high leverage network™, a platform for experience innovation

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How the evolution of devices, content and applications continues to guide the Alcatel-Lucent vision and strategy - and how it enables service providers to connect, captivate and capitalize.

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COPYRIGHT © 2012 ALCATEL-LUCENT. ALL RIGHTS RESERVED.

HIGH LEVERAGE NETWORKTM

A PLATFORM FOR EXPERIENCE INNOVATION

Marcus Weldon May 22, 2012

2

COPYRIGHT © 2012 ALCATEL-LUCENT. ALL RIGHTS RESERVED.

WHAT IS

DRIVING THE

MARKET?

3

COPYRIGHT © 2012 ALCATEL-LUCENT. ALL RIGHTS RESERVED.

STARTING POINT:

THE USERS ARE IN COMMAND

Sleep with

smartphone (USA)

Users/month on

Facebook apps platform

500M+

Content hours in 7hrs

by 8-18 years old (USA)

11.5

Would cut anything

but Mobile BB (UK)

67%

66%

84% Choose Internet over

partner or car (Germany)

70% Mobile-only Web users

in emerging markets

100M+ Tablets sold in 2012

globally

USERS WANT TO CONNECT, CONSUME AND CREATE ANYWHERE, ANYTIME

Broadband users

microblog (China)

100%

4

COPYRIGHT © 2012 ALCATEL-LUCENT. ALL RIGHTS RESERVED.

Source: The Nielsen Company

STARTING POINT:

THE TABLET VERSUS. . . EVERYTHING ELSE

Don’t use device Use device less Same usage Use device more

Smart

Phone

GPS Gaming Console

Portable Gaming Console

Portable Media Player

eBook NetBook Laptop PC Desktop PC

TABLET ENHANCES THESE

DEVICES

TABLET REPLACES THESE

DEVICES

Connected

TV

Post vs. Pre-Tablet:

A DRAMATIC USAGE SHIFT IS HAPPENING

5

COPYRIGHT © 2012 ALCATEL-LUCENT. ALL RIGHTS RESERVED.

THE NET EFFECT:

THIS IS VERY DEMANDING

MASSIVE GROWTH IN DEMAND REQUIRES NEW SUPPLY STRATEGY

24%

30%

13%

34%

54%

45X - 85X

GROWTH

0

200,000

400,000

600,000

800,000

TOTAL DAILY TRAFFIC BY YEAR (TB)

Wi-Fi Home

Metro Cell (Wi-Fi)

Metro Cell (3G/LTE)

Smart offload

Macro

2011 2012 2013 2014 2015 2016

CAGR 2011- 2016

Bell Labs

Modeling

6

COPYRIGHT © 2012 ALCATEL-LUCENT. ALL RIGHTS RESERVED.

KEY INDUSTRY FOCUS:

RADIO CAPACITY

CELL SPLIT

ADD

CARRIERS

CARRIER

AGGREGATION

MIMO

(4TX) eICIC COMP AAA

METROCELLS/

HETNET

EXPENSIVE REQUIRES

SPECTRUM

<1.2X <1.2X ~1.25X <1.1X

(REL-11)

1.4X TO 2.5X GAIN = N

3D Beamforming

20 MHz 20 MHz Frequency

THE FUTURE IS WIRELESS – BUT HOW CAN WE MEET DEMAND?

2x

>10x

1.5x

MORE

SPECTRUM

(Hz)

MORE

SPECTRAL

EFFICIENCY

(Bits/Sec/Hz)

MORE

SPATIAL

EFFICIENCY

(Bits/Sec/Hz/

User)

INCREASE

CAPACITY

7

COPYRIGHT © 2012 ALCATEL-LUCENT. ALL RIGHTS RESERVED.

OPERATORS COSTS AND PROFITS

2007 2008 2009 2010 2011

10%

20%

60%

70%

//

CAPEX / Revenue

Adjusted OP / Revenue

Adjusted OPEX/ Revenue

OPERATORS CONSUMER REVENUES

+2.5% WW revenue: ARPU decline offset by more subs. High pressure on CAPEX to control OP

ARPU ($)

2007 2008 2009 2010 2011

Mobile voice

Mobile data

Fixed data

Fixed voice

CAGR

2007-2011

-1.3%

-4.4%

-14.1%

+1.0%

25

20

15

10

5

0

THE ISSUE:

OPERATORS HAVE NOT CAPTURED THE FULL VALUE

NEED TO UNLOCK THE NETWORK VALUE TO MEET THE USER DEMAND

8

COPYRIGHT © 2012 ALCATEL-LUCENT. ALL RIGHTS RESERVED.

WHAT IS THE

REAL VALUE OF

THE NETWORK?

9

COPYRIGHT © 2012 ALCATEL-LUCENT. ALL RIGHTS RESERVED.

THE NETWORK:

THE ESSENTIAL BRIDGE BETWEEN HAND AND CLOUD

THREE DISTINCT FUNCTIONS BUT A SINGLE EXPERIENCE UNIVERSE

BEST EXPERIENCE BEST DELIVERY BEST MEDIA AND APPS

Handheld Cloud Network Cloud Content

10

COPYRIGHT © 2012 ALCATEL-LUCENT. ALL RIGHTS RESERVED.

THE NETWORK:

THE ESSENTIAL BRIDGE BETWEEN HAND AND CLOUD

COMPUTING

COMMUNICATING

STORING

GAMING

STREAMING

VALUE VALUE UNREALIZED VALUE

Cloud Network

Latency

Total capacity,

time to load

Total capacity,

bandwidth

Total capacity,

bandwidth,

latency

Bandwidth, latency

THE NETWORK (AND THE OPERATOR) IS CRITICAL TO THE EXPERIENCE

11

COPYRIGHT © 2012 ALCATEL-LUCENT. ALL RIGHTS RESERVED.

PERSPECTIVE:

ALCATEL-LUCENT RISES TO NETWORK CHALLENGE(S)

APPLICATION

ENABLEMENT

AE

Apps

Infra

lightRadio™

2011

HIGH LEVERAGE

NETWORK™

2010 2008 2009

AT THE FOREFRONT OF DEFINING AND ENABLING KEY INDUSTRY SHIFTS

12

COPYRIGHT © 2012 ALCATEL-LUCENT. ALL RIGHTS RESERVED.

PERSPECTIVE: LEADERSHIP CREATES A UNIQUE MARKET SWEET SPOT

IP

WDM

Weak

Strong

Weak Strong

ALU

IP

NETWORK APPS

Weak

Strong

Weak Strong

ALU

IP

DSL & PON

Weak

Strong

Weak Strong

ALU

IP

WIRELESS RAN

Weak

Strong

Weak Strong

ALU

ALL-IP

AT THE

CORE

CORE VALUE: IP LEADERSHIP COUPLED TO TRANSPORT, ACCESS & APP ASSETS

13

COPYRIGHT © 2012 ALCATEL-LUCENT. ALL RIGHTS RESERVED.

ADAPTING TO

A NEW

REALITY

14

COPYRIGHT © 2012 ALCATEL-LUCENT. ALL RIGHTS RESERVED.

PERSPECTIVE:

PROFOUND SHIFT DRIVES POTENTIAL FOR REAL GLOBAL GROWTH

USERS ARE MAKING THE MOVE, ARE WE READY?

“ANALOG” ECONOMY

VERTICALIZED SECTORS

BO

OK

S

MU

SIC

VID

EO

TE

LE

PH

ON

Y

CO

NS

UM

ER

G

OO

DS

EN

ER

GY

• Independent economies

• Disconnected

• Subscriptions, brand loyalty

• Hardware-defined

• Unit of mass markets

• Proximity-based groups

• Innovation timescale = years

“DIGITAL” ECONOMY

• Interdependent markets

• Connected

• Digital cannibalization

• Software-defined

• Unit of family, friends, colleagues

• Rise of virtual social groups

• Innovation timescale = months

AE

APPS

INFRA

PARTIAL RECONSTRUCTION

TO DIGITAL INDUSTRIES

“NEXT DIGITAL” ECONOMY

• Global market and economy

• Hyper-connected

• A-la-carte user experience

• Software-driven

• Unit of one, highly empowered

• Virtual global communities dominate

• Innovation timescale = days

DEEP SOCIETAL CHANGE

15

COPYRIGHT © 2012 ALCATEL-LUCENT. ALL RIGHTS RESERVED.

VISION: HIGH LEVERAGE NETWORK AS AN ENABLING PLATFORM FOR

USER EXPERIENCE

“ This is the clearest representation of our vision that I have seen – very compelling” TIER 1 OPERATOR EXECUTIVES – FEB 2012

ARTIFICIAL INTELLIGENCE

BUILT ON AND IN THE NETWORK

ALL IP INFRASTRUCTURE

DECISION ANALYTICS

OPTIMIZATION

CONTROL

EXPERIENCE CREATION AND ENABLEMENT

My

Storage

My

Media

My

Comms

My

Compute

My

Gaming

BEST LATENCY, BANDWIDTH, CAPACITY & UPLOAD TIME

EXPERIENCE PACKAGES

16

COPYRIGHT © 2012 ALCATEL-LUCENT. ALL RIGHTS RESERVED.

SOLUTION:

THE RELATED ALCATEL-LUCENT PRODUCT AND SERVICES

NG OSS + BSS

IP portfolio

lightRadio

WDM portfolio

FTTX VDSL/PON portfolio

NETWORK

Customer Experience portfolio(2)

CloudBand +

Mobile Commerce portfolio(1)

Video Delivery System

IMS /Advanced Comms portfolio

Smart Charging/Policy

Open API Platform (OAP)

SOFTWARE

Note: NG OSS & BSS includes Billing & Payment, Context & Identity systems; (1) includes Optism; (2) includes Motive;

ALL IP INFRASTRUCTURE (E.G. ACCESS, TRANSPORT, EDGE, CORE)

EXPERIENCE CREATION AND ENABLEMENT

OFFERS AND ADVERTISING

YIELD

MANAGEMENT

NETWORK

POLICY

CHARGING

POLICY CONTROL

OPTIMIZATION

DECISION

ANALYTICS

CUSTOMER CONTEXT

AND IDENTITY

CLOUD

ORCHESTRATION

COMMS CONTENT

THE ESSENTIAL FOCUS OF OUR INVESTMENT AND ENERGY

SERVICES BRING IT TOGETHER: Transform and harness HLN as an enabling platform

17

COPYRIGHT © 2012 ALCATEL-LUCENT. ALL RIGHTS RESERVED.

NEW INSTANTIATION OF THE STRATEGY

lightRadio METROCELLS

CREATING AN OPEN PLATFORM FOR DYNAMIC SERVICE ENABLEMENT

Best effort, variable

experience

QoS-enabled, constant

experience Converged backbone

Wireless Packet Core

FTTx /IP/optical backhaul

Metrocells

~ 100 Mbps IMS Gateways

Velocix CDN

PCRF/Smart Charging

Decision analytics

Optimization

Experience creation and enablement

CloudBand

Radio control & BBU

Motive WNG

OAP

Control

Alcatel-Lucent Professional Services

A platform of lightRadio cells

• Wireless + Wireline + IP + Optics + Control +

Optimization + Analytics

• “Invisible everywhere”

• Units of one, self-organized into groups

• Continuous capacity optimization

• The YOU network – YOU are in control of YOUR

experience and YOUR digital assets

18

COPYRIGHT © 2012 ALCATEL-LUCENT. ALL RIGHTS RESERVED.

SOLUTION:

THE NEW INNOVATION ENGINES

DRIVING THE USER EXPERIENCES OF THE NEXT DIGITAL ECONOMY

CONNECTIVITY INTELLIGENCE

INFRA

CLOUD CLOUD NETWORKING

USER-OPTIMIZED

ALL-IP NETWORKS

TOTAL EXPERIENCE

NETWORK ANALYTICS

PRIVACY CONTROL

AND SECURITY

CloudBand

BELL LABS

CO-CREATION

RAISING THE BAR ON THE NETWORKS

NEW

DOMAINS

WNG

CXT

Carrier Cloud

Motive Customer Experience

Wireless Network Guardian

OPENING

TO THE

CLOUD

19 COPYRIGHT © 2012 ALCATEL-LUCENT. ALL RIGHTS RESERVED.

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