Rob Pullen: a mobile operator with 30,000 sites
$70 million in capex and $875 million in opex over five
by using ethernet backhaul
Smartphone sales are up, and use of mobile data and video is
up, and that’s a healthy user demand that is
creating an opportunity for Tellabs, says CEO Rob Pullen.
Why? Because people are using them at a surprising rate, and
operators’ resources are being stretched to
deliver data down their networks.
"With handheld computers and smartphones,
there’s a tsunami of data," says Pullen. "Over 50%
of operators’ bandwidth is being used just by
At the same time customers have suddenly discovered video
conferencing, mainly with fixed terminals, "but mobile will
arrive in a few years", he warns. Again, there’s
more strain on the networks that are struggling to deliver this
There are two main impacts, warns Pullen, an engineer
who’s been with Tellabs for 25 years this year and
has been CEO for almost two years: "There’s an
impact on the backhaul from the radio tower to the internet,
and on the mobile packet core to the subscriber."
That means operators whose capacity is being stretched "have
to invest more heavily in the network", says Pullen. "The
problem is that the bandwidth is increasing but prices are
staying flat, so profit is being eroded. They’re
trying to deliver a higher bandwidth with the same
He cites some information that AT&T has offered,
suggesting that 4% of its iPhone customers are using 30% of the
Many mobile operators are still relying on traditional E1 or
T1 fixed connections to their base stations, "which are
expensive", though some are now moving to ethernet connections.
"Around 120 mobile operators are using our mobile ethernet
backhaul," says Pullen. "They’re saving around 50%
on using E1 or T1."
The savings will get even greater once operators start
offering data-heavy LTE or WiMax services, he notes: "We
calculate their savings then will be 60-90%."
This means that operators can make substantial savings by
choosing ethernet over E1/T1. Pullen offers a calculation that
his team has made: "A mobile operator with 30,000 sites can
save $70 million in capital expenditure," he says, "and $875
million in operational costs over five years by using ethernet
Tellabs has worked with mobile networks for many years,
traditionally with legacy TDM technology. "We saw the
transition to higher bandwidths coming, and the trend to mobile
internet and video, and we knew it would require a new
technology," says Pullen.
"It’s a global phenomenon," he says, "though
around the world there are different carriers in different
phases." Many are still planning the move from 2G to 3G, while
3G players are looking towards 4G technologies such as LTE and
WiMax. "We have customers in 90 countries now," he says,
listing names such as AT&T, NTT, Telecom Italia, Verizon
Wireless and Vodafone. "We are focussed on leadership in the
But this ambition has meant that Tellabs has had to acquire
skills from outside. In December 2009, the company completed a
deal to buy WiChorus, a specialist in mobile packet core
systems for LTE and WiMax networks. "We were trying to help
mobile operators monetise the internet," says Pullen. "They
want to move from offering just bitpipes to more intelligent
What sort of services? "Obviously one is mobile advertising,
but there’s also content awareness. Operators want
— with customers’ permission —
to personalise content and services on the mobile
The idea is to perform "content aware analytics" of top
internet sites — so that an operator can, for example,
spot that a customer is in the Trafalgar Square area of London
and recommend nearby restaurants. "Or you can be in a store,
and use the barcodes to check the best prices," he says.
"When the internet started it was more or less a search
engine. Now it’s migrating to a community-oriented
service, and the next trend is more personalised content." If
operators get it right, customers will be willing to pay, he
"It’s a great opportunity for service providers
to monetise content," says Pullen: content that currently comes
from Google, Yahoo!, Hulu and others.
But why is the service provider in such a great position?
"Consumers have a high level of trust in service providers," he
notes. Mobile networks have had a high level of security and
— so far — have not been susceptible to
viruses and other attacks. "But as the phone becomes more like
the computer, it could be prone to threats," he warns. Service
providers have a role in ensuring security levels are kept
The WiChorus purchase has allowed Tellabs to offer a
platform that is "a 4G network element that can be used in a 3G
network." Ideal, he points out, for the fast analytic design
that a content-aware architecture needs. "You have to identify
the top 400 sites and how people use them."
This acquisition — priced at $165 million
— is helping to change Tellabs, which was founded 35
years ago to make echo suppressors for the telephone industry.
"We’re much more of a software-oriented company,"
says Pullen. "Some of our systems have three million lines of
WiChorus has "an adjacency" to Tellabs business today, which
is very different from those days of echo suppressors.
"We’ll use the mobile packet core systems from
WiChorus to optimise our backhaul systems." For example,
operators will be able to arrange to give different priorities
to different traffic, "minimising peer-to-peer traffic, for
WiMax already has some clever optimisation techniques that
Tellabs proposes to make use of: traffic can be routed to less
congested base stations, for example, so that traffic is
Tellabs is not biased one way or another in the great 4G
rivalry between WiMax and LTE, though. "We’re
already taking part in LTE trials, but I can’t
name the customers — though they’re among
the top 50 operators."
And that’s why his calculation about the
potential saving in backhaul cost is so important. "We work
with about 120 mobile operators, and as they migrate to LTE
they can save 60-90% of their capital expenditure."
Cash in the bank
So what strategy is Pullen planning for Tellabs over the
next few years? He certainly has the resources available for
potential acquisitions: "We have $1 billion in cash and
marketable securities, and no debt," he says.
The company is meanwhile continuing to invest heavily in
R&D, he says: 17% of sales, with R&D centres in
Finland, Denmark, India and China as well as the US.
"Our strategy is to innovate with a focus on growth areas,"
he says, listing Brazil, China, India, Russia and South Africa
as particular target markets.
"One of our focus areas is business services," says Pullen.
For example, delivering video conferencing and cloud computing
in the core of the public network.
Meanwhile there’s an opportunity to work with
operators that still have frame relay and asynchronous transfer
mode networks, helping them to migrate these old technologies
to IP-based services. "We can help with that. How do you extend
the life of highly profitable frame relay and ATM switches
while at the same time migrating to where the world is
Does he expect all frame relay and ATM kit to go? "Oh, no.
There’ll still be frame relay and ATM in the
network when I retire — and I’m a
relatively young man." According to the Tellabs website,
he’s just 47, so that means there’s a
lot of life in the legacy technologies yet.
In the short term, he wants Tellabs to become "more
international and more profitable", bringing down operational
expenses. "We have a rock-solid balance sheet", and the
telecoms business "appears to be stabilising", he says.
One area that Tellabs does not plan to enter is
outsourcing-like managed services, says Pullen. "You can plan,
build, optimise and operate," but Tellabs confines its business
to the first three of those, and not operations, "not in the
short term", he adds. "There is opportunity but we have not
gone down that path yet."
CEO and president of Tellabs
- Educated at the University of Illinois in electronic
engineering and physics, with an MBA Northwestern University
with a focus on finance and marketing
- Joined Tellabs in January 1985 as an electrical
- Later senior vice president of the optical networking
- Senior vice president of North American sales from 2002
until late 2005
- Then vice president and general manager of global
- CEO from February 2008