2014 RIP Ericsson Nokia Siemens Alcatel Lucent Networks
Today Friday 13th August 2014, the conglomerate Ericsson Nokia Siemens Alcatel Lucent Networks has filed for bankruptcy protection.
How can it be that only 2,5 years ago the conglomerate consisted of three companies that were employing tens of thousands employees each? Bad management was not the reason for the downfall. Each company was professionally managed and was trying to provide solutions its customers asked for. Their major business was delivering LTE (5G) networks to telecom customers all over the world.
The downfall initiated at the end of 2012 when their customers started to massively launch LTE networks. Subscribers in 2013 noticed that with the new LTE network calls and SMS could be substituted by free VoIP and instant messaging. All of a sudden telecom revenues started plummeting. To make things worse HD digital content distribution moved from broadcasting to streaming, putting heavy loads on the new networks and the associated costs onto network operators. By switching off digital broadcasting, spectrum all of a sudden became less expensive, triggering major accounting adjustments. Several operators went into panic mode and started large-scale consolidations and cost cuts. This triggered a consolidation between the three major telecom solution providers.
Operators never requested their solution providers to help them build new revenue generating solutions until it was too late. Operators were asking for faster, easier to manage and cheaper networks instead. As a clear example of the Innovator’s Dilemma, telecom solution providers focused on what customers requested, not on what customers really needed.
For the telecom industry IP communications, Cloud Computing, Smart Phones, Tablets, Content Streaming, Social Networks were all disruptive innovations that changed the status quo completely and faster than anybody in the industry expected. Consumers changed their behaviour faster than telecom providers anticipated. Dotcoms, then also called over-the-top-players, were a lot more agile than operators and telecom solution providers.
After the introduction of LTE, also the complexity of the telecom industry changed. For the first time networks no longer had services entangled in obscure protocols. Standardized web technology could be used which massively invited IT players to enter into areas that used to be the exclusive playing field of telecom solution providers. Ericsson Nokia Siemens Alcatel Lucent Networks had a company structure build around complex proprietary-standards and solutions. When these could be substituted by off-the-shelf standard-based solutions, services daily prices got divided by four. This rendered the existing players uncompetitive virtually overnight.
February 2012: This post is fictional but unless telecom solution providers start asking their customers how they will generate new revenues with LTE, nothing will stop it from happening…