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Jim Barthold
Lucent Technologies Inc. last week paid over $21 billion to grab a firm foothold in the converged telecommunications marketplace.
The company spent $20 billion to acquire Ascend Communications Inc., a major supplier of computer networking gear that is expected to provide Lucent with expertise in Internet-style communications technology.
In a smaller, but complementary move, Lucent paid $1.48 billion for billing and customer care services provider Kenan Systems Corp. This will allow Lucent to offer end-to-end customer care and management packages to converged services providers.
Lucent has set up a Broadband Networks Group unit to "fully tap the power of this merger" said Rich McGinn, Lucent's chairman-CEO. McGinn added the merger creates "the largest broadband networking business in the world, by far."
Lucent's move could spell long-term trouble for traditional cable billing and customer care providers like CSG Systems Inc. and CableData Inc., because Lucent would potentially offer a more complete services package of back office and customer care solutions.
AT&T Corp., through its proposed acquisition of Tele-Communications Inc. and local networking agreements with other cable operators, is clearly a target for these converged service offerings.
"Did we do it just for AT&T? I would say of course not," said Rasul Damji, Lucent's billing systems director. "However, anybody in this business from a convergence point of view, (will) be looking for (service companies) who can do not only cable billing but also be able to do broadband IP (Internet Protocol) type of things.
"That was definitely part of the consideration, in addition to obviously wireless, data, wireline," he continued.
Lucent COO-Bell Laboratories president Dan Stanzione, named to head the Broadband Networks Group, said Lucent would compress and converge duplicative operations with Ascend while widening its networking focus.
"We believe this revolution is really more than just data: it's also about optical, it's about software, it's about services and other elements of the next generation of networking," he said.
Lucent has "traditionally played very well in the back office areas of network management, but as service operators offer more converged services, such as voice, video and data, that focus had to change and expand," explained Lance Boxer, group VP-communications software.
To do that, the company needed to expand its focus and acquire expertise in a vertically integrated market, said Damji.
"Right now Lucent can say we are the only vendor to go across the entire TNM (Telecommunications Network Management) billing, customer care, ordering, provisioning portfolio," Damji said. "By being in this space it prepares us in the whole arena" that includes not only broadband, but Lucent's traditional telco-based customers.
"It offers a holistic solution into the entire space ... and it prepares us for when service providers like AT&T get into that space," he continued.
Kenan's focused has been on handling converged broadband services.
"They're (Lucent) interested in the broadest interpretation or the broadest scope of our positioning," agreed Bob Kiburz, Kenan's senior VP-operations. "They want to play in all those various segments and they're excited about the potential in broadband."
Kenan's cable customers include Network Inc. and Canadian MSO Le Groupe Videotron Itee.
"We've done a lot of work and a lot of enhancement in making our cable product more robust through our Videotron deployment and other basic enhancement of the technology," Kiburz reported. "Our pipelines are becoming much richer in the cable environment."
Kenan's product strengths, as well as an international customer base that includes British Telecom, MCI WorldCom in Britain and France Telecom, along with Internet Service Providers (ISPs) like AT&T Worldnet and GTE Internetworking, fit Lucent's plans.
"Kenan, as a company, has a number of products focused on cable, electronic commerce, Internet billing, all areas that are vitally important to our customers," agreed Boxer.
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