Europe's service providers have entered the post-bubble era, according to Stephane Teral of RHK. Speaking at this week's OFC conference in Atlanta, he said that following the "write-down party" of the major European service providers, a telecommunications turn-around can now take place in Europe. Teral feels that BT and KPN lead the pack. While France Telecom and Deutsche Telekom started later, they are making continuing progress.
As system and component vendors plan for the future, Teral said they should to be aware several trends in Europe.
- Fewer service providers mean fewer buyers of equipment.
- There is a shift from large-scale pan-European network deployments to small footprint city and rural IP/Ethernet-based networks.
- SDH is here to stay, and the 3rd generation SDH rollout has already started.
- OEO OCS deployment is about to ramp up. There is no need for wavelength grooming for now.
- The integration of bandwidth management and aggregation means that even fewer boxes are needed
Francois Tillerot of France Telecom R&D shared his predictions on the approach that European carriers will take to their optical core in the coming years. In the present business climate, the rule is to minimize investment. Service providers will select "pay as you grow" solutions whenever the introductory cost is low enough. They will generally upgrade existing technologies, such as to increase capacity or optical reach, rather than move to new technologies. Software evolutions are preferable to equipment replacement, and can yield improvements in such areas as network management and optimization.
For start-ups, the big picture has changed, according to Jeffrey Andrews of Atlas Ventures. Carriers' buying patterns have changed, making it more challenging to sell equipment without an OEM partnership. Financing has changed, resulting in far higher standards for funding. Questions of geography have changed as well. With the increased importance of cash efficiency and higher operating margins, there are more reasons to establish and expand start-ups in Europe and Asia. Many locations offer lower salaries than in the United States, and provide strong R&D tax credits and other programs. There are also benefits to being located closer to growing customer markets. International outsourcing also offers excellent business opportunities, particularly for software development in India and manufacturing in East Asia. However, start-ups outside of the US have to contend with other challenges, such as the difficulty of providing stock option incentives to employees and cumbersome regulations on staffing reductions in many countries.
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