Siemens executive lays out U.S. market strategies: Ganswindt talks straight about winning contracts and when to acknowledge defeat

America's Network, April 1, 2004 by Joan Engebretson

America's Network contributing editor Joan Engebretson recently sat down for a wide-ranging industry discussion with Thomas Ganswindt, president and chief executive of Siemens Information and Communications Co., the Munich-based unit of Siemens AG which provides customers with Internet infrastructure, electronic equipment and wireless services.

America's Network: Siemens ICN's three areas of emphasis are broadband, optical, and next-generation switching, and you said that your goal is to be number one or two worldwide in each of these areas. What are your goals in North America for each of those areas, and where are you now?

Thomas Ganswindt: In the optical business we had no position in the U.S. But now we have AT&T as a customer and another major carrier is looking at our product. I'm pretty confident that we have an opportunity to gain the number one position in the U.S.

With regard to next-generation switching, it's a very interesting situation because competitors have a huge installed base in the U.S. and we have only a few EWSD installations. We have to change that to gain a major share. Technologically, we have a carrier grade softswitch that we are installing in the U.S. that is being used by SBC and Cablevision, and there's more to come.

Q: What about your goals in the broadband access area?

A: Broadband, ooh broadband. This is unfortunately a tough market. The price reductions we see in this area over the last 12 months are unbelievable. And in the U.S. we don't really have a market position. There is one very entrenched competitor and there are the U.S. companies.

In the United States, the regional Bell companies must deploy new technology to compete against the cable operators. If they are not able to deliver the services, then they will see more and more telephone lines and second lines going to the cable operators. And that's exactly what's happening, so they have to deploy new technology. So we will see a trend toward fiber probably to the home.

So now the question is, what is the best time to step into this market? Is it right at the beginning or is it at a later point in time? To date, RBOCs are focused on technology, and then the next step will be a situation where they look at the cost and which vendor can meet the price point that they must have. So we are considering this, and let me put it this way, we haven't given up.

Q: Six months ago, the RBOCs had just issued their RFP for fiber-to-the-premises and you mentioned that you wanted to be a player in that market.

A: We know the outcome of the tender process. The first round was favorable for known companies. But we believe there is enough time to come back and fight against the competition.

Q: Do you have a goal of being number one or two in the U.S. in that area, or is that also a worldwide goal?

A: You must be at least number two. If you are not able to achieve the number two position or the number one position, it is very difficult to make money.

Q: What do you see the mix being in the U.S. between DSL and fiber-to-the-premises, and how quickly do you think telcos will embrace FTTP?

A: That's an interesting question. I'm a little bit pessimistic about FTTP deployment. I think it will take us to the year 2005 before we see much deployment.

Q: How soon before there are more lines of FTTP deployed than DSL?

A: Oh that will take a long, long time. If you look at the number of DSL lines in Germany and Italy and so on, you can see that telecom operators were able to gain the major share. The cable operators were not able to catch up, never. In the U.S. it's totally different. The RBOCs didn't do their job, maybe because the access network is different there. However, the cable operators were quite successful in the United States. And it's very difficult to catch up now.

Q: You have said that you want to take a disruptive approach in North America. What are you going to do in each of your product areas that would be disruptive?

A: In the softswitch, the platform and hardware we use is disruptive because it's not proprietary. Our software architecture is based on object-oriented open interfaces using protocols like SIP.

Q: Don't all the vendors say that though?

A: Yeah, they all say that. The question is who has it really available, and how many subscribers can you connect to the softswitch? The important question is the scalability and reliability.

Q: How about the optical area? What are you doing that's disruptive there?

A: In the year 2000, everybody talked about terabits and 160 channels. That was the name of the game. Now why did we gain the contract from AT&T? Not because we are the capacity leader. The customer has enough capacity. What he wants to have is a system allowing him to reduce operational expenditures, especially in the long haul, where it costs a tremendous amount of money to connect new customers because there's always service people involved. They have to send people to do this.

Our whole discussion with AT&T was about the question of how to automate the network; it was not about the bandwidth. So we developed in our laboratories in the U.S. and in Germany systems allowing us to do everything automatically, and we have a product that no one else has.