Nokia’s strategy has changed direction more often than the wind, but it now seems set on a clearer course towards dominance in access, software defined infrastructure and systems integration. The Finnish company after all began as a pulp mill in 1865 and only settled down into telecoms infrastructure and technology in the 1990s. This led to its entry and dominant position in the mobile industry during the early noughties, when it contributed significantly to the GSM, 3G and LTE standards.
It became the world’s largest maker of mobile phones and carried this dominance briefly into the smartphone era until its spectacular fall at the hands of Apple’s iPhone, exacerbated by backing the wrong horse with Microsoft.
The plan then was to focus on mobile infrastructure as well as a few advanced technologies including digital maps, leaving the company by 2014 with no presence at all in mobile phones for the first time since that industry’s inception after its handset division was finally sold to Microsoft for $7.5 billion.
But then Nokia did another about turn with its massive expansion into fixed broadband as well as pay TV infrastructure and integration through the acquisition of Alcatel Lucent for $16 billion, announced in April 2015 and then finally closed in November 2016. This propelled Nokia back to top tech company status and coincided with its re-entry into the mobile phone business through the back door following the launch of Finnish start up HMD Global early in 2016. This firm had licensed the Nokia name and some IP (Intellectual Property), which enabled it to start making low end feature phones based on the original Nokia design. Launched at Mobile World Congress 2017 in Barcelona, 126 million of the upgraded Nokia 3310 phones priced at around $60 had sold by June 2017.
Meanwhile Nokia had become a major player in pay TV with a strong presence in systems integration as well as a foothold in cable migration through the Alcatel-Lucent acquisition. Nokia moved to build on the latter through the take-over in September 2016 for an undisclosed sum of US start-up Gainspeed, which had quickly since its foundation in 2012 become one of the leaders in DAA (Distributed Access Architecture) technology for the cable industry with its Virtual CCAP (Converged Cable Access Platform) product line.
This gave Nokia a product portfolio including the Gainspeed Access Controller, a software-driven orchestration tool for managing network nodes, as well as a video engine for converting QAM video before it travels over a digital fiber link. The latter has emerged to play a key role in cable migration towards distributed operation where the PHY is located at the edge of the operator’s fiber network. Nokia also gained the Access Node SC-2D supporting DOCSIS data delivery over a last-mile coaxial network, as well as the Access Node SF-4X for DOCSIS delivery over a 10G-EPON last-mile fiber link.
It took a while for Nokia to assimilate this portfolio into an expanded range, which has finally just been unveiled as a major statement of intent to become the number one in unified cable access. The timing is good because many MSOs are preparing to embark on migration towards DAA and many have complex infrastructures which may make Nokia’s flexible platform appealing. The main point is that Nokia is avoiding MSOs having to choose between the two principal versions of universal access node, called R-PHY and R-MAC-PHY.
The difference is that R-PHY distributes the PHY function to the fiber nodes while retaining central control over the MAC, while R-MAC-PHY distributes both. R-MAC-PHY retains more complex functions centrally while the traditional layer two functions are distributed to fiber nodes. In the case of R-PHY, all MAC functions are retained centrally while just the PHY is distributed.
Other vendors offer these as alternative options and the success of Nokia’s approach will depend on how many operators will want to mix and match both. It will also depend on whether large operators previously leaning towards R-PHY, as many have done, will be interested in keeping both on the grounds that one might be better in some locations, but not others. As we pointed out last week, several top tier operators including Liberty Global are leaning away from R-MAC-PHY towards R-PHY, in the grounds this would simplify migration and management even though Nokia’s Gainspeed cable access node allows operators to switch between the two at the press of a button.
Nokia contends that having to choose between the two greatly restricts flexibility to deploy the best technology for each use case. This has forced some operators to decide on one or the other before fully understanding the potential impact on their network with the result they have sometimes made the wrong choice. Other vendors such as Cisco argue that operators are best off incurring the extra pain of migrating to R-PHY now because they will then enjoy greater efficiencies and cost savings.
Nokia has countered that to an extent by presenting the choice between R-PHY and R-MAC-PHY as one that operators can make in the short term while still easily being able to go all R-PHY in the longer term. This also exploits the virtualization of the whole cable modem termination (CMTS), which can now be placed in the optimal location, which could be the data center, head end, hub, OSP (Outside Plant) street cabinet, or the access node itself. While this virtualization capability is not unique to Nokia it dovetails well with the option to choose between R-PHY and R-MAC-PHY when that is in the access node.
Irrespective of how compelling this particular selling point is, Nokia has now amassed a powerful cable access portfolio and will be a strong match for rivals such as Arris and Cisco in this area. In some advanced technology areas though Nokia has scaled back, partly to focus resources on core areas including cable TV. In 2015 it divested itself of the digital mapping unit that had been identified as core only two or three years earlier. More surprisingly at first sight it has also scaled back on its Virtual Reality (VR) development this week, at a time when this looked like it was coming together nicely through the combination of units coming from Alcatel-Lucent and internally within Nokia before that acquisition (See separate story in this issue).
However there is a clue perhaps in that both Nokia and Alcatel-Lucent had been focusing on the content acquisition side with development of VR cameras, so there was some redundancy or slack to cut out. Alcatel’s offerings were more correctly called 360-degree cameras, with lightweight models designed for mobile use. Nokia had focused on more serious though still portable kit with its OZO cameras, which also captured surround sound.
But now as we report and analyze in more detail elsewhere, Nokia has ceased making the OZO camera and cut 310 of the 1090 employees in the unit. Instead Nokia is redoubling its efforts in the burgeoning digital health sector in the hope or expectation that this will ultimately prove more profitable and a larger market than VR. So this is yet another shift in strategy, although the bulk of the business is now focused on broadband, mobile ecosystems and pay TV.