Q&A: Michael Wheeler, EVP, global IP network business unit, NTT Communications
Michael Wheeler, EVP, global IP network business unit, NTT Communications, talks to Capacity about acquisitions, 100G and the never-ending OTT debate
There have been numerous M&A announcements in the North American market and around the world over the past year. Is acquisition always the best way to grow a carrier business?
Acquisition is certainly not the only way to grow. NTT Com is growing organically too, in all sorts of ways. Just as an internet backbone, we’re growing every day.
I’d say the motivation behind an acquisition is often not growth – that’s just a by-product. It might be about extending footprint, gaining a new capability, adding customer types. It’s usually more multi-faceted than ‘We want to add revenue’.
What acquisition does offer is a way to grow that isn’t possible organically. In a healthy market there can be a benefit when two companies come together. One and one can make three. We’re seeing quite a bit of that sort of acquisition in the US and Europe at the moment. It can be different in a market in crisis, like Brazil. But there is of course only so much acquisition you can manage at any one time. A single company only has a certain tolerance for the number of deals they can cope with.
What has been the experience of NTT Com with the acquisitions that it has announced in the last year or two
Acquisitions like e-shelter or Virtela have given us access to people who’ve been doing something special successfully for a number of years, bringing on board a whole new point of view and a set of experiences that we don’t have internally – even a company of our size. For the future, you’ll probably see us continue to look for acquisitions that have a compelling footprint from a co-location and database point of view. When we are looking at acquisitions, we need to have a global mindset, because that’s what our customers have, and it’s what they expect of us.
There has been a surge in 100G deployments as demand for capacity continues to expand. How does the transition to 100G compare to the transition to 10G a few years ago?
We’ve seen a number of new customer announcements in the past few months at the 100G level, comparable in numbers to the new 10G customers we were getting in 2006. But we’re still in the earliest days of 100G. By the middle to end of 2016, we’ll see if that compares to 2007 because that’s when we saw the most noticeable uptick in 10G customers. My prediction is that we’ll see very similar things.
Are NTT Com customers asking to add 100G ports? If so, for what reasons?
There’s two types of asking. There’s curiosity about what sort of ports are available, and there’s customers with real needs in specific markets at a 100G level and they need us to provide a quote. We’re not really tracking the first type. The second is where we are paying real attention. What we are not seeing today is people ordering 100G ports with a view to getting rid of all their 10G ports. It’s always for incremental capacity, not a replacement.
You have talked extensively about the relationships between global carriers and OTTs. Do you still see them most likely as partners instead of competitors?
I’ve always believed that to be true. I see OTTs and carriers, in their classic form, as a cohesive set of players in the overall ecosystem that is the internet.
The reality is that for consumers and for businesses, the internet is a beneficial tool that gives them access to data and to information that they wouldn’t have had 20 years ago in a very cost effective and efficient manner. Given that, then service providers and content providers are the two pieces that unite that whole thing. Alone, neither side is able to generate value for end users.
It just makes sense for both sides to figure out ways to work together. To make that happen needs a set of rational business people on both sides to create a relationship that works. In certain markets and in certain parts of the world, for various historical reasons, the two sides haven’t always been able to work that out. The internet ecosystem usually finds a way to fix that. Traffic ends up being exchanged by people who do have those relationships in place, and so the end user is still able to achieve what their goal is, which is to access the data and content they need over the internet in a cost effective and efficient way.
By and large, I think most people, even if reluctantly, have been able to work through those issues and will continue to do so. In a free market, things will mostly work themselves out over time. But we do as an industry need to be more creative, from an economic and technological point of view.