The question of standards is also clearly a vital one.  

Svanberg spells out their importance: “Sometimes standards are described in the US as if they were a form of socialism. But the telecommunications sector has made incredible progress because it has been able to set global standards that have allowed it to function on a global scale.

“Telecommunications systems are enormously complex. No company can invent the entire system. So you have to have cross-licensing and interoperability. It is like a Rubik’s cube – everything depends on everything else. We are all responsible for some element, and no decision can be made if it does not fit in with the system as a whole. There is no scope for solo artists.

“You may perhaps think that a local standard will offer support for your industry and more rapid advances. But even though this approach may be successful locally in the short term, in the long run it will be wrong. WiMAX has accelerated the development of HSPA but this has not benefited WiMAX. 

“A joint standard does not mean less competition. On the contrary it enhances competition. But then you have to fight fair. It means understanding the market and using your resources wisely.

“Microsoft, Apple, Cisco, Google – they are all out there on their own. Cooperation does not come naturally to them. Because they are not part of a Rubik’s cube, where everything is inter-reliant, they can always do what their customers want. But that is not possible for us. Our starting point is that all the elements in the system must work together. Then you need a collaborative culture,” says Carl-Henric Svanberg.

NETWORK TRANSFORMATION

Before mobile telephony, each country had a different fixed network. Ericsson supplied the various countries according to their local standards, with distribution organized through subsidiaries. Mobile telephony has led to dramatic changes by centralizing operations.

Nowadays, fixed and mobile networks are being linked. Svanberg says: “When they are migrated, it all becomes one network – the same core network for both fixed and mobile telephony, the same routers and network intelligence. So where Ericsson has been rolling out 2G and 3G networks for the past 20 years, customers are now saying: ‘I have this equipment and I want you to use it all to build an IP network within the next five years’. We are back with local initiatives but now it is the fixed networks that set the parameters.”

This means a change in the established system as well, where the service side has come into play after the network is built. “Now we are moving into the next phase: service-driven deals. This is a sweeping change that places the vendors in a new role. And it is becoming very difficult to duplicate one contract with another customer.”

In Ny Teknik, Svanberg put it this way: “In the past, our main business was to roll out networks. Now our customers are increasingly asking if we can help them create ¬converged networks. And that is a complicated process that takes time to complete.”

He points out that Ericsson currently has about 20,000 engineers involved in research and development and 6,000 system engineers. In five years the two groups may be similar in size.

Author: Svenolof Karlsson & Anders Lugn

The converged network

The converged network. Description in Ericsson’s annual report 2006.

© Telefonaktiebolaget LM Ericsson and Centre for Business History

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