Alcatel-Lucent, the global telecommunications innovator, is optimistic of the future having endured a difficult six years since its merger. It has shifted its focus to customer service and innovation and is looking for growth in emerging markets.
As Frederic Chapelard holds up the lightRadio cube, one can discern the excitement in his voice. The small square crystal cube is the future of telecommunications: it holds both the antenna and the electronics that are usually found on large, unsightly telecommunication towers.
The lightRadio cube is the future and was developed by Alcatel-Lucent, the global technology company that provides solutions for the telecommunications sector at its legendary Bell Labs in the US.
Not only can it be placed just about anywhere – on light posts, bus-stops, buildings etc – the lightRadio will reduce power consumption by 50%, contributing significantly towards reducing global warming.
The lightRadio will transform the model for wireless networks and possibly change the way the wireless industry operates, predicts Dan Hays, a telecommunications consultant with PRTM in Washington D.C.
Alcatel-Lucent is working with China Mobile and Telefonica, the Spanish broadband and telecommunications provider, to field test the product and hopes to have it on the market by 2013. That means the lightRadio will go from development stage to commercial use within five years, a new achievement for the French-American telecommunications equipment maker.
“In the past we have been slow in bringing ideas and innovation to the market but now we have changed that mindset,” says Chapelard, the president director of Alcatel-Lucent Indonesia. The company, he adds, is also shifting its focus on where it spends on R&D -75% of funds are now used for new generation of products and 25% on existing products.
As it pushes ahead with its new strategy of developing new telecommunication products – it will soon launch a new chip that will accelerate the speed of IP networks by up to four times – Alcatel-Lucent is also shifting its attention towards Asia, where it sees phenomenal growth in the coming years.
“We see Indonesia as a platform for us to market our services,” says Chapelard. “We have started defining for all emerging markets the right solutions from the demand side of telecommunications networks.”
The company already has relationships with telecommunications companies PT Telkom , Indosat and Exelcomindo; works with the oil and gas sector to develop enterprise communication networks and is developing telecommunication solutions for coalmines.
Chapelard says he was cheered this year when the government identified information and telecommunications technology (ICT) as one of the sectors that will be promoted in its economic development master-plan.
“We are at a turning point in Indonesia as the country faces some big challenges,” he adds. “It has been proven that every 10% increase in broadband penetration contributes to 1.3% in gross domestic product growth but there is a cost to this.”
The challenge will be to determine which ICT products are commercially viable and which are not. Alcatel-Lucent, which has been operating in Indonesia for 30 years, can fall back on its deep knowledge of the local market to make the right choices.
This will be crucial as other global telecommunications equipment makers such as Ericsson, Siemens and Huawei Technologies are all expanding their operations in Indonesia. According to Chapelard, the telecommunications industry is growing at between 10% and 15% annually, which is a major draw for global companies.
The right bandwidth
As Indonesia’s telecommunication industry gallops ahead, telecommunication companies are struggling to keep pace in terms of new investments and meeting demand. According to Chapelard, his customers are rethinking the manner in which they invest so as to maximize their investment dollars.
“We have to find a balance between fixed broadband and wireless broadband,” he notes. “Telkom is investing $2 billion in new fixed broadband while other providers are waiting for the new wireless technology and 4G services.”
He estimates that telecommunications companies are investing $2.5 billion in Indonesia as they expand bandwidth. While voice and text services do not use much bandwidth, pictures and videos, which are growing in usage, require much bigger bandwidth.
“One of the key issues our customers face is the divergence of cost and revenue,” says Chapelard. “Costs are rising faster than revenue because people are consuming more which is forcing telcos to diversify their value chain.”
Large telcos must therefore now also provide cloud computing services and application stores to spread their revenue streams. With the ability to generate greater intelligence within their networks, telcos can target greater mobile advertising revenue. “Our role is to help our customers meet these challenges by helping them save on costs and monetize their network.”
To fulfill this objective, Alcatel-Lucent plans to build an R&D lab in Indonesia so to be able to develop solutions for Indonesian companies. “We are looking to create a community or partnership with a university and industry players to work on applications and deployment,” says Chapelard.
The new lab hopes to create applications that will give farmers access to information on the market price of their products; help logistics and transportation companies be more efficient or help banks to expand their mobile banking networks.
Indonesia, says Chapelard, is unique because three different market segments exist at the same time. On one end, you have a mass market that wants basic telecommunication services while on the other end of the spectrum you have entrepreneurs who want and need new applications to drive their business. Sandwiched in between is a smaller group of consumers who want fast speed and advanced services.
Alcatel-Lucent was formed when Alcatel merged with Lucent Technologies on December 1, 2006. Although it has struggled to keep pace with technology and lost money for a few years after the merger, the company saw a return to profit in the fourth quarter of 2010. Its worldwide revenue exceeded $23 billion last year.