THE HIGH LEVERAGE NETWORK A PLATFORM FOR CUSTOMER EXPERIENCE INNOVATIONSTRATEgIC WhITE PAPER

The telecommunications market is undergoing profound change: broadband

traffic continues to grow thanks to improved devices, better connectivity,

more compelling applications, and increasing fixed and mobile penetration.

As the driving force behind these market trends, smartphones, mobile devices

and applications have put users in command of the services they want to

use. Service providers can no longer base their business models solely on the

number of subscribers, minutes or broadband packages they sell. Neither can

they just provide services and expect users to buy them.

As tablet-type devices become more prevalent, users want access to their

personal cloud applications and content from anywhere at any time, and they

expect a superior customer experience. however, the tablet is the first mass-

market device that requires the cloud to provide additional processing power

and storage capacity for all the applications and content that users want.

The cloud is the key to making applications and content accessible at any

time, in any place, and on any device. To provide these capabilities with a

superior customer experience requires the network as the essential bridge

between users’ devices and applications and content in the cloud. The

network will therefore provide the core value proposition. Alcatel-Lucent has

evolved its high Leverage Network™ architecture to include the capabilities

service providers need to address these new market realities and deliver an

exceptional customer experience.

TAbLE Of cONTENTs

Market drivers / 1

Users are now in command / 2

The tablet compared to other devices / 3

Demanding effects on the network / 4

The network — essential bridge between hand and cloud / 6

Realizing the value of the network / 7

The high Leverage Network / 8

Alcatel-Lucent product and services portfolio / 10

Alcatel-Lucent credentials / 11

Conclusion / 13

Acronyms / 13

References / 14

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MARKET dRIVERsThe telecommunications market is undergoing profound change: broadband traffic continues to grow thanks to affordable smart devices, ubiquitous connectivity, more compelling applications, and increasing fixed and mobile penetration. Figure 1 shows some of the global trends in the telecommunications industry although differences exist between developed and emerging markets.

Figure 1. Global trends in telecommunications

FIXED BROADBANDCONNECTIONS

+30% +32% +346% +990%

696million

7.3billion

5.8 million1.3 million 12

billion1.1billion

5.5 billion

MOBILECONNECTIONS

WI-FIPUBLIC SPOTS

M2MDEVICES

APPLICATIONDOWNLOADS

+129% +168% +98% +879%

SMARTPHONESALES

PUBLIC CLOUDREVENUE

MOBILE VIDEOCONSUMPTION

532million

2011 2015 2011 2015 2011 2015 2011 2015

41.7billion

1.15billion

177billion89.4

billion

4.2billion429

million428

million18.2

billion

2011 2015 2011 2015 2011 2015 2011 2015

These global trend statistics make compelling reading:

• Fixed broadband — The total number of consumer fixed broadband connections worldwide at the end of 2012 is expected to grow from 532 million in 2011 to approximately 696 million in 2015.1

• Mobile connections — In contrast, Gartner® expects mobile connections to grow from 5.5 billion in 2011 to 7.3 billion in 2015 although not all these are mobile broadband connections.2

• Public Wi-Fi® spots — There is an increasing density of Wi-Fi networks, spreading to the next generation of hotspot locations in retail outlets, wider areas, cities, and so on. The number of hotspots is expected to increase from 1.3 million in 2011 to 5.8 million in 2015 according to Informa — an increase of about 350 percent.3

• Application downloads — Growth in the content market shows no signs of slowing down. An Ovum forecast indicated that during 2009, 2.7 billion applications were downloaded. Downloads reached over 18 billion in 2011 and are projected to reach 41.7 billion in 2015.4

• Smartphone sales — The total number of smartphone units purchased by end users was 428 million in 2011 and is expected to be 1.15 billion in 2015. Approximately 70 percent of total handset sales and nearly half of smartphone sales in 2012 are forecast to come from emerging markets.5

• Data moving to the cloud — Gartner expects that cloud usage and storage will grow five times over the next five years. Analysts are sizing the several types of cloud — personal, hybrid and public — differently. Gartner also anticipates that the worldwide

MOBILE CONTINUES TO gROW RAPIDLYgartner expects mobile connections

to grow from 5.5 billion in 2011 to

7.3 billion in 2015.

1 Gartner, Forecast Analysis: Consumer Fixed Voice, Internet and Broadband Services, Worldwide, 2009-2016, 2Q12 Update, May 31, 20122 Gartner, Mobile Services, Worldwide, 2008-2016, 2Q12 Update, June 15, 20123 Informa Telecoms & Media and Wireless Broadband Alliance, WBA Industry Report 2011: Global Developments in Public Wi-Fi, 20114 Ovum, Mobile Application Download and Revenue Forecast: 2011–16, August 20115 Pyramid Research, Smartphone Forecast, April 2012

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total public cloud will grow from 89.4 billion US dollars in 2011 to 176.8 billion US dollars in 2015.6 In contrast, Yankee Group forecasts that enterprise cloud services are converging with mobile applications and device diversity, and the worldwide revenue for enterprise cloud services will increase from 9.2 billion US dollars in 2010 to 22.3 billion US dollars in 2014 — a compound annual growth rate (CAGR) of 30 percent.7

• M2M devices — Machine-to-machine (M2M) technology is becoming mainstream and part of critical business processes as operators build their M2M portfolios. Scalability will drive costs down, and regulation is providing stimulus. Over 12 billion M2M devices are expected in 2015, excluding PCs, TVs and other handheld mobile devices.8 Eighty percent of traffic revenue contribution is from smart cities, smart grids, healthcare and public safety vertical markets. Connectivity is provided through 2G, 3G, 4G, short range, MAN, fixed WAN and satellite. M2M mobile connectivity is migrating from 2G to 3G and 4G technologies.

• Mobile video consumption — In 2011 there were 429 million video downloads to mobile devices per day, predicted to grow to 4.2 billion per day by 2015. YouTube currently delivers about 600 million video streams per day to mobile devices, and 84.4 percent of the US Internet audience has viewed online video.9

Before examining how these market trends affect service providers, we describe the dramatic shift to end users as the stakeholders who now define the market.

usERs ARE NOW IN cOMMANdAs the driving force behind the preceding telecommunications market trends, smart-phones, mobile devices and personalized applications and content have put users in command of the services they want to use. Service providers can no longer base their business models solely on the number of subscribers, minutes or broadband packages they sell. Neither can they just provide services and expect users to buy them. The statistics in Figure 2 show how much users now depend on their smartphones, mobile devices and applications.

Figure 2. User dependence on smartphones

66%SLEEP WITHSMARTPHONE (US)

11.5CONTENT HOURS IN 7 HRSBY 8-18 YEAR-OLDS (US)

500M+USERS/MONTH ONFACEBOOK APPS PLATFORM

80%NEW SOFTWARE ONTHE CLOUD BY 2016

67%WOULD CUT ANYTHING BUTMOBILE BROADBAND (UK)

84%CHOOSE INTERNET OVERPARTNER OR CAR (GERMANY)

100M+TABLETSSOLD in 2012

70%MOBILE-ONLY WEB USERSIN EMERGING MARKETS

For example, 66 percent of US users sleep with their smartphones, 84 percent of German users would choose the Internet over their partner or car, and two-thirds of UK users would give up anything but mobile broadband. Another staggering statistic is that young people are highly concurrent consumers of content, consuming 11.5 hours of content in a period of seven hours — for example, by watching a film while chatting with friends and posting comments on Facebook.

6 Gartner, Forecast: Public Cloud Services, Worldwide and Regions, Industry Sectors, 2010-2015, 2011 Update, June 29, 20117 Yankee Group webinar: Bringing Cloud Services to the Enterprise, March 2011 8 Machina Research, M2M Global Forecast & Analysis 2010-20, October 20119 comScore, Inc, Press Release: comScore Releases January 2012 U.S. Online Video Rankings, February 20, 2012

MOBILE VIDEOYouTube delivers 600 million video

streams per day to mobile devices.

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This data gives a sense of users’ overwhelming need to connect, interact and express themselves. More than 500 million users per month are now on the Facebook applica-tions platform while 80 percent of new software will be available in the cloud by 2016. In emerging markets, a greater investment in mobile networks compared to fixed net-works has resulted in 70 percent of users being mobile-only Web users (compared to 25 percent in the US). Globally, the growth of tablet devices is expected to reach over 100 million devices in 2012, indicating that tablets are rapidly becoming the device of choice for many applications.

A perfect storm has been created with the proliferation of intuitive mobile devices, compelling applications and content, and pervasive mobile broadband access networks. This combina-tion is also driving demand for the personal cloud. Users expect to connect their devices to all their applications and content in the cloud, anytime, with a high level of customer experi-ence. However, current over-the-top (OTT) offerings from Apple®, Amazon and Google™ are fragmented and non-seamless — opening up opportunities for service providers. A dramatic societal shift is taking place in which the customer experience really matters.

THE TAbLET cOMpAREd TO OTHER dEVIcEsAs previously mentioned, tablet sales are expected to reach over 100 million devices in 2012. In 2011, the number of mobile-connected tablets tripled to 34 million. According to the latest NPD DisplaySearch Tablet Quarterly report, sales of tablets will surge from 81.6 million units in 2011 to 424.9 million units by 2017.10 The forecast for 2013 alone has increased from 168.9 million to 184.2 million shipments. The report estimates that more tablet PCs will be shipped in 2016 than notebook PCs, indicating that tablets are becoming the device of choice for many users.

Figure 3 shows the results of a 2011 survey in which Nielsen asked recent tablet users whether they were likely to use their tablet device more or less for different applica-tions.11 From the bar charts, we can deduce that tablets will probably replace certain devices and enhance others over time.

Figure 3. Tablets: enhancing and replacing other devices

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

Smart-phone

GPS Gamingconsole

Portablegamingconsole

Portablemediaplayer

eBook NetBook LaptopPC

DesktopPC

TABLET ENHANCESTHESE DEVICES

TABLET REPLACESTHESE DEVICES

ConnectedTV

Post- vs. pre-tablet:

EXPERIENCE MATTERSIt is clear that a dramatic societal

shift is taking place in which

the customer experience

really matters.

10 NPD DisplaySearch, Tablet Quarterly report, May 201211 Nielsen Company, Nielsenwire, Connected Devices: How We Use Tablets in the U.S., May 5, 2011

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For example, portable gaming consoles and media players are likely to be replaced by tablets. Electronic book (e-book) devices such as the Amazon Kindle Fire are essentially becoming tablets, and tablets will probably be used much more in the future instead of netbooks, laptops and desktop PCs. The smartphone is essentially a small tablet and the connected TV is essentially a large tablet, while many global positioning devices are likely to be replaced by global positioning system (GPS) functions in smartphones.

Three similar devices provide a lens into the future: tablets; smartphones or highly portable tablets with mobile communications; and connected TVs or bigger, non-portable tablets for use at home to consume video content and media.

Tablets are making a huge impact on the market because they converge:

• Behavior — When users become used to having their content available on their tablets, they want to access it on their other tablet devices: smartphones and connected TVs.

• Work and home — While users may be happy to carry separate smartphones for work and personal use, they are very unlikely to want to carry two tablet devices.

• Nomadic and mobile — Users want to use their tablets both at home and work as well as when commuting or traveling.

• User expectations — Tablets deliver an exceptional customer experience, and users now have high expectations of the services they use across all their devices.

The tablet may be a desirable and magical device that radically converges and changes the market, but it has limited processing power and storage capacity to meet optimum price points. The tablet is the first mass-market device that requires the cloud to provide additional processing power and storage capacity for all the applications and content that users want.

The cloud is the key to making applications and content accessible at any time, in any place and on any device. The network is required to make everything available from the cloud all the time, everywhere and on all devices. The network will provide the core value proposition and help service providers to deliver an exceptional customer experience.

dEMANdING EffEcTs ON THE NETWORKIt is useful to consider future demands on the network. Alcatel-Lucent Bell Labs has created a model to show the effect that millions of mobile tablet-type devices concurrently access-ing content and applications in the cloud will have on the network. The model also predicts how much future demand there could be on the network: 45 to 85 times growth based on an unconstrained demand-side model and ignoring supply-side limitations (see Figure 4).

Figure 4. Bell Labs model of future traffic demand

Macro Smart offload Metro cell (3G/LTE) Metro cell (Wi-Fi) Wi-Fi home

2011 2012 2013 2014 2015 20160

200,000

400,000

600,000

800,000TOTAL DAILY TRAFFIC BY YEAR (TB)

45x - 85xGROWTH

ThE NETWORK MATTERSThe network is required to make

everything available from the

cloud all the time, everywhere

and on all devices.

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Taking into consideration where users are likely to be, how they are likely to access the network during the day and what applications they are likely to access, the model shows that the wireline network can support most of the demand using Wi-Fi because Wi-Fi is essentially an extension of the wireline network. Although Wi-Fi can support almost half the predicted demand, it cannot support it all: Wi-Fi does not respond well to certain applications, such as those requiring high Quality of Service (QoS).

Metro or small cells, including both licensed and unlicensed interfaces, support approxi-mately one quarter of the total predicted demand while macro cells support one fifth of the demand. Sophisticated techniques such as smartloading can also be used to support some of the demand. This technique uses analytics to predict the content, media and applications that users are most likely to want based on their preferences and behavior, and pushes them to their devices in advance when there is spare network capacity.

The massive growth shown in the demand-side model requires a new supply-side strategy and an architecture in which wireline networks, small cells, macro cells and sophisticated analytic techniques all play a role.

On the supply side, typical models project forward from present day and predict 10 to 30 times growth. Compared to the Bell Labs demand-side model, typical supply-side models do not differ much. Essentially, we are close to a scenario in which demand is actually driving the supply side as opposed to the reverse. We need to satisfy the demand with more supply rather than constraining demand with what we can afford to supply.

The challenge is to solve the economics of supply and demand. Service providers have not been capturing the full value of the network, as shown in Figure 5.

Figure 5. Service-provider consumer revenues, costs and profits

CAGR2007-2011

-1.3%

-4.4%

-14.1%

+1.0%

10%

20%

60%

70%

SERVICE PROVIDER COSTS AND PROFITS

2007

High pressure on CAPEX to control operating profit.

2008

CAPEX/revenue

Adjusted operating profit/revenue

Adjusted OPEX/revenue

2009 2010 20110

15

10

5

20

25

30

SERVICE PROVIDER CONSUMER REVENUES

AR

PU

($

)

2007 2008 2009 2010 2011

+2.5% worldwide revenue: ARPU decline offset by more subscribers.

Fixed data

Fixed voice

Mobile voice

Mobile data

The left side of Figure 5 shows revenue streams over the previous five years. Consumer average revenue per user (ARPU) from fixed data, fixed voice and mobile voice have been declining for some time while ARPU from mobile data has not increased commen-surate with the increase in the amount of mobile data traffic on the network. Although ARPU has declined, overall worldwide revenues have increased slightly because the number of subscribers has increased.

NETWORK DEMAND EXCEEDS SUPPLYWe need to satisfy network

demand with more supply rather

than constraining demand with

what we can afford to supply.

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The overall effect of the ARPU decline is shown on the right side of Figure 5. Operating expenditures (OPEX) have increased as service providers build out and transform their networks to increase capacity and cope with demand. The result has been pressure on capital expenditures (CAPEX) to control operating profits. To solve the declining ARPU problem, we need to unlock and monetize the unrealized value in the network.

THE NETWORK — EssENTIAL bRIdGE bETWEEN HANd ANd cLOudAs previously discussed, the tablet is likely to become the predominant handheld device, and it needs the cloud to provide the necessary processing power and storage capacity to support user applications and content. The network is therefore the essential bridge between the device in the user’s hand and the applications and content in the cloud.

The cloud needs the device as a portal to consume the applications and content it con-tains. The device and the cloud must therefore be connected by the network. The cloud also needs the network to deliver a user experience that is guaranteed and so needs to be tightly coupled with the network. As some of the network control plane functions move into the cloud, the network and the cloud start to merge, requiring an additional level of coupling.

Similarly, the network is starting to control devices and become more tightly coupled with them — for example, for session mobility between Wi-Fi and cellular devices and the selection of the wireless interface based on the needs of the application. Network-based servers are essentially controlling the device. The network is talking to both the device and the cloud, and increasingly the device and the network have– elements in the cloud. Acting together, these three distinct functions — device, network and cloud — can build user experiences that deliver real value (see Figure 6).

Figure 6. The network as the essential bridge between the user device and cloud applications and content

DEVICESthat give the

BEST END-USEREXPERIENCE

NETWORKthat is

SCALABLE, INTELLIGENT,RELIABLE, AUTOMATED

CLOUD APPS AND CONTENTthat are

PERSONAL, SOCIAL, SECURE

ESSENTIAL ROLE OF ThE NETWORKThe network is the essential bridge

between the device in the hand

and applications and content in

the cloud.

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REALIzING THE VALuE Of THE NETWORK Value clearly resides in the devices — smartphone, tablet, connected TV, and so on — and in the applications users want to access, such as Google Apps™, Facebook and YouTube. Device manufacturers derive value from the devices they sell, and application and content providers (ACPs) derive value from users, advertisers and sponsors. Service providers are not capturing the value of their networks, but they must provide connectiv-ity and bandwidth to deliver applications and content from the cloud to the device, as shown in Figure 7.

Figure 7. Service providers are not realizing the value of their networks

COMPUTING

STORING

STREAMING

GAMING

COMMUNICATING

NETWORK

VALUEVALUE UNREALIZED VALUE

Users will want to access five main types of application and content in the future:

• Computing, such as media manipulation and virtual desktops

• Storing, such as content on Apple iCloud and Google applications

• Streaming, such as video, film and TV

• Gaming, such as online interactive games

• Communicating, such as high-definition videoconferencing

These five types of applications and content can be mashed up and combined. However, they all need special treatment from the network to deliver the best customer experience. Applications such as storage and streaming need the least amount of special treatment and can be delivered by simply using more bandwidth to ensure a positive customer experience. In contrast, computing, gaming and communicating all have latency and QoS requirements that cannot be solved with bandwidth alone.

As we enter the world of computing, gaming and communicating in the cloud, these applications need to leverage the intelligence and additional capabilities of the network to deliver the best customer experience. Although the network provides the key to con-necting user devices to cloud applications and delivering the best customer experience, service providers have not yet been able to fully monetize and derive real value from the network.

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Figure 8 shows how service providers can realize the value of the network to deliver applications and content, with:

• A scalable, intelligent, efficient all-IP network that can deliver bandwidth at the lowest cost per bit, thereby reducing costs

• A service creation and enablement environment that is able to deliver the set of personalized applications with the best customer experience by leveraging the intelligence and capabilities of the network, thereby increasing revenues

Figure 8. Realizing the value of the network

COMPUTING

STORING

STREAMING

GAMING

COMMUNICATING

SCALABLE, INTELLIGENT, EFFICIENT NETWORK

SERVICE AND EXPERIENCECREATION AND ENABLEMENT

REALIZED VALUE VALUEVALUE

This approach requires service providers to transform their networks and their operations and IT systems to support new business opportunities, become more agile and drive down cost.

In the new world of the device in the hand connecting to applications and content in the cloud, the network — and therefore the service provider — is critical to achieving the best customer experience.

THE HIGH LEVERAGE NETWORKAlcatel-Lucent introduced the High Leverage Network™ (hereafter HLN) architecture in 2009: a converged, scalable, intelligent, efficient all-IP network that delivers bandwidth at the lowest cost per bit. The HLN also enables service providers to partner with ACPs and to use the capabilities of the network to deliver a better customer experience in exchange for a share of revenue. This was the original Alcatel-Lucent Application Enablement approach.

ThE ESSENTIAL ROLE OF ThE SERVICE PROVIDERThe network — and therefore

the service provider — is critical

to achieving the best customer

experience.

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Alcatel-Lucent has evolved the HLN architecture to include additional capabilities that address the new market realities of users accessing their personalized applications and content in the cloud from any device, anywhere and at any time (see Figure 9).

Figure 9. The High Leverage Network

EXPERIENCE CREATIONAND ENABLEMENT

DECISIONANALYTICS

OFFERS ANDADVERTISING

CUSTOMER CONTEXTAND IDENTITY

OPTIMIZATION

CONTROL

ALL-IPINFRASTRUCTURE

EXPERIENCE PACKAGES

CONSUMER AND ENTERPRISEAPPLICATIONS AND MEDIA

NEW CUSTOMER EXPERIENCEVALUE PROPOSITIONS

“This is the clearest representation of our vision that I have seen – very compelling.”Tier 1 Operator Executives – Feb. 2012

MyComputing

MyStorage

MyComms

MyGaming

MyMedia

BEST LATENCY, BANDWIDTH, CAPACITY AND QUALITY

YIELDMANAGEMENT

CLOUDORCHESTRATION

POLICY CHARGINGCOMMS CONTENT

EDGE COREACCESS BACKHAUL

The left side of Figure 9 shows the High Leverage Network. At the bottom is the intel-ligent all-IP infrastructure, spanning the access, transport, edge and core domains of the network. This approach seeks to eliminate the service silos and overlays of legacy networks, thereby reducing the cost and complexity of operations. On top of the all-IP infrastructure is the Control layer, which enables basic user connectivity and session setup as well as control of communication, content policy and charging functions.

Above the Control layer is the Optimization layer, with two key elements:

• Cloud Orchestration — Controls virtual network and cloud resources to deliver applications with the best customer experience. This element enables the dynamic allocation and removal of resources as services and applications demand.

• Yield Management — Maximizes the value of the network through real-time payment and charging. This function offers flexible and context-specific real-time charging models for both fixed and mobile services and converged charging capabilities across applications and services running on multiple devices.

Decision Analytics is a Service Level Agreement (SLA)-centric layer that analyzes real-time network and offline data, providing analysis and decision-making to optimize the SLA for the user and the application. This layer has two key elements:

• Customer Experience — Ensures that network and cloud resources are allocated to assure the best user experience — the experience he/she has paid for.

• Offers and Advertising — Intelligently orchestrates the creation and delivery of personalized service offers and targeted advertising based on user preferences.

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The top layer, Experience Creation and Enablement, provides a secure API exposure layer coupled with the application developer toolsets necessary to rapidly design and deliver personalized applications and services. Development can occur within the service provider’s own organization or in conjunction with ACP partners.

The horizontal HLN architecture layers provide an enabling platform for the creation of personalized applications and services that enhance the customer experience. On the right side of Figure 9 are the personalized versions of the previously listed five main categories of applications: My Computing, My Storage, My Communications, My Gaming and My Media. The network self-orchestrates and optimizes to deliver these personalized experiences to the user anywhere, anytime and on any device.

ALcATEL-LucENT pROducT ANd sERVIcEs pORTfOLIO The High Leverage Network architecture maps to the Alcatel-Lucent product and services portfolio shown in Figure 10. The figure also provides an indication of where we are making our portfolio investments to deliver on the HLN.

Figure 10. HLN architecture and Alcatel-Lucent product and services portfolio

EXPERIENCE CREATIONAND ENABLEMENT

DECISIONANALYTICS

OFFERS ANDADVERTISING

CUSTOMER CONTEXTAND IDENTITY

OPTIMIZATION

CONTROL

ALL-IPINFRASTRUCTURE

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

Notes: NG OSS and BSS includes Billing and Payment, Context and Identity systems. (1) includes Optism™, (2) includes Motive™.

Mobile Commerce portfolio(1)

Open API Platform (OAP)

EXPERIENCE

SOFTWARE

Customer Experience portfolio(2)

CloudBand +

Wireless

INFRASTRUCTURE

Wireline

IP

Optics

Video and Content Delivery

IMS/Advanced Comms portfolio

Policy and ChargingNG OSS + BSS

YIELDMANAGEMENT

CLOUDORCHESTRATION

POLICY CHARGINGCOMMS CONTENT

EDGE COREACCESS BACKHAUL

The HLN all-IP infrastructure maps to the Alcatel-Lucent portfolio of wireless, wireline, IP and optics products. The Control, Optimization and Decision Analytics layers in Figure 10 map to the Alcatel-Lucent software and solutions product portfolio. Products in the Control layer include IP Multimedia Subsystem (IMS) Advanced Communications, Policy and Charging and the Velocix Content Delivery Network (CDN) appliances. Products in the Optimization and Decision Analytics layers include Alcatel-Lucent CloudBand™, Motive™ Customer Experience and Optism™ Mobile Commerce products.

LEVERAgINg ThE NETWORKThe network self-orchestrates and

optimizes to deliver personalized

experiences to the user anywhere,

anytime and on any device.

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Mapping to the top Experience Creation and Enablement layer, our portfolio includes the Alcatel-Lucent Open API Platform (Application Enablement) and a suite of application development tools and services. All these products and services are brought together to harness the HLN as an experience-enabling platform by a portfolio of Professional, Consulting and Operations Management services.

ALcATEL-LucENT cREdENTIALsAlcatel-Lucent has been at the forefront of defining and enabling key industry shifts in response to network challenges. Our progression of innovation is vital to our future vision and our evolved HLN strategy, as shown in Figure 11.

Figure 11. Defining and enabling key industry shifts

lightRadio 400 Gb/sNETWORKING

HIGH LEVERAGENETWORK

APPLICATIONENABLEMENT

2008 2009 2010 2011 2012

APPLICATIONENABLEMENT

APPLICATIONS

INFRASTRUCTURE

In 2006, Alcatel-Lucent developed the Triple Play Service Delivery Architecture (TPSDA), a network architecture that allowed service providers to deliver their own video and TV services. However, by 2008 user demand for OTT video from ACPs was bypassing service providers’ offerings. A new approach was needed to help service providers partner with ACPs and to use the capabilities of the network to deliver a better customer experience in exchange for a share of revenue. This was the original Alcatel-Lucent Application Enablement approach.

During this time, Alcatel-Lucent developed the High Leverage Network architecture, a converged, scalable, intelligent, efficient all-IP network that delivers bandwidth at the lowest CAPEX per bit. HLN also supports Application Enablement by enabling applica-tions to leverage the intelligence and capabilities built into the network using managed and controlled open APIs.

GreenTouch™ is an initiative Alcatel-Lucent introduced in 2010 to help reduce OPEX per bit. This industry consortium seeks to dramatically improve the energy efficiency of communications networks. As part of this initiative, we have responded with products that use an average of 20 percent less energy than the previous generation.

In 2011, Alcatel-Lucent launched the lightRadio™ product. This represents a new approach to building wireless networks: a base station is broken into its component elements and distributed throughout the network. One of the key elements is the Alcatel-Lucent lightRadio cube, which combines and shrinks the various cell tower antennas into a single powerful, Bell Labs-pioneered multifrequency, multistandard (2G, 3G, long term evolution [LTE]) device. The lightRadio cube can be mounted on poles, the sides of buildings or anywhere there is power and a broadband connection.

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In June 2011, Alcatel-Lucent introduced the FP3 chip,the first commercially available net-work processor supporting IP processing at 400 Gb/s transmission speeds. And in March 2012 Alcatel-Lucent introduced the PSE chipset, the industry’s first 400 Gb/s coherent optical chipset. Both the FP3 and PSE dramatically increase network performance and capacity while at the same time greatly reducing power consumption per bit.

For some time, Alcatel-Lucent has been moving toward an all-IP strategy. Figure 12 shows the value of IP to us today, with four charts that represent key technology areas: Optics (Wavelength Division Multiplexing [WDM]), digital subscriber line (DSL) and passive optical network (PON), Network Applications, and Wireless Radio Access Network (RAN). The axes of each chart show the relevance of Alcatel-Lucent (purple dots) to the market in IP combined with each of these technologies relative to competitors’ relevance (blue dots).

Figure 12. Leadership of Alcatel-Lucent in the all-IP market

Alcatel-Lucent Competitors

IP

WDM

Weak

Strong

IP

NETWORK APPS

Weak

Strong

IP

DSL and PON

Weak

Weak Strong Weak Strong

Weak Strong Weak Strong

Strong

IP

WIRELESS RAN

Weak

Strong

ALL-IPAT THECORE

For example, the top left chart shows the position of Alcatel-Lucent relative to our competitors in the combination of IP and WDM. Alcatel-Lucent is in the upper right quadrant, representing strength in the combination of IP and WDM. IP and WDM are increasingly being integrated, enabling cost-effective transport and routing offload to improve backbone network economics.

Alcatel-Lucent is also in the upper right quadrant for the combination of IP and wireline technologies such as DSL and PON, enabling us to build end-to-end all-IP access, aggre-gation, edge and core networks with DSL and PON technologies that provide different fixed access options.

Similarly, Alcatel-Lucent is in the upper right quadrant for the combination of IP and wireless. We are moving to smaller cells that deliver higher capacity and greater coverage with our distributed lightRadio approach. LightRadio enables us to build all-IP access, backhaul, packet core and backbone networks that support 2G/3G/LTE and Wi-Fi technologies, providing multistandard radio access over a single infrastructure.

In network applications, the strengths of Alcatel-Lucent in IP-based network functions such as IMS, policy control, cloud orchestration and content delivery place us in the top right quadrant. Increasingly, these applications are becoming more tightly coupled with the network.

All-IP is at the core of our strategy to become a market leader in the delivery of wireless and wireline access, transport and applications that enable service providers to provide the vital link between the device in the hand and applications and content in the cloud.

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cONcLusIONThe High Leverage Network architecture that Alcatel-Lucent introduced several years ago is evolving to meet new market demands.

Our original vision of a converged, scalable, intelligent efficient all-IP network that deliv-ers bandwidth at the lowest CAPEX per bit has largely been validated by customers and the success our HLN product portfolio. Alcatel-Lucent Application Enablement, which enables applications to leverage the intelligence and capabilities built into the network through managed and controlled open APIs, has also proved to be the right approach.

However, the market has changed and users are now in control. As tablet-type devices become more prevalent, users want access to their personalized applications and content in the cloud from anywhere, at any time. In response, we have evolved the HLN to include additional capabilities that help service providers address these new market realities.

The HLN is a platform for innovation that enables service providers to realize the value of the network by addressing current and future business challenges, increasing revenue and reducing costs by:

• Delivering personalized services that better meet user needs

• Accelerating time-to-market for new services

• Developing new business models through partnerships

• Scaling and managing capacity to meet increasing traffic demands

• Reducing the cost of operations and improving efficiency

• Reducing green footprint by using less power and space

Most important, the High Leverage Network enables service providers to enhance their customers’ experience by delivering content, applications and services from the cloud to any device, anywhere and anytime.

AcRONyMs2g, 3g, 4g Second generation, Third generation, Fourth generation

ACP application and content provider

API application programming interface

ARPU average revenue per user

CAgR compound annual growth rate

CAPEX capital expenditures

CDN Content Delivery Network

DSL digital subscriber line

gPS global positioning system

hLN high Leverage Network

IMS IP Multimedia Subsystem

IP Internet Protocol

IT information technology

LTE long term evolution

M2M machine-to-machine

MAN metropolitan area network

The high Leverage NetworkALcATEL-LucENT WHITE pApER

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OPEX operating expenditures

OTT over-the-top

PON passive optical network

QoS Quality of Service

RAN Radio Access Network

SLA Service Level Agreement

TPSDA Triple Play Service Delivery Architecture

UK United Kingdom

US United States

Wi-Fi Wireless Fidelity

WAN wide area network

WDM Wavelength Division Multiplexing

REfERENcEs1. comScore, Inc. Press Release: comScore Releases January 2012 U.S. Online Video

Rankings. February 20, 2012.www.comscore.com/Press_Events/Press_Releases/2012/2/comScore_Releases_ January_2012_U.S._Online_Video_Rankings

2. Gartner. Forecast: Public Cloud Services, Worldwide and Regions, Industry Sectors, 2010-2015, 2011 Update. June 29, 2011.www.gartner.com/id=1734724

3. Gartner. Forecast Analysis: Consumer Fixed Voice, Internet and Broadband Services, Worldwide, 2009-2016, 2Q12 Update. May 31, 2012.www.gartner.com/id=2033015

4. Gartner. Mobile Services, Worldwide, 2008-2016, 2Q12 Update. June 15, 2012. www.gartner.com/id=2050315

5. Informa Telecoms & Media and Wireless Broadband Alliance. WBA Industry Report 2011: Global Developments in Public Wi-Fi. 2011.www.wballiance.com/resource-centre/global-developments-wifi-report.html

6. Machina Research. M2M Global Forecast & Analysis 2010-20. October 2011www.machinaresearch.com/m2mglobal2020.html

7. Nielsen Company. Nielsenwire, Connected Devices: How We Use Tablets in the U.S. May 5, 2011. blog.nielsen.com/nielsenwire/online_mobile/connected-devices-how-we-use-tablets- in-the-u-s/

8. NPD DisplaySearch. Tablet Quarterly report. May 2012.www.displaysearch.com/cps/rde/xchg/displaysearch/hs.xsl/tablet_quarterly.asp

9. Ovum. Mobile Application Download and Revenue Forecast: 2011–16. August 2011.http://store.ovum.com/Product/mobile_application_download_and_revenue_forecast_201116?productid=OT00103-002Pyramid Research. Smartphone Forecast. April 2012.www.pyramidresearch.com/SmartphoneForecasts.htm

10. Yankee Group Webinar: Bringing Cloud Services to the Enterprise. March 2011.http://blogs.yankeegroup.com/2011/03/29/webinar-bringing-cloud-services/

www.alcatel-lucent.com Alcatel, Lucent, Alcatel-Lucent and the Alcatel-Lucent logo are trademarks of Alcatel-Lucent. All other trademarks are the property of their respective owners. The information presented is subject to change without notice. Alcatel-Lucent assumes no responsibility for inaccuracies contained herein. Copyright © 2012 Alcatel-Lucent. All rights reserved. M2012063505 (July)