Design World

  • Home
  • Technologies
    • ELECTRONICS • ELECTRICAL
    • Fastening • joining
    • FLUID POWER
    • LINEAR MOTION
    • MOTION CONTROL
    • SENSORS
    • TEST & MEASUREMENT
    • Factory automation
    • Warehouse automation
    • DIGITAL TRANSFORMATION
  • Learn
    • Tech Toolboxes
    • Learning center
    • eBooks • Tech Tips
    • Podcasts
    • Videos
    • Webinars • general engineering
    • Webinars • Automated warehousing
    • Voices
  • LEAP Awards
  • 2025 Leadership
    • 2024 Winners
    • 2023 Winners
    • 2022 Winners
    • 2021 Winners
  • Design Guides
  • Resources
    • Subscribe
    • 3D Cad Models
      • PARTsolutions
      • TraceParts
    • Digital Issues
      • Design World
      • EE World
    • Engineering diversity
    • Trends
  • Supplier Listings
  • Advertise
  • Subscribe

The Impact of Nortel’s Bankruptcy

By atesmeh | September 30, 2009

Once a gorilla in telecom, the company is getting dismantled,
leaving questions about the pieces.

Throughout the explosive growth in wireless in the 1980s and ’90s, four huge companies – Lucent (nee AT&T), Nortel, Ericsson and Motorola – dominated the market for large-scale infrastructure networks in North America. What a difference a decade makes.

Three of these four were among the largest North American-based corporations and major contributors to American and Canadian global dominance in large-scale high-tech enterprise. Today, Lucent is no longer an independent company, having been “merged” under duress a few years ago with the French telecom giant Alcatel. Motorola is struggling financially and is pretty much out of the large-scale commercial infrastructure business.

Once a gorilla in telecom...And now Nortel Networks, the last remaining major North American telecom infrastructure provider and long an icon of Canadian high-tech capability, is bankrupt and will likely be sold off in pieces. Ericsson won a bid for Nortel’s CDMA-2000 (1X-RTT and EV-DO) and LTE assets, although there was significant pressure on the Canadian government to disapprove the deal. At this writing, the fates of Nortel’s smaller GSM and UMTS businesses are very much in question.

For people like myself who have been around the industry for a long time, the fate of these once mighty companies is unsettling, and it is tempting to focus on the course of events that caused their rapid decline. More important at this juncture, however, is to consider what immediate and longer term impacts Nortel’s demise might have on the rest of the wireless industry.

SINGLE MARKET VENDORS
Wireless networks are long life cycle investments. That might seem like an obvious statement because towers and switching centers are hardly disposable commodities. But the major factor that defines network life cycle is not so readily apparent. It is that, at least historically, regional wireless networks have generally been limited to a single major equipment vendor. This in spite of the fact that network operators have for years, and with considerable success, been pushing for development of interoperability standards that at least in theory allow mixing of different vendors’ equipment in a single regional network.

The sticking point is in development of proprietary technical features relating to network operation. Such features are usually transparent to the end user but can have a significant impact on performance and efficiency of the network. More often than not, these features involve inter-working of multiple base stations, each of which must be equipped with enabling proprietary software (and in a few cases, hardware). Furthermore, some operational network characteristics – for example, algorithms that govern handoff processing – invariably contain some proprietary elements. The result: It’s difficult or impossible to mix base stations from multiple vendors within the core urban areas of a regional network.

This requirement for vendor homogeneity is particularly true for CDMA 1X-RTT and EV-DO networks. There are many Nortel equipped CDMA networks in the United States and Canada, including several in the largest urban markets. Operators of these networks are more or less forced to continue to count on Nortel for ongoing technical support and for provisioning of hardware for spares and for network expansion.

With this essentially captive market, it is a pretty good bet that the CDMA infrastructure component of Nortel will emerge in some form. But herein lies a rub. Providing reasonable customer support for operators like Verizon Wireless will require a significant enterprise. The cost of maintaining such a business may be difficult to support without the prospect of ongoing sales opportunities, not just for expansions of existing Nortel CDMA networks but for new networks as well. But where do such opportunities lie?

1X-RTT and EV-DO networks in North America are pretty much all spoken for and in any case are reaching maturity. There are plenty of new 3G networks, and more than a few new 1X-RTT networks, being planned in developing countries, but the lower-cost Asian vendors, in particular China’s Huawei and ZTE, have been very aggressive in going after those opportunities. Indeed, the Chinese vendors have begun making inroads in the North American market, further eroding new business opportunities for a restructured Nortel. This difficulty accounts in part for the feeling of some Wall Street analysts that Ericsson’s bid of $1.1 billion (U.S.) is too high.

TODAY’S REVENUES
Now let’s flip this situation around to look at it from the perspective of major operators of Nortel 1X-RTT and EV-DO networks. Their forward-looking focus is mainly on planning for deployments of 4G networks, but their revenues today are dependent on operation of those CDMA systems. 1X-RTT networks in particular are expected to be in operation for many years, with the voice services they deliver continuing to provide the majority of their operators’ revenues. Ongoing support from Nortel or its successor is therefore critical.

Of course, such operators have the option of replacing their Nortel infrastructure with equipment provided by another vendor. However, while not unheard of, such a change in a major urban network carries an enormous cost in terms of capital outlay, engineering resources and potential for service disruptions. More likely, big operators like Verizon will seek guarantees of ongoing support from the resurrected Nortel, perhaps at a cost that will provide reasonable revenues for that entity.

Looking ahead, what are the prospects for Nortel or its successor in the wireless infrastructure market? Certainly, the biggest opportunities will be in deployments of 4G networks. It seems unlikely that major operators will want to depend on a company in or just emerging from bankruptcy to take a lead role, but there will continue to be investments in new 4G networks for quite a few years. Furthermore, the “all IP” structure of 4G networks is supposed to make them more amenable to multi-vendor operation, although that very much remains to be seen.

One thing that Nortel does have going for it is a legacy of experienced and innovative engineering. They know how to get wireless networks up and running and operating at peak efficiency. Those are skills that could be of enormous value in dealing with 4G’s inevitable startup problems and growing pains. Nortel will probably never return to its glory years, when its employment topped 90,000, but if it can manage to leverage its existing customer base and continue funding R&D, there is no reason that it cannot emerge once again as a major player in wireless infrastructure.

Drucker is president of Drucker Associates.
He may be contacted at
[email protected].

You Might Also Like


Filed Under: Infrastructure

 

LEARNING CENTER

Design World Learning Center
“dw
EXPAND YOUR KNOWLEDGE AND STAY CONNECTED
Get the latest info on technologies, tools and strategies for Design Engineering Professionals.
Motor University

Design World Digital Edition

cover

Browse the most current issue of Design World and back issues in an easy to use high quality format. Clip, share and download with the leading design engineering magazine today.

EDABoard the Forum for Electronics

Top global problem solving EE forum covering Microcontrollers, DSP, Networking, Analog and Digital Design, RF, Power Electronics, PCB Routing and much more

EDABoard: Forum for electronics

Sponsored Content

  • Sustainability, Innovation and Safety, Central to Our Approach
  • Why off-highway is the sweet spot for AC electrification technology
  • Looking to 2025: Past Success Guides Future Achievements
  • North American Companies Seek Stronger Ties with Italian OEMs
  • Adapt and Evolve
  • Sustainable Practices for a Sustainable World
View More >>
Engineering Exchange

The Engineering Exchange is a global educational networking community for engineers.

Connect, share, and learn today »

Design World
  • About us
  • Contact
  • Manage your Design World Subscription
  • Subscribe
  • Design World Digital Network
  • Control Engineering
  • Consulting-Specifying Engineer
  • Plant Engineering
  • Engineering White Papers
  • Leap Awards

Copyright © 2025 WTWH Media LLC. All Rights Reserved. The material on this site may not be reproduced, distributed, transmitted, cached or otherwise used, except with the prior written permission of WTWH Media
Privacy Policy | Advertising | About Us

Search Design World

  • Home
  • Technologies
    • ELECTRONICS • ELECTRICAL
    • Fastening • joining
    • FLUID POWER
    • LINEAR MOTION
    • MOTION CONTROL
    • SENSORS
    • TEST & MEASUREMENT
    • Factory automation
    • Warehouse automation
    • DIGITAL TRANSFORMATION
  • Learn
    • Tech Toolboxes
    • Learning center
    • eBooks • Tech Tips
    • Podcasts
    • Videos
    • Webinars • general engineering
    • Webinars • Automated warehousing
    • Voices
  • LEAP Awards
  • 2025 Leadership
    • 2024 Winners
    • 2023 Winners
    • 2022 Winners
    • 2021 Winners
  • Design Guides
  • Resources
    • Subscribe
    • 3D Cad Models
      • PARTsolutions
      • TraceParts
    • Digital Issues
      • Design World
      • EE World
    • Engineering diversity
    • Trends
  • Supplier Listings
  • Advertise
  • Subscribe
We use cookies to personalize content and ads, to provide social media features, and to analyze our traffic. We share information about your use of our site with our social media, advertising, and analytics partners who may combine it with other information you’ve provided to them or that they’ve collected from your use of their services. You consent to our cookies if you continue to use this website.OkNoRead more