is to enable operators to achieve a two-sided business model that generates revenue through traditional service delivery to subscribers, but also through the exposure of network assets to third-party partners,” notes McGarvey.

Also on the application front, social networking was a big presence in communications this year, with Facebook and Twitter garnering a large share of the attention, in part due to their use by politicians. In fact, Openwave Systems (News - Alert) recently issued a report revealing that four of the leading 10 domains accessed by mobile users in the U.S. are social networking sites.

“Creativity in product development is re-emerging,” says Steve Vonder Haar, research director for Interactive Media Strategies. “[There is] lots of experimentation in weaving different software applications (i.e. social media services) with emerging IP communications platforms. Ultimately, richer software translates into a richer communications platform.”

Policy-Based Networking

Speaking of politics, significant new developments have been afoot around communications policy at the federal level.

In an unprecedented move to make high-speed Internet access more widely available to lessen the digital divide, create jobs, improve the economy, and otherwise address the public interest, the federal government this February announced plans to make available $7.2 billion for new broadband networks. At the same time, the American Recovery and Reinvestment Act of 2009 assigned the Federal Communications Commission the task of putting together a National Broadband Plan, which is under way now but due out in February 2010. This plan is supposed to be the country’s blueprint for communications policy and goal-setting going forward.

That plan is just one of the major areas of focus for the FCC (News - Alert), which this year saw a changing of the guard under the Obama administration. In addition to the broadband stimulus and the National Broadband Plan, new FCC Chairman Julius Genachowski (News - Alert) has net neutrality on his mind. He recently sent tongues wagging with his comment that both wireline and wireless operators must treat all traffic traversing their networks with an even hand.

And, in a speech at the CTIA (News - Alert) conference in October in which he emphasized the central role of wireless communications for the FCC, the communications industry and our economy in general, Genachowski said: “My specific objectives involve unleashing spectrum for broadband; removing obstacles to 4G deployment, like delays in tower siting; developing fair rules of the road to preserve the openness of the Internet, while recognizing the differences between wired and wireless technologies; and empowering consumers by supporting a vibrant, transparent and competitive mobile marketplace.”

As Vince Vittore, principal analyst at Yankee Group (News - Alert), notes, the new FCC chairman has “set a completely different tone at the commission, and we’re already seeing it in Genachowski’s willingness to tackle topics like net neutrality head on.”

But as the carriers’ wireless and wireline networks are inundated with a growing amount of traffic from both internally-provided services and over-the-top applications, many continue to restate the need for policy-based network management that enables operators to monitor and differentiate between traffic as needed. So the network neutrality/fair use that had recently died down came back to life in 2009 and will no doubt drag on through much of 2010.

Big Fish

Not surprisingly, 2009 also has seen important new developments at the industry’s major telecom and datacom equipment suppliers.

The most prominent news falling under that category probably was the demise of Nortel, a company that once stood shoulder to shoulder with AT&T/ Lucent/ ALU, Ericsson (News - Alert) and Siemens.

Frost & Sullivan’s Gruia says Nortel (News - Alert) entering Chapter 11 and then selling off its businesses bit by bit were the developments of 2009 that will really stay with him. He says the dissolution of Nortel marks the end of an era, particularly for those in Canada, where it was the leading high-tech firm.

For Jon Arnold, principal of J Arnold & Associates, the story of the year was Cisco’s acquisition of Tandberg (News - Alert).

“They keep making big acquisitions, forcing their way into businesses they previously had partners for,” says Arnold. “It’s disrupting the ecosystem in ways that may be unhealthy and forcing others to either stay or leave Cisco’s fold.”

On a more uplifting note, Alcatel-Lucent (News - Alert) had some good news this year when it posted its first quarterly profit since the merger of Alcatel and Lucent back in 2006. It’s been a tough year, so let’s leave things on an up note, shall we? IT

» Internet Telephony Magazine Table of Contents