AT THE SPEED OF IDEAS TM

2010annual report

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012010 AnnuAl report

ideas fortomorrow

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contents

cr spotlight // look for this icon

to find news about Alcatel-lucent's achievements

in corporate responsibility. Find the full 2010 Cr report online

at www.alcatel-lucent.com

website // Find more content online at

www.alcatel-lucent.com

the speed thoughts book

02 twelve trends in telecoms04 speed thoughts

the busINess book

32 letter from the chairman34 2010 key figures36 management team38 alcatel-lucent worldwide40 americas42 europe, middle east, africa44 asia-pacific46 strategic industries47 enterprise48 services50 operations

the strAtegY book

54 networks60 applications and solutions62 Bell laBs/innovation72 fast forwards74 people76 strategic overview78 interview

with Ben verwaayen80 investor relations

the long-trusted partner of service providers, enterprises, strategic industries and governments around the world, alcatel-lucent is a leader in mobile, fixed, ip and optics technologies, and a pioneer in applications and services. alcatel-lucent includes Bell labs, one of the world’s foremost centers of research and innovation in communications technology.

with operations in more than 130 countries and one of the most experienced global services organizations in the industry, alcatel-lucent is a local partner with global reach.

the company achieved revenues of 16 billion euros in 2010 and is incorporated in france and headquartered in paris.

2010annual report

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012010 AnnuAl report

ideas fortomorrow

th

e s

pe

ed

th

ou

gh

ts

bo

ok

contents

cr spotlight // look for this icon

to find news about Alcatel-lucent's achievements

in corporate responsibility. Find the full 2010 Cr report online

at www.alcatel-lucent.com

website // Find more content online at

www.alcatel-lucent.com

the speed thoughts book

02 twelve trends in telecoms04 speed thoughts

the busINess book

32 letter from the chairman34 2010 key figures36 management team38 alcatel-lucent worldwide40 americas42 europe, middle east, africa44 asia-pacific46 strategic industries47 enterprise48 services50 operations

the strAtegY book

54 networks60 applications and solutions62 Bell laBs/innovation72 fast forwards74 people76 strategic overview78 interview

with Ben verwaayen80 investor relations

the long-trusted partner of service providers, enterprises, strategic industries and governments around the world, alcatel-lucent is a leader in mobile, fixed, ip and optics technologies, and a pioneer in applications and services. alcatel-lucent includes Bell labs, one of the world’s foremost centers of research and innovation in communications technology.

with operations in more than 130 countries and one of the most experienced global services organizations in the industry, alcatel-lucent is a local partner with global reach.

the company achieved revenues of 16 billion euros in 2010 and is incorporated in france and headquartered in paris.

2010annual report

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022010 AnnuAl report

032010 AnnuAl report

tweLVe CommANdINg treNds iN TeLeCoMs

2.the world invests in ImAgINAtIoN

information and communications technology attracts more research and development dollars than any other sector.2

4.…getting chattier bY the mINute

there’s no end in sight to the mobile traffic explosion. By 2015, we’ll hit 30 times today’s level.4

6.You are the content

gamers around the world are using network technologies and other innovations not only to play together but also to create a shareable ‘gameverse’ of their own invention.

7.step aside, hAL 9000

your fridge sending temperature readings to your phone; trains signaling passengers when to get off: technology is opening up a whole new world of automation.

9.shootINg pAst cloud 9

the worldwide 'cloud services' market hit $68 billion in 2010 and by 2014 will more than double to $149 billion.5

11.one giant leap for mobILe dAtA

ip technology is making it easier and more economical to run wireless networks driven by data—and is expected to jump from 6 percent to 75 percent by 2015.4

8.setting a new thumb-speed reCord

200,000 text messages a second—that’s the global average today, with sms (short messaging system) communication tripling between 2007 and 2010.3

10.two countries. 300 mILLIoN ‘heLLos’

more than 300 million people went mobile in india and china in 2010.3

12.“wAIt ANd see” is not an option

information and communications technology accounts for 2 percent of the world’s greenhouse gas emissions. By 2020, that will nearly double to 4 percent—twice the amount of the aviation sector. the time to take green action is now.6

1.eCoNomIes have a connection speed

every 10 percent increase in broadband connectivity boosts a country’s gdp by 1.2 percent.1

3.oNe ChAttY planet…

with 5.3 billion mobile subscriptions worldwide,3 wireless has people talking. and texting. and surfing.

5.if a picture’s worth a thousand words, VIdeo’s worth mILLIoNs

three years from now, half of all mobile communication in the world will be video.4

1 world Bank. 2 institute for prospective technological studies (the 2010 report on the r&d in ict in the european union). 3 itu. 4 Bell labs. 3 itu. 4 Bell labs. 5 gartner. 6 greentouch™.

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022010 AnnuAl report

032010 AnnuAl report

tweLVe CommANdINg treNds iN TeLeCoMs

2.the world invests in ImAgINAtIoN

information and communications technology attracts more research and development dollars than any other sector.2

4.…getting chattier bY the mINute

there’s no end in sight to the mobile traffic explosion. By 2015, we’ll hit 30 times today’s level.4

6.You are the content

gamers around the world are using network technologies and other innovations not only to play together but also to create a shareable ‘gameverse’ of their own invention.

7.step aside, hAL 9000

your fridge sending temperature readings to your phone; trains signaling passengers when to get off: technology is opening up a whole new world of automation.

9.shootINg pAst cloud 9

the worldwide 'cloud services' market hit $68 billion in 2010 and by 2014 will more than double to $149 billion.5

11.one giant leap for mobILe dAtA

ip technology is making it easier and more economical to run wireless networks driven by data—and is expected to jump from 6 percent to 75 percent by 2015.4

8.setting a new thumb-speed reCord

200,000 text messages a second—that’s the global average today, with sms (short messaging system) communication tripling between 2007 and 2010.3

10.two countries. 300 mILLIoN ‘heLLos’

more than 300 million people went mobile in india and china in 2010.3

12.“wAIt ANd see” is not an option

information and communications technology accounts for 2 percent of the world’s greenhouse gas emissions. By 2020, that will nearly double to 4 percent—twice the amount of the aviation sector. the time to take green action is now.6

1.eCoNomIes have a connection speed

every 10 percent increase in broadband connectivity boosts a country’s gdp by 1.2 percent.1

3.oNe ChAttY planet…

with 5.3 billion mobile subscriptions worldwide,3 wireless has people talking. and texting. and surfing.

5.if a picture’s worth a thousand words, VIdeo’s worth mILLIoNs

three years from now, half of all mobile communication in the world will be video.4

1 world Bank. 2 institute for prospective technological studies (the 2010 report on the r&d in ict in the european union). 3 itu. 4 Bell labs. 3 itu. 4 Bell labs. 5 gartner. 6 greentouch™.

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052010 AnnuAl report

042010 AnnuAl report

SoCIAl IMpACt05Human necessities: Food, water, sHelter— and broadbandJyoti Mahurkar-thombre

07looking backward: india in 2015rati thanawala

the worLd of CommuNICAtIoNs IN 2015

download the speed thoughts at www.alcatel-lucent.com/speedthoughts

teCHnoloGICAl CHAnGe09How Fast is your Future?James Watt

12

guest SpeeD tHouGHt

billions and billions oF bitsemily nagle Green

14wires? wHat wires?Wim Sweldens

16time to smarten upBasil Alwan

18europe: Falling beHind?Gabrielle Gauthey

20tHis is not your FatHer’s networkMarcus Weldon

our SHAreD Future23tHe Future is closer tHan you tHinkGee rittenhouse

25you ain’t seen notHing yetolivia Qiu

27tHe world is my smartpHoneJeong Kim

personal perspectives

n the next few years, those of us who enjoy high-speed broadband

will have access to ever-faster and smarter applications, devices and services—wherever we are, whenever we want them.

unfortunately, “those of us” isn’t everyone.

this widening digital divide poses a global problem—one we need to address in a holistic way over the next five years. We can already see that people living on the ‘have-not’ side are being disad-vantaged financially and intellec-tually, health-wise and in terms of overall quality of life. this while the digital ‘haves’ enjoy greater financial freedoms, better education and health, and green-er lives in increasingly paperless societies.

the Internet has connected peo-ple like never before. Social net-works are slowly reducing the degrees of separation between

In every part of the world, high-speed connectivity has become essential for social progress and economic prosperity. We need to close the digital divide or risk whole countries being left out of the world’s connected future.

humAN NeCessItIes: FooD, WAter, SHelter— AnD BroADBAnD

i

Favorite saying: “I have not failed, I’ve just found 10,000 ways that won’t work.” • thomas Alva edison

Jyoti maHurkar-tHombrestats: 23 years in the industryposition: ceo, alcatel-lucent new Zealand & pacific islands

human beings privileged enough to participate in them. In the com-ing years, we’ll use more video. We’ll benefit from offerings that make our lives easier and more pleasant by taking into account where we are and what kinds of things we prefer. We’re in the midst of a transition to a digital life in which we can rely on the network for virtually every aspect of our lives.

Connecting the unconnectedYet a large segment of the globe is not participating in this revolu-tion. And that means we are all missing the opportunity to col-laborate intelligently with those

people. Crowdsourcing, for exam-ple, uses the web to bring togeth-er large communities to help with specific tasks. Is it less rich when a significant segment of the pop-ulation is excluded by its inability to access the Internet? likely so.

What if the next brave individu-als who risk everything for what they believe is right are not on the Internet? the recent political changes in a number of countries were preceded by disruption of social media sites, mobile net-works and, in some cases, access to the entire Internet. that is proof positive that networks

•••

social impact

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052010 AnnuAl report

042010 AnnuAl report

SoCIAl IMpACt05Human necessities: Food, water, sHelter— and broadbandJyoti Mahurkar-thombre

07looking backward: india in 2015rati thanawala

the worLd of CommuNICAtIoNs IN 2015

download the speed thoughts at www.alcatel-lucent.com/speedthoughts

teCHnoloGICAl CHAnGe09How Fast is your Future?James Watt

12

guest SpeeD tHouGHt

billions and billions oF bitsemily nagle Green

14wires? wHat wires?Wim Sweldens

16time to smarten upBasil Alwan

18europe: Falling beHind?Gabrielle Gauthey

20tHis is not your FatHer’s networkMarcus Weldon

our SHAreD Future23tHe Future is closer tHan you tHinkGee rittenhouse

25you ain’t seen notHing yetolivia Qiu

27tHe world is my smartpHoneJeong Kim

personal perspectives

n the next few years, those of us who enjoy high-speed broadband

will have access to ever-faster and smarter applications, devices and services—wherever we are, whenever we want them.

unfortunately, “those of us” isn’t everyone.

this widening digital divide poses a global problem—one we need to address in a holistic way over the next five years. We can already see that people living on the ‘have-not’ side are being disad-vantaged financially and intellec-tually, health-wise and in terms of overall quality of life. this while the digital ‘haves’ enjoy greater financial freedoms, better education and health, and green-er lives in increasingly paperless societies.

the Internet has connected peo-ple like never before. Social net-works are slowly reducing the degrees of separation between

In every part of the world, high-speed connectivity has become essential for social progress and economic prosperity. We need to close the digital divide or risk whole countries being left out of the world’s connected future.

humAN NeCessItIes: FooD, WAter, SHelter— AnD BroADBAnD

i

Favorite saying: “I have not failed, I’ve just found 10,000 ways that won’t work.” • thomas Alva edison

Jyoti maHurkar-tHombrestats: 23 years in the industryposition: ceo, alcatel-lucent new Zealand & pacific islands

human beings privileged enough to participate in them. In the com-ing years, we’ll use more video. We’ll benefit from offerings that make our lives easier and more pleasant by taking into account where we are and what kinds of things we prefer. We’re in the midst of a transition to a digital life in which we can rely on the network for virtually every aspect of our lives.

Connecting the unconnectedYet a large segment of the globe is not participating in this revolu-tion. And that means we are all missing the opportunity to col-laborate intelligently with those

people. Crowdsourcing, for exam-ple, uses the web to bring togeth-er large communities to help with specific tasks. Is it less rich when a significant segment of the pop-ulation is excluded by its inability to access the Internet? likely so.

What if the next brave individu-als who risk everything for what they believe is right are not on the Internet? the recent political changes in a number of countries were preceded by disruption of social media sites, mobile net-works and, in some cases, access to the entire Internet. that is proof positive that networks

•••

social impact

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072010 AnnuAl report

062010 AnnuAl report

today represent power. network users are powerful based on ideas, not on might.

It’s everybody’s businessWe all must take a role in narrow-ing the divide. Governments need to make it a regulatory priority. telcos have to make it a business imperative. their partners in designing and building networks must innovate to enable network accessibility for everyone. econo-mies at large must transition to the high-speed Internet to realize productivity gains in small and medium-sized enterprises, corpo-rations, telecommunications com-panies, network builders and governments—even households. Application and smartphone sup-pliers will of course share in the responsibility—and in a substan-tial part of the benefits.

If we want to move from the dig-ital divide to the digital economy, we must not fall victim to a low-est-common-denominator men-tality when it comes to access, speed, device availability and cost. A major component of the cost to users is of course the ser-vice provider’s own operational expenses. those expenses will be partly addressed through modest gains in revenues through a growing subscriber base, but pro-ductivity gains and rapid innova-tion are also essential for the vision of universal coverage to become reality.

In recent months, natural disasters such as the floods in Queensland, Australia, the earthquake in Christchurch, new Zealand and the devastating tsunami in Japan have provided examples of how

the network by itself is not enough; to actually use it people need the right devices and applications, the right ways and means. that is the challenge to the industry.

intricately woven our networks are with the lives of people. Dur-ing times of crisis our networks have become the lifelines for res-cue and recovery missions carried out by first responders. these events also create new opportuni-ties once decisions are made to rebuild the infrastructure and restore the lives of local citizens.

making it happenthe work of the next years is to replace existing copper-wire net-works with fiber optics; to con-tinue combining the capabilities of wired and wireless networks; to move data from our desktops to the cloud. people shouldn’t have to think about how they are accessing the network—or the cost of doing so—they should just be able to do it, with the network intelligently managing the details. Greener networks may become the norm, replacing cumbersome towers and antennas with new architectures based on miniatur-ized equipment that is nearly invisible to the community.

We won’t be able to dismantle the paper economy until the digital economy matures and is accessi-ble to everyone who wants to participate in it. I believe that if we act today, by 2015 the tele-communications sector will have helped reduce the digital divide by making network construction, deployment and operation far more affordable and available. However, the network by itself is not enough; to actually use it people need the right devices and applications, the right ways and means. that is the challenge to the industry—Alcatel-lucent included—over the next few years.

Jyoti mahurkar-thombre

•••

am writing to you from the year 2015. A lot has happened since 2011.

Some of it may have been as you imagined—and much as you did not.

2011 brought the ipad 21 tablet,

with one million units sold in the first weekend. Applications for Apple2 and Android™3 topped 600,000, and the first major 4G mobile broadband networks were introduced. the potential of inno-vative technologies to improve people’s lives was clear, primarily those in the developed world.

the real surprise is how quickly innovation transformed the lives of those in emerging economies such as india. In 2011, 50 percent of Indians had no access to mobile phones. today, in 2015, farmers, students, housewives and rural workers have smart-phones, tablets and other mobile connected devices—sometimes sharing them among the mem-bers of a family or village. these devices are now viewed as essen-tial to people’s livelihoods, edu-cation and entertainment.

LookINg bACkwArd: InDIA In 2015

Devices come packaged with voice- and touch-activated appli-cations that allow the citizens of this country with 23 languages to seek work, access information and find medical help. Students save valuable time and money receiv-ing interactive education at home rather than spending hours travel-ing to tutoring locations. In places where good schools are scarce, high-quality education modules are just a click away. And it’s com-mon to see families on trains and buses crowded around small screens watching Bollywood mov-ies. (oh, and let’s not forget the real-time sports: people are pay-ing for the convenience of watch-ing cricket games on their mobile devices when they are stuck in traffic and can’t be near a tV.)

so how did this happen? In retro-spect it seems to have been quite simple: some breakthrough tech-nologies were invented and two types of Indian entrepreneurs took them to the market.

the first entrepreneurs came from india’s large and vibrant software industry. Bored from years of laboring to develop applications for foreign markets, they wanted to break out and achieve something for them-selves. they were the new gen-eration: ambitious, knowledge-able, globally connected, and in touch with the needs of Indian consumers. they used the best practices available in 2011 to cre-ate an environment for rapid

Favorite saying: “Be the change you want to see in the world.” Mahatma Gandhi

rati tHanawalastats: 30 years in the industryposition: vp, Bell labs network planning, performance and economic analysis

•••

An imagined retrospective on how India embraced technology and transformed the lives of millions.

i

social impact

SpeAKInGFroM tHe future

1 ipad 2 is a trademark of apple, inc., registered in the u.s. and other countries. 2 apple is a trademark of apple, inc., registered in the u.s. and other countries. 3 android is a trademark of google, inc.

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072010 AnnuAl report

062010 AnnuAl report

today represent power. network users are powerful based on ideas, not on might.

It’s everybody’s businessWe all must take a role in narrow-ing the divide. Governments need to make it a regulatory priority. telcos have to make it a business imperative. their partners in designing and building networks must innovate to enable network accessibility for everyone. econo-mies at large must transition to the high-speed Internet to realize productivity gains in small and medium-sized enterprises, corpo-rations, telecommunications com-panies, network builders and governments—even households. Application and smartphone sup-pliers will of course share in the responsibility—and in a substan-tial part of the benefits.

If we want to move from the dig-ital divide to the digital economy, we must not fall victim to a low-est-common-denominator men-tality when it comes to access, speed, device availability and cost. A major component of the cost to users is of course the ser-vice provider’s own operational expenses. those expenses will be partly addressed through modest gains in revenues through a growing subscriber base, but pro-ductivity gains and rapid innova-tion are also essential for the vision of universal coverage to become reality.

In recent months, natural disasters such as the floods in Queensland, Australia, the earthquake in Christchurch, new Zealand and the devastating tsunami in Japan have provided examples of how

the network by itself is not enough; to actually use it people need the right devices and applications, the right ways and means. that is the challenge to the industry.

intricately woven our networks are with the lives of people. Dur-ing times of crisis our networks have become the lifelines for res-cue and recovery missions carried out by first responders. these events also create new opportuni-ties once decisions are made to rebuild the infrastructure and restore the lives of local citizens.

making it happenthe work of the next years is to replace existing copper-wire net-works with fiber optics; to con-tinue combining the capabilities of wired and wireless networks; to move data from our desktops to the cloud. people shouldn’t have to think about how they are accessing the network—or the cost of doing so—they should just be able to do it, with the network intelligently managing the details. Greener networks may become the norm, replacing cumbersome towers and antennas with new architectures based on miniatur-ized equipment that is nearly invisible to the community.

We won’t be able to dismantle the paper economy until the digital economy matures and is accessi-ble to everyone who wants to participate in it. I believe that if we act today, by 2015 the tele-communications sector will have helped reduce the digital divide by making network construction, deployment and operation far more affordable and available. However, the network by itself is not enough; to actually use it people need the right devices and applications, the right ways and means. that is the challenge to the industry—Alcatel-lucent included—over the next few years.

Jyoti mahurkar-thombre

•••

am writing to you from the year 2015. A lot has happened since 2011.

Some of it may have been as you imagined—and much as you did not.

2011 brought the ipad 21 tablet,

with one million units sold in the first weekend. Applications for Apple2 and Android™3 topped 600,000, and the first major 4G mobile broadband networks were introduced. the potential of inno-vative technologies to improve people’s lives was clear, primarily those in the developed world.

the real surprise is how quickly innovation transformed the lives of those in emerging economies such as india. In 2011, 50 percent of Indians had no access to mobile phones. today, in 2015, farmers, students, housewives and rural workers have smart-phones, tablets and other mobile connected devices—sometimes sharing them among the mem-bers of a family or village. these devices are now viewed as essen-tial to people’s livelihoods, edu-cation and entertainment.

LookINg bACkwArd: InDIA In 2015

Devices come packaged with voice- and touch-activated appli-cations that allow the citizens of this country with 23 languages to seek work, access information and find medical help. Students save valuable time and money receiv-ing interactive education at home rather than spending hours travel-ing to tutoring locations. In places where good schools are scarce, high-quality education modules are just a click away. And it’s com-mon to see families on trains and buses crowded around small screens watching Bollywood mov-ies. (oh, and let’s not forget the real-time sports: people are pay-ing for the convenience of watch-ing cricket games on their mobile devices when they are stuck in traffic and can’t be near a tV.)

so how did this happen? In retro-spect it seems to have been quite simple: some breakthrough tech-nologies were invented and two types of Indian entrepreneurs took them to the market.

the first entrepreneurs came from india’s large and vibrant software industry. Bored from years of laboring to develop applications for foreign markets, they wanted to break out and achieve something for them-selves. they were the new gen-eration: ambitious, knowledge-able, globally connected, and in touch with the needs of Indian consumers. they used the best practices available in 2011 to cre-ate an environment for rapid

Favorite saying: “Be the change you want to see in the world.” Mahatma Gandhi

rati tHanawalastats: 30 years in the industryposition: vp, Bell labs network planning, performance and economic analysis

•••

An imagined retrospective on how India embraced technology and transformed the lives of millions.

i

social impact

SpeAKInGFroM tHe future

1 ipad 2 is a trademark of apple, inc., registered in the u.s. and other countries. 2 apple is a trademark of apple, inc., registered in the u.s. and other countries. 3 android is a trademark of google, inc.

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092010 AnnuAl report

082010 AnnuAl report

development of new applications, and made it accessible to talented developers across India. their efforts were championed both by leaders in the It industry and by scientists from top institutions, such as the Indian Institutes of technologies. Mobile operators who had already deployed 3G and 4G networks in 2011 and 2012 needed applications for their customers and provided important seed investments. thousands of applications were created for Indian consumers.

the next entrepreneurs were the indian mobile phone companies themselves. they created a mar-ket for mobile data and video and simultaneously delivered on their social responsibility to serve those who had previously been without access . they were unfazed by studies that claimed mobile phone service would only

be widely adopted if it cost less than five percent of household expenses. Knowing that just three percent of the Indian population owned personal computers in 2011, and that just three percent had wireline access, they saw mobile technologies as the main way for many people to access video and other online content. they convinced device manufac-turers to create inexpensive mod-els for this segment of consumers on the basis of the business vol-ume they would gain. these mobile phone companies were extremely demanding—driving innovation from device and net-work vendors anxious to serve India’s large markets.

the new entrepreneurs also drove down the prices of data plans and services, leapfrogging the West as they did so. they were the first to introduce dis-

counted data offers during off-peak hours. Consumers love this new service, which starts with the following message: “For the next 30 minutes, you can make calls or download videos at a dis-counted rate of 80 percent, cour-tesy of India Cola (or some other sponsoring company).” the rev-enue from this advertising gives a boost to the mobile phone com-panies’ bottom line and helps subsidize end users. tens of mil-lions of people who previously could not afford to call now do so during these times (which, amaz-ingly, make up more than 50 per-cent of the day), and all subscrib-ers can affordably load video content onto their devices. the model is similar to what airlines do: sell unfilled seats at a dis-count. the innovative Indian operators applied the same prin-ciple to video and created lots of happy customers.

Now, in 2015, india is an innova-tion pacesetter. the country’s software developers and mobile companies are moving fast to bring value to a population that just a few short years ago was underserved. their style is im-provisational; their value propo-sition is “fast, cheap, and just good enough” to meet customers’ near-term needs—if not all their lifestyle wants… yet. the Hindi word for this is “jugaad,” which describes something that has been in India’s DnA for millennia, a spirit honed by years of surviv-ing in an environment of scarce resources. It is what brought the world the $2,500 nano car by tata Motors, a no-frills sub-com-pact that addressed the essential needs of a large segment of price-

in 2011, 50 percent of indians had no access to mobile phones. in 2015, farmers, students and housewives have smartphones, tablets and other connected devices.

•••

SpeAKInGFroM tHe future

sensitive consumers. now, for the first time, jugaad is being applied by entrepreneurs in India to make mobile communications afford-able and relevant to the masses. the result is rich innovations that are now being transported to other developing countries and even to the developed world. We have unleashed the tiger of inno-vation, and everyone is reaping the benefits.

as you read this in 2011, you may ask if some issues we saw back then remain unsolved. the answer is, unfortunately, yes. I bel ieve that one area that remains challenging is the gov-ernment’s role in fostering cre-ative and effective initiatives that will have an impact on our collec-tive ability to share the advan-tages of connectivity with those who are underserved. I hope that

techNological chaNge

n 2010, we pushed the speed of optical net-works to 100 Gigabits

per second on a single fiber. that’s like sending an entire library floor’s worth of informa-tion through the Internet in a single second.

You need fiber optics for those kinds of speeds because they work, literally, at the speed of light—turning voice, data and video signals into wavelengths and firing them down fibers between cities, across oceans, all around the world.

how fAst Is Your future?

i

Favorite saying: “…all progress depends on the unreasonable man.” • George Bernard Shaw

James wattstats: 25 years in the industryposition: president, alcatel-lucent optics patent holder—in areas of traffic management and internet protocol (ip)

that was 2010. Within a couple of years, we could hit 400 Gigabits per second. It’s a pretty mind-blowing increase, and what’s maybe more mind-blowing is that

we will very likely need that kind of speed to keep up with the amount of downloads, uploads and content streaming that will

•••

With coming advances in optical networking, the answer is, “pretty fast.” And a good thing, too, because the power users of tomorrow are going to push to the limits networks exponentially faster than the ones we have today.

when I write to you next from 2020, we will have solved this challenge—and come very close to the vision of global universal service.

rati thaNawala

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092010 AnnuAl report

082010 AnnuAl report

development of new applications, and made it accessible to talented developers across India. their efforts were championed both by leaders in the It industry and by scientists from top institutions, such as the Indian Institutes of technologies. Mobile operators who had already deployed 3G and 4G networks in 2011 and 2012 needed applications for their customers and provided important seed investments. thousands of applications were created for Indian consumers.

the next entrepreneurs were the indian mobile phone companies themselves. they created a mar-ket for mobile data and video and simultaneously delivered on their social responsibility to serve those who had previously been without access . they were unfazed by studies that claimed mobile phone service would only

be widely adopted if it cost less than five percent of household expenses. Knowing that just three percent of the Indian population owned personal computers in 2011, and that just three percent had wireline access, they saw mobile technologies as the main way for many people to access video and other online content. they convinced device manufac-turers to create inexpensive mod-els for this segment of consumers on the basis of the business vol-ume they would gain. these mobile phone companies were extremely demanding—driving innovation from device and net-work vendors anxious to serve India’s large markets.

the new entrepreneurs also drove down the prices of data plans and services, leapfrogging the West as they did so. they were the first to introduce dis-

counted data offers during off-peak hours. Consumers love this new service, which starts with the following message: “For the next 30 minutes, you can make calls or download videos at a dis-counted rate of 80 percent, cour-tesy of India Cola (or some other sponsoring company).” the rev-enue from this advertising gives a boost to the mobile phone com-panies’ bottom line and helps subsidize end users. tens of mil-lions of people who previously could not afford to call now do so during these times (which, amaz-ingly, make up more than 50 per-cent of the day), and all subscrib-ers can affordably load video content onto their devices. the model is similar to what airlines do: sell unfilled seats at a dis-count. the innovative Indian operators applied the same prin-ciple to video and created lots of happy customers.

Now, in 2015, india is an innova-tion pacesetter. the country’s software developers and mobile companies are moving fast to bring value to a population that just a few short years ago was underserved. their style is im-provisational; their value propo-sition is “fast, cheap, and just good enough” to meet customers’ near-term needs—if not all their lifestyle wants… yet. the Hindi word for this is “jugaad,” which describes something that has been in India’s DnA for millennia, a spirit honed by years of surviv-ing in an environment of scarce resources. It is what brought the world the $2,500 nano car by tata Motors, a no-frills sub-com-pact that addressed the essential needs of a large segment of price-

in 2011, 50 percent of indians had no access to mobile phones. in 2015, farmers, students and housewives have smartphones, tablets and other connected devices.

•••

SpeAKInGFroM tHe future

sensitive consumers. now, for the first time, jugaad is being applied by entrepreneurs in India to make mobile communications afford-able and relevant to the masses. the result is rich innovations that are now being transported to other developing countries and even to the developed world. We have unleashed the tiger of inno-vation, and everyone is reaping the benefits.

as you read this in 2011, you may ask if some issues we saw back then remain unsolved. the answer is, unfortunately, yes. I bel ieve that one area that remains challenging is the gov-ernment’s role in fostering cre-ative and effective initiatives that will have an impact on our collec-tive ability to share the advan-tages of connectivity with those who are underserved. I hope that

techNological chaNge

n 2010, we pushed the speed of optical net-works to 100 Gigabits

per second on a single fiber. that’s like sending an entire library floor’s worth of informa-tion through the Internet in a single second.

You need fiber optics for those kinds of speeds because they work, literally, at the speed of light—turning voice, data and video signals into wavelengths and firing them down fibers between cities, across oceans, all around the world.

how fAst Is Your future?

i

Favorite saying: “…all progress depends on the unreasonable man.” • George Bernard Shaw

James wattstats: 25 years in the industryposition: president, alcatel-lucent optics patent holder—in areas of traffic management and internet protocol (ip)

that was 2010. Within a couple of years, we could hit 400 Gigabits per second. It’s a pretty mind-blowing increase, and what’s maybe more mind-blowing is that

we will very likely need that kind of speed to keep up with the amount of downloads, uploads and content streaming that will

•••

With coming advances in optical networking, the answer is, “pretty fast.” And a good thing, too, because the power users of tomorrow are going to push to the limits networks exponentially faster than the ones we have today.

when I write to you next from 2020, we will have solved this challenge—and come very close to the vision of global universal service.

rati thaNawala

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102010 AnnuAl report

112010 AnnuAl report

physics. For example, more and more information will have to be pushed through the cables that run under the ocean connecting the continents. the distance across the pacific is more than 10,000 kilometers: we’re dealing with very long distances in those cases, and the reality is that transmission over 400 kilometers is much easier than over thou-sands. today we can send infor-

mation across the ocean at 40 Gigabits per second and by 2014 we should be at 100 Giga-bits per second with technologi-cal advances.

So distance is one challenge we’ll have to solve to extend today’s networks. Figuring out ways to expand them in already crowded cities is another. ripping up streets to lay down new fiber is

be going on by then, as well as with ‘cloud computing’ and other business applications.

Having the capacity is one thing, but the question on a lot of peo-ple’s minds in the industry is, “How will our networks be able to manage all that traffic?” Fair enough! If networks are going to handle so much more informa-tion, they’ll have to become a whole lot simpler and more flex-ible than they are today. this streamlining and flexibility will come from more automation and less dependence on people to fine-tune them when changes are needed—because the changes will come too fast and there will be too many of them to keep up with. So there will have to be more blending of electronics with optics: software and systems capable of making split-second (well, in fact, faster than that) decisions about where to send wavelengths, what information to dump into them, what informa-tion to pull out.

Automating the optical network is going to be a big preoccupation for the industry over the next several years. Another one is going to be extending the net-work, getting it to reach more people in more places.

Creating a truly connected world is about building what some peo-ple like to call a ‘universal com-munications infrastructure’—one that goes everywhere. to deliver such higher speed connectivity out to more places so that every-one in the world has access to it, we’ll have to solve some basic challenges of geography and

they’re going to expect more from their technology than we would have ever dreamed, and do things with it, solve problems that we probably always thought were impossible.

•••

highly unpopular. In some cities, network operators are using the sewer systems, in others, micro-wave transmitters. there are a lot of interesting technical problems to figure out: and not just how to do it, but how to do it affordably.

All of this is very exciting, but what does it actually mean ? Forget the technology for a minute: what kind of world is going to be using all of this capacity and connectivity?

By 2015, we’ll have a generation of young adults who have grown up with smartphones and laptops, who can’t remember a time before there was WiFi in coffee shops, before Youtube™1 or Google™.2 they’re going to expect more from their technology than we would have ever dreamed, and do things with it, solve problems that we probably always thought were impossible. they’ll find whole new uses for being connected.

now, some people worry about the bad that may come with the good—issues of privacy and mis-use. technology is a tool of soci-ety, and society has its positive and negative aspects. While tech-nology can’t solve social prob-lems, it can help. We need to make sure networks and services support society’s solutions for handling known risks—for exam-ple, by spreading information quickly so people can keep safe from identity theft and other harm.

So, yes, there’s good and bad. But the good is so powerful. these expanded networks will connect what otherwise would remain isolated. look at examples like

ushahidi, the website that brings people together to support natu-ral disaster recovery efforts. Con-necting people has a positive impact.

By using connectivity in new ways, the generation of users we’ll see in 2015 is going to push soci-ety to evolve. Government institu-tions, educational institutions, even the ‘institution’ of the family will change as a result. How will young adults want to maintain their family ties now that they’ve grown up being able to Skype3 with their grandparents?

lots of speed, lots of connection, lots of change. the future is going to come fast. But at the same time, we are and will remain human. Despite all the technol-ogy at her disposal, my daughter still wants to play with her fr iends at recess and host sleepovers. the end of all this connectivity may in fact be a greater sense of connection.

James watt

1 youtube is a trademark of google, inc. 2 google is a trademark of google, inc. 3 skype is a trademark of skype limited and other related companies.

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102010 AnnuAl report

112010 AnnuAl report

physics. For example, more and more information will have to be pushed through the cables that run under the ocean connecting the continents. the distance across the pacific is more than 10,000 kilometers: we’re dealing with very long distances in those cases, and the reality is that transmission over 400 kilometers is much easier than over thou-sands. today we can send infor-

mation across the ocean at 40 Gigabits per second and by 2014 we should be at 100 Giga-bits per second with technologi-cal advances.

So distance is one challenge we’ll have to solve to extend today’s networks. Figuring out ways to expand them in already crowded cities is another. ripping up streets to lay down new fiber is

be going on by then, as well as with ‘cloud computing’ and other business applications.

Having the capacity is one thing, but the question on a lot of peo-ple’s minds in the industry is, “How will our networks be able to manage all that traffic?” Fair enough! If networks are going to handle so much more informa-tion, they’ll have to become a whole lot simpler and more flex-ible than they are today. this streamlining and flexibility will come from more automation and less dependence on people to fine-tune them when changes are needed—because the changes will come too fast and there will be too many of them to keep up with. So there will have to be more blending of electronics with optics: software and systems capable of making split-second (well, in fact, faster than that) decisions about where to send wavelengths, what information to dump into them, what informa-tion to pull out.

Automating the optical network is going to be a big preoccupation for the industry over the next several years. Another one is going to be extending the net-work, getting it to reach more people in more places.

Creating a truly connected world is about building what some peo-ple like to call a ‘universal com-munications infrastructure’—one that goes everywhere. to deliver such higher speed connectivity out to more places so that every-one in the world has access to it, we’ll have to solve some basic challenges of geography and

they’re going to expect more from their technology than we would have ever dreamed, and do things with it, solve problems that we probably always thought were impossible.

•••

highly unpopular. In some cities, network operators are using the sewer systems, in others, micro-wave transmitters. there are a lot of interesting technical problems to figure out: and not just how to do it, but how to do it affordably.

All of this is very exciting, but what does it actually mean ? Forget the technology for a minute: what kind of world is going to be using all of this capacity and connectivity?

By 2015, we’ll have a generation of young adults who have grown up with smartphones and laptops, who can’t remember a time before there was WiFi in coffee shops, before Youtube™1 or Google™.2 they’re going to expect more from their technology than we would have ever dreamed, and do things with it, solve problems that we probably always thought were impossible. they’ll find whole new uses for being connected.

now, some people worry about the bad that may come with the good—issues of privacy and mis-use. technology is a tool of soci-ety, and society has its positive and negative aspects. While tech-nology can’t solve social prob-lems, it can help. We need to make sure networks and services support society’s solutions for handling known risks—for exam-ple, by spreading information quickly so people can keep safe from identity theft and other harm.

So, yes, there’s good and bad. But the good is so powerful. these expanded networks will connect what otherwise would remain isolated. look at examples like

ushahidi, the website that brings people together to support natu-ral disaster recovery efforts. Con-necting people has a positive impact.

By using connectivity in new ways, the generation of users we’ll see in 2015 is going to push soci-ety to evolve. Government institu-tions, educational institutions, even the ‘institution’ of the family will change as a result. How will young adults want to maintain their family ties now that they’ve grown up being able to Skype3 with their grandparents?

lots of speed, lots of connection, lots of change. the future is going to come fast. But at the same time, we are and will remain human. Despite all the technol-ogy at her disposal, my daughter still wants to play with her fr iends at recess and host sleepovers. the end of all this connectivity may in fact be a greater sense of connection.

James watt

1 youtube is a trademark of google, inc. 2 google is a trademark of google, inc. 3 skype is a trademark of skype limited and other related companies.

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122010 AnnuAl report

hat will the ICt indus-try—that’s Information and Communications

technology—look like in 2015?

Before I get out my crystal ball, let’s look backward first. think for a moment about time-telling itself. Mechanical clock technol-ogy first emerged in the form of clock towers. the lovely village of Brantôme in France’s périgord has one of the oldest in europe, built in romanesque style. Why a bell tower? Because the technol-ogy was scarce, so locating the mechanism in an accessible cen-tral place and triggering bells to ring at regular intervals allowed it to be used by many. Since then, as time-telling technology has gotten smaller and cheaper, clocks moved into our homes, then to our pockets and wrists, and now to virtually any device that can benefit: radios, micro-waves, coffee pots, and much more. time-telling has diffused. And in so doing, the number of time-telling things has grown exponentially—from a few dozen

bILLIoNs ANd bILLIoNs of bIts

w

Favorite saying: “the truth does not change according to our ability to stomach it.” • Flannery o’Connor

emily nagle greenstats: 30 years in the industryposition: chairman, yankee group research, inc.

clock towers in the 13th century to a quantity today that would be difficult to know precisely but is surely in the hundreds of billions.

that’s good context for my pre-dictions for the information and communications technology sec-tor by 2015: exponential diffu-sion. not a new trend, but rather something that has characterized the progress of technology since the introduction of the clock... and more recently, the introduc-tion of electronic computing in the middle of the last century.

When exponential trends com-bine, the pace of technological change accelerates. Computing, storage, networks, each continue

to become more efficient, cheap-er and smaller. no longer does technology require centuries to diffuse, as the clock did, but decades or less. As a result, by 2015 we can expect pronounced expansion in at least four areas.

Cloud computingYankee Group research suggests that the revenues recognized by the global provision of enterprise computing services in the net-work will surpass $22B by 2014—at a compound annual growth rate of more than 30 percent. Why? Just as factories in the early 20th century were able to stop generating their own power as the global electrical grid matured, businesses will move

tomorrow’s high-tech leaders will be companies that understand the business of connecting huge numbers of people and things. In a world where information is everything —and everything is information—global networks are going to have to support a whole new mode of connected living.

techNological chaNge

guest speedtHouGHt

132010 AnnuAl report

away from centralized, on-site computing centers and instead locate their computing and data storage elsewhere.

Connected devicesthe expansion of an affordable, high-capacity, intelligent global network is also spawning the emergence of more networked things in our lives. this trend includes new classes of consumer products, such as the tablet (which Yankee Group expects to represent an annual global mar-ket of $45B by 2015), and surely new devices our imaginations have yet to create. In commercial enterprises, we expect to see the long-heralded addition of net-work connectivity to the compa-ny’s ‘assets’—equipment, compo-nents, infrastructure—so that they, too, can use the network to send and receive information and instructions, saving time, labor, and other costs in the process. By 2015, we expect more than 50 billion things worldwide to be connected—10 times the number of people the network will con-nect. the exponential growth will come from a combination of machine-to-machine applications that have been around for the better part of the last decade, such as fleet management, and new uses for connected things, such as digital signage. All due to the ability of computing and con-nectivity to further diffuse into

the world thanks to the continu-ing fall in costs and size of the core technology.

small-scale computingA major change in how software is created and used is underway, a second-order effect of the expo-nential growth in smartphones, tablets, and other connected devices. It’s atomized software—small applications that, given the reduced computing and display capabilities of those devices, focus on just a few key functions. From the days of complex, monolithic software systems built to run from massive central computing facili-ties, we’re moving toward a frag-mented, simplified software space from which there is no return. Mobile apps will reach $26M in global sales by 2015. Will we con-tinue to choose them from online ‘app stores’? Doubtful. no one cares to search for needles in hay-stacks. During the next few years, open networks and open operat-ing systems will support a more hybridized, integrative approach to emerge. users may assemble higher-order functions from mul-tiple apps, jigsaw-puzzle style.

‘exa-scale’ datalastly, the unstoppable and rap-idly accelerating pace of intercon-necting people and things around the world is unleashing orders of magnitude increases in the vol-ume of digital data in our lives.

By 2015, we expect more than 50 billion things worldwide to be connected—10 times the number of people the network will connect.

there are at least three factors: speed, thanks to the network’s ability to tell us about events in real time; scale, due to the increased numbers of people, things and activities engaged in the networked world; and sen-sors that gather new dimensions of information from us and our things. people today are just get-ting used to the difference between the prefixes ‘mega-’ (millions) and ‘giga-’ (billions), and now we’re into ‘exa-’ territory, the prefix that means billions of bil-lions. Internet traffic today is being measured in exabytes per month. new insights will emerge from new types of data: already, Google1 has shown that the loca-tion of people searching for infor-mation on flu symptoms is a reli-able predictor of the location of the next flu outbreak.

Given the rapid expansions ahead, by 2015 our 20th century computing history may not look as charming as the stone campa-nile in Brantôme, but it will be just as outdated.

emily Nagle greeN

1 Google is a trademark of Google, Inc.

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122010 AnnuAl report

hat will the ICt indus-try—that’s Information and Communications

technology—look like in 2015?

Before I get out my crystal ball, let’s look backward first. think for a moment about time-telling itself. Mechanical clock technol-ogy first emerged in the form of clock towers. the lovely village of Brantôme in France’s périgord has one of the oldest in europe, built in romanesque style. Why a bell tower? Because the technol-ogy was scarce, so locating the mechanism in an accessible cen-tral place and triggering bells to ring at regular intervals allowed it to be used by many. Since then, as time-telling technology has gotten smaller and cheaper, clocks moved into our homes, then to our pockets and wrists, and now to virtually any device that can benefit: radios, micro-waves, coffee pots, and much more. time-telling has diffused. And in so doing, the number of time-telling things has grown exponentially—from a few dozen

bILLIoNs ANd bILLIoNs of bIts

w

Favorite saying: “the truth does not change according to our ability to stomach it.” • Flannery o’Connor

emily nagle greenstats: 30 years in the industryposition: chairman, yankee group research, inc.

clock towers in the 13th century to a quantity today that would be difficult to know precisely but is surely in the hundreds of billions.

that’s good context for my pre-dictions for the information and communications technology sec-tor by 2015: exponential diffu-sion. not a new trend, but rather something that has characterized the progress of technology since the introduction of the clock... and more recently, the introduc-tion of electronic computing in the middle of the last century.

When exponential trends com-bine, the pace of technological change accelerates. Computing, storage, networks, each continue

to become more efficient, cheap-er and smaller. no longer does technology require centuries to diffuse, as the clock did, but decades or less. As a result, by 2015 we can expect pronounced expansion in at least four areas.

Cloud computingYankee Group research suggests that the revenues recognized by the global provision of enterprise computing services in the net-work will surpass $22B by 2014—at a compound annual growth rate of more than 30 percent. Why? Just as factories in the early 20th century were able to stop generating their own power as the global electrical grid matured, businesses will move

tomorrow’s high-tech leaders will be companies that understand the business of connecting huge numbers of people and things. In a world where information is everything —and everything is information—global networks are going to have to support a whole new mode of connected living.

techNological chaNge

guest speedtHouGHt

132010 AnnuAl report

away from centralized, on-site computing centers and instead locate their computing and data storage elsewhere.

Connected devicesthe expansion of an affordable, high-capacity, intelligent global network is also spawning the emergence of more networked things in our lives. this trend includes new classes of consumer products, such as the tablet (which Yankee Group expects to represent an annual global mar-ket of $45B by 2015), and surely new devices our imaginations have yet to create. In commercial enterprises, we expect to see the long-heralded addition of net-work connectivity to the compa-ny’s ‘assets’—equipment, compo-nents, infrastructure—so that they, too, can use the network to send and receive information and instructions, saving time, labor, and other costs in the process. By 2015, we expect more than 50 billion things worldwide to be connected—10 times the number of people the network will con-nect. the exponential growth will come from a combination of machine-to-machine applications that have been around for the better part of the last decade, such as fleet management, and new uses for connected things, such as digital signage. All due to the ability of computing and con-nectivity to further diffuse into

the world thanks to the continu-ing fall in costs and size of the core technology.

small-scale computingA major change in how software is created and used is underway, a second-order effect of the expo-nential growth in smartphones, tablets, and other connected devices. It’s atomized software—small applications that, given the reduced computing and display capabilities of those devices, focus on just a few key functions. From the days of complex, monolithic software systems built to run from massive central computing facili-ties, we’re moving toward a frag-mented, simplified software space from which there is no return. Mobile apps will reach $26M in global sales by 2015. Will we con-tinue to choose them from online ‘app stores’? Doubtful. no one cares to search for needles in hay-stacks. During the next few years, open networks and open operat-ing systems will support a more hybridized, integrative approach to emerge. users may assemble higher-order functions from mul-tiple apps, jigsaw-puzzle style.

‘exa-scale’ datalastly, the unstoppable and rap-idly accelerating pace of intercon-necting people and things around the world is unleashing orders of magnitude increases in the vol-ume of digital data in our lives.

By 2015, we expect more than 50 billion things worldwide to be connected—10 times the number of people the network will connect.

there are at least three factors: speed, thanks to the network’s ability to tell us about events in real time; scale, due to the increased numbers of people, things and activities engaged in the networked world; and sen-sors that gather new dimensions of information from us and our things. people today are just get-ting used to the difference between the prefixes ‘mega-’ (millions) and ‘giga-’ (billions), and now we’re into ‘exa-’ territory, the prefix that means billions of bil-lions. Internet traffic today is being measured in exabytes per month. new insights will emerge from new types of data: already, Google1 has shown that the loca-tion of people searching for infor-mation on flu symptoms is a reli-able predictor of the location of the next flu outbreak.

Given the rapid expansions ahead, by 2015 our 20th century computing history may not look as charming as the stone campa-nile in Brantôme, but it will be just as outdated.

emily Nagle greeN

1 Google is a trademark of Google, Inc.

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142010 AnnuAl report

or a lot of people, mobile communication sti l l seems like a new thing.

With millions around the world just getting their first cellphones, it’s easy to forget that mobile net-works have been around for 30 years. While their capabilities have evolved, their basic design has stayed the same, which is a problem now that they’re increas-ingly having to handle all kinds of multimedia content—video, gam-ing, presentations and more—and not just the voice communication for which they were built. If all mobile calls today were to switch to high-definition video, existing networks would need 500 times more capacity to manage the load. As built, they’re not ready for that kind of growth.

rethinking the mobile networkCurrent mobile networks are made up of large cell sites cover-ing wide areas. this makes sense

wIres? whAt wIres?

F

Favorite saying: “Be bold.”

wim sweldensstats: 15 years in the industryposition: president, alcatel-lucent wireless divisionieee fellow (2003)

for voice communication but isn’t ideal for high-speed data, video and other applications because it creates bottlenecks when many people try to use the same set of network resources at once.

What’s the solution? Mobile com-panies are exploring the use of additional, smaller cell sites to serve clusters of subscribers in usage hot spots—typically dense urban areas, buildings, shopping malls, sports arenas and other gathering places. this not only provides a way of handling spikes in volume but also makes the net-works themselves less power-

hungry, easier to install and—because it requires fewer large transmission towers—less intru-sive as well.

these kinds of solutions are called ‘active, intelligent, distrib-uted radio’. Alcatel-lucent’s ver-sion of this is lightradio™, which takes the components of a tradi-tional mobile transmission sta-tion and scatters them through-out a service area. even though they’re distributed, the pieces all work together. It’s a model that makes it very easy for networks to grow because expansion doesn’t require any heavy-duty

one generation’s transformation is the next’s status quo. With the push toward all-mobile connectivity, people may soon think it strange that devices ever had to be ‘plugged in’. But before we reach that point, some things will have to change.

techNological chaNge

152010 AnnuAl report

construction—or take up a lot of space, given that equipment tra-ditionally a cubic meter in size is shrunk down to a device the size of a rubik’s Cube.

boosting capacity: Ip to the rescueIf the above approaches solve the challenge of how to grow the net-work, there’s still the question of how to boost its capacity. In the wired world, high-speed, high-capacity services take advantage of a single, uniform technology based on Ip (Internet protocol). this same change is now well underway on the mobile side of

things: older technologies are being transitioned to Ip to deliver the next generation of services.

the beauty of all-Ip is that it com-bines mobile and fixed technol ogy in the same network to handle voice, email, video communica-tions and messaging—making it hugely economical and efficient, especially for companies that deliver both types of services.

get your head in the cloudthose efficiencies are going to multiply with the arrival of ‘cloud computing.’ In the cloud world, computer processing is central-

ized in the network instead of on each user’s device. It becomes a commodity that is shared dynam-ically among applications, direct-ed where it’s needed when it’s needed. Consumers’ devices—their smartphones, laptops and whatnot—end up requiring less computer power, making them lighter, thinner and more porta-ble: they get their functionality through network connectivity.

the notion of the cloud can be also applied to the design of mobile networks themselves. today as people travel around using their devices, they create peaks and valleys of information in the network. Active, distribut-ed radio resolves this fundamen-tal problem of ‘traffic flow’ by combining the processing for many cell sites in a cloud-like way, handling unpredictable shifts smartly and dynamically as they occur. this creates massive capacity by using the collective resources of the network instead of relying on solitary sites and equipment.

mobility unboundWith the transition to high-speed, high-capacity services, mobile networks are becoming integrat-ed with Ip wireline networks. A new era in communications tech-nology is emerging. What that really means is that people will soon be able to do what they already wish for today: to stay effortlessly connected no matter where they go and use whatever device they please—wire-free.

wim sweldeNs

if all mobile calls today were to switch to high-definition video, existing networks would need 500 times more capacity to manage the load. as built, they’re not ready for that kind of growth. t

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142010 AnnuAl report

or a lot of people, mobile communication sti l l seems like a new thing.

With millions around the world just getting their first cellphones, it’s easy to forget that mobile net-works have been around for 30 years. While their capabilities have evolved, their basic design has stayed the same, which is a problem now that they’re increas-ingly having to handle all kinds of multimedia content—video, gam-ing, presentations and more—and not just the voice communication for which they were built. If all mobile calls today were to switch to high-definition video, existing networks would need 500 times more capacity to manage the load. As built, they’re not ready for that kind of growth.

rethinking the mobile networkCurrent mobile networks are made up of large cell sites cover-ing wide areas. this makes sense

wIres? whAt wIres?

F

Favorite saying: “Be bold.”

wim sweldensstats: 15 years in the industryposition: president, alcatel-lucent wireless divisionieee fellow (2003)

for voice communication but isn’t ideal for high-speed data, video and other applications because it creates bottlenecks when many people try to use the same set of network resources at once.

What’s the solution? Mobile com-panies are exploring the use of additional, smaller cell sites to serve clusters of subscribers in usage hot spots—typically dense urban areas, buildings, shopping malls, sports arenas and other gathering places. this not only provides a way of handling spikes in volume but also makes the net-works themselves less power-

hungry, easier to install and—because it requires fewer large transmission towers—less intru-sive as well.

these kinds of solutions are called ‘active, intelligent, distrib-uted radio’. Alcatel-lucent’s ver-sion of this is lightradio™, which takes the components of a tradi-tional mobile transmission sta-tion and scatters them through-out a service area. even though they’re distributed, the pieces all work together. It’s a model that makes it very easy for networks to grow because expansion doesn’t require any heavy-duty

one generation’s transformation is the next’s status quo. With the push toward all-mobile connectivity, people may soon think it strange that devices ever had to be ‘plugged in’. But before we reach that point, some things will have to change.

techNological chaNge

152010 AnnuAl report

construction—or take up a lot of space, given that equipment tra-ditionally a cubic meter in size is shrunk down to a device the size of a rubik’s Cube.

boosting capacity: Ip to the rescueIf the above approaches solve the challenge of how to grow the net-work, there’s still the question of how to boost its capacity. In the wired world, high-speed, high-capacity services take advantage of a single, uniform technology based on Ip (Internet protocol). this same change is now well underway on the mobile side of

things: older technologies are being transitioned to Ip to deliver the next generation of services.

the beauty of all-Ip is that it com-bines mobile and fixed technol ogy in the same network to handle voice, email, video communica-tions and messaging—making it hugely economical and efficient, especially for companies that deliver both types of services.

get your head in the cloudthose efficiencies are going to multiply with the arrival of ‘cloud computing.’ In the cloud world, computer processing is central-

ized in the network instead of on each user’s device. It becomes a commodity that is shared dynam-ically among applications, direct-ed where it’s needed when it’s needed. Consumers’ devices—their smartphones, laptops and whatnot—end up requiring less computer power, making them lighter, thinner and more porta-ble: they get their functionality through network connectivity.

the notion of the cloud can be also applied to the design of mobile networks themselves. today as people travel around using their devices, they create peaks and valleys of information in the network. Active, distribut-ed radio resolves this fundamen-tal problem of ‘traffic flow’ by combining the processing for many cell sites in a cloud-like way, handling unpredictable shifts smartly and dynamically as they occur. this creates massive capacity by using the collective resources of the network instead of relying on solitary sites and equipment.

mobility unboundWith the transition to high-speed, high-capacity services, mobile networks are becoming integrat-ed with Ip wireline networks. A new era in communications tech-nology is emerging. What that really means is that people will soon be able to do what they already wish for today: to stay effortlessly connected no matter where they go and use whatever device they please—wire-free.

wim sweldeNs

if all mobile calls today were to switch to high-definition video, existing networks would need 500 times more capacity to manage the load. as built, they’re not ready for that kind of growth. t

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162010 AnnuAl report

t seems that every time the communications industry announces a

new capability it is rapidly con-sumed: new applications emerge that push the limits and suddenly the network’s playing catch-up again. Most recently, social and entertainment applications have taken off, with high-definition (HD) video the main consumer of network capacity (bandwidth). We’re also seeing applications leave the desktop and make their home in the network—what’s called cloud computing. All of these demand always-on, reli-able, high-performance networks.

redefining ‘possible’As in pCs, tablets and phones, the engine of network bandwidth growth is silicon technology. In some ways silicon is like a blank sheet of paper; every generation writes something new on it, drawing more complex, more powerful designs and reweaving the fabric of the Internet. this is the lifeblood of our business: advancing the ways companies,

tIme to smArteN up

homes and devices access net-work resources; and reshaping the capabilities of the large core networks that move massive flows of information around the Internet. this progress can’t hap-pen in isolation. It’s not particu-larly useful to have very high-speed access if there aren’t the resources in the rest of the net-work to connect to other users or applications. It’s like an orchestra: to produce good results, all parts must be on time and in tune.

getting the most value out of the networkAssembling a technological ensemble like the one we’re talk-ing about is, of course, an expen-

sive proposition. telcos need to generate enough revenues from their networks to shoulder the cost of change. Fortunately for these companies, their ‘product’—the network—is becoming more essential and valuable with every passing day. What started as prin-cipally a way for businesses to communicate has become the fabric of our social lives, work lives and economies. It’s truly remarkable.

to harness the value in the net-work, we have to do things differ-ently than we have up to now. network companies’ business models need to change. Building a faster network alone won’t suffice.

Favorite saying: “What you can do, or dream you can do, begin it. Boldness has genius, power and magic in it.” • Goethe

basil alwanstats: 25 years in the industryposition: president, alcatel-lucent ip division founder ceo, timetra

i

It used to be that if you had more calls or data flowing through your network the solution was to add more capacity. But with an ever-greater variety of media (HD video, anyone?) pouring through today’s networks at faster and faster speeds, capacity alone isn’t enough. We have to make the networks we use more economical, energy efficient and, in a word, smarter.

techNological chaNge

172010 AnnuAl report

At Alcatel-lucent we talk about b u i l d i n g H i g h l e v e r a g e networks™—‘high leverage’ because they must not only carry all the voice, data and video they can, at the lowest possible cost, but they also have to contain the necessary intelligence to use every single network asset to its fullest capability. to accomplish this, network operators will require a toolset of new technolo-gies, which has created whole new areas of development in our industry.

Intelligence + control = opportunityA good example is on-demand HD video. to support it, content delivery network (CDn) technol-ogy must be deployed deep in the operator network. CDn creates pockets throughout the network where copies of popular sites, downloads and streams can be stored close to the people who want them. If thousands of households are watching a single program, it is economically imperative that each individual video stream not have to travel across the entire Internet every time it’s viewed. rather, the video should be stored locally to improve the quality and speed of the subscriber experience.

to ensure subscribers get their fair share of high-speed connec-tivity, network companies also need to be able to impose usage caps and controls. this requires that a new set of technologies be built into equipment so compa-nies can see and understand the way information is flowing through their networks. It also requires policies and systems

that can recognize subscribers, know what plan they’re on, and set the network to deliver the level of service they’re paying for. Some people might be open to allowing their preferences or usage to be analyzed in order to receive more effective and less obtrusive advertising. this again requires systems that can analyze and understand information flows much more deeply than today’s networks do.

So the network of tomorrow won’t just be high-speed; it will also be intelligent. this will ensure companies building the public networks of tomorrow deliver the best performance to their subscribers while benefiting from the economics required to support ongoing growth. this is indeed the only way forward. We all have a vested interest in see-ing the continuation of this renaissance in communications. no matter who you are—subscrib-er, application developer or telco—making sure this burgeon-ing, boundary-less, digital net-worked world comes to be is essential.

basil alwaN

the network of tomorrow won’t just be high-speed; it will also be intelligent.

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162010 AnnuAl report

t seems that every time the communications industry announces a

new capability it is rapidly con-sumed: new applications emerge that push the limits and suddenly the network’s playing catch-up again. Most recently, social and entertainment applications have taken off, with high-definition (HD) video the main consumer of network capacity (bandwidth). We’re also seeing applications leave the desktop and make their home in the network—what’s called cloud computing. All of these demand always-on, reli-able, high-performance networks.

redefining ‘possible’As in pCs, tablets and phones, the engine of network bandwidth growth is silicon technology. In some ways silicon is like a blank sheet of paper; every generation writes something new on it, drawing more complex, more powerful designs and reweaving the fabric of the Internet. this is the lifeblood of our business: advancing the ways companies,

tIme to smArteN up

homes and devices access net-work resources; and reshaping the capabilities of the large core networks that move massive flows of information around the Internet. this progress can’t hap-pen in isolation. It’s not particu-larly useful to have very high-speed access if there aren’t the resources in the rest of the net-work to connect to other users or applications. It’s like an orchestra: to produce good results, all parts must be on time and in tune.

getting the most value out of the networkAssembling a technological ensemble like the one we’re talk-ing about is, of course, an expen-

sive proposition. telcos need to generate enough revenues from their networks to shoulder the cost of change. Fortunately for these companies, their ‘product’—the network—is becoming more essential and valuable with every passing day. What started as prin-cipally a way for businesses to communicate has become the fabric of our social lives, work lives and economies. It’s truly remarkable.

to harness the value in the net-work, we have to do things differ-ently than we have up to now. network companies’ business models need to change. Building a faster network alone won’t suffice.

Favorite saying: “What you can do, or dream you can do, begin it. Boldness has genius, power and magic in it.” • Goethe

basil alwanstats: 25 years in the industryposition: president, alcatel-lucent ip division founder ceo, timetra

i

It used to be that if you had more calls or data flowing through your network the solution was to add more capacity. But with an ever-greater variety of media (HD video, anyone?) pouring through today’s networks at faster and faster speeds, capacity alone isn’t enough. We have to make the networks we use more economical, energy efficient and, in a word, smarter.

techNological chaNge

172010 AnnuAl report

At Alcatel-lucent we talk about b u i l d i n g H i g h l e v e r a g e networks™—‘high leverage’ because they must not only carry all the voice, data and video they can, at the lowest possible cost, but they also have to contain the necessary intelligence to use every single network asset to its fullest capability. to accomplish this, network operators will require a toolset of new technolo-gies, which has created whole new areas of development in our industry.

Intelligence + control = opportunityA good example is on-demand HD video. to support it, content delivery network (CDn) technol-ogy must be deployed deep in the operator network. CDn creates pockets throughout the network where copies of popular sites, downloads and streams can be stored close to the people who want them. If thousands of households are watching a single program, it is economically imperative that each individual video stream not have to travel across the entire Internet every time it’s viewed. rather, the video should be stored locally to improve the quality and speed of the subscriber experience.

to ensure subscribers get their fair share of high-speed connec-tivity, network companies also need to be able to impose usage caps and controls. this requires that a new set of technologies be built into equipment so compa-nies can see and understand the way information is flowing through their networks. It also requires policies and systems

that can recognize subscribers, know what plan they’re on, and set the network to deliver the level of service they’re paying for. Some people might be open to allowing their preferences or usage to be analyzed in order to receive more effective and less obtrusive advertising. this again requires systems that can analyze and understand information flows much more deeply than today’s networks do.

So the network of tomorrow won’t just be high-speed; it will also be intelligent. this will ensure companies building the public networks of tomorrow deliver the best performance to their subscribers while benefiting from the economics required to support ongoing growth. this is indeed the only way forward. We all have a vested interest in see-ing the continuation of this renaissance in communications. no matter who you are—subscrib-er, application developer or telco—making sure this burgeon-ing, boundary-less, digital net-worked world comes to be is essential.

basil alwaN

the network of tomorrow won’t just be high-speed; it will also be intelligent.

th

e s

tr

At

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oo

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182010 AnnuAl report

192010 AnnuAl report

aution: disruptive change aheadIndustry observers have

called the recent rapid increase in mobile data an ‘explosion’ with good reason. the magnitude and speed of change we’ve seen with the rise of smartphone use has never been experienced with any innovation before—and we are still just on the eve of the mobile Internet.

How did it come about? the first contributor was extremely fast adoption of new technology. In 1999, one human being out of six had a mobile phone. By 2010, it was seven out of 10. the second is the enhanced capability of the devices themselves: roughly 10 percent of all mobile phones today can connect to the Internet, and 70 percent will be able to do so by 2015. the 400 biggest cit-ies in the world will be home to 13,000 smartphones for every square kilometer in 2015, com-pared to 400 today.

europe: fALLINg behINd?

last but not least, some 90 per-cent of mobile usage by 2015 will be able to send and receive video. If just one of every five smart-phones were to simultaneously connect to the network in such a scenario, demand would soar by a factor of 30. this means signifi-cant investments are needed in every area of the network to increase capacity. estimates for europe alone put that investment at around 380 billion euros over the coming decade, 100 billion of which will be for wireless access. And in fact most regions of the world are seeing this spending happen: in Asia, the u.S., russia

and eastern europe. It seems that Central and Western europe are lagging behind.

this is not Alexander graham bell’s business modelthe traditional business model for telecommunications, which goes back all the way to the tele-phone’s inventor, Alexander Graham Bell, is coming to an end. network companies today can no longer make enough money sell-ing voice minutes that are priced based on the distance a call trav-els, and can’t turn the data cours-ing through their systems into revenue even though the volume

Favorite saying: “turbulence ahead: disruptive thinking urgently needed.”

gabrielle gautHeystats: 19 years in the industryposition: executive vp, global government and public affairs, alcatel-lucent

It’s been a marathon of change for european telcos over the past five years—and the biggest disruptions are still to come. they have to overhaul their business models, and fast. What will it take? A change-ready environment, starting with a common european vision for the industry.

c

techNological chaNge of voice, data and video is grow-ing. As a result, telecommunica-tions companies are reluctant and even unable to finance the net-work upgrades they need to make to keep up with user demand.

outdated interconnection agree-ments—which govern how they allow others to use their net-works—and services piggyback-ing on their networks from so-called ‘over-the-top’ providers who deliver applications like Youtube,1 Facebook2 and Google3 to telco customers without any fees for network use, are com-pounding the problem. Most

painful is the fact that these over-the-toppers are enjoying fast revenue growth, a stunning increase in market capitalization, and a very different price-to-earnings ratio than the network operators. they have very dif-ferent business models and are often global players, while telcos remain mainly local. While this is so, the future of the telcos and the over-the-top providers is closely linked: for all the imbal-ance between them, they are in fact highly interdependent.

how do we create a digital society?What’s desperately needed is a shared vision, especially in europe, to ensure that society continues to explore and reap the benefits of digital technology. Why? Because the telecommuni-cations sector is no longer a scat-tering of independent companies but rather a matrix of intercon-nected businesses. this is largely because Ip is the technology that will underpin the networks of tomorrow. Ip is the Internet pro-tocol, a digital way of exchanging information no matter what kind of information it is. In the past,

voice, data and video needed dif-ferent kinds of networks to carry them: Ip can do it all.

But quality remains an issue. tra-ditional fixed-line telephone ser-vice comes with quality guaran-tees: your call gets through, doesn’t get dropped, and the sound is good. Ip technologies, however, have been developed without standard rules for quality of service or for interconnection between Internet Service provid-ers (ISps). ISps just promise to

make their ‘best effort’ to deliver. Standardization is essential to guarantee that quality of service remains consistent from end to end—from the point a message is sent to the point where it is received. And quality is exactly what consumers expect.

What is the solution to finance the huge investment gap? there are only 3 options:

1. We have to increase end-user revenues through new, enhanced services priced according to each user’s needs and expectations of quality. this ability to distinguish

service quality is at the heart of the so-called ‘net-neutrality’ debate.

2. We have to make sure telecoms companies can contribute value and earn money by providing—or enabling others to provide—new kinds of digital services. Key to this will be their ability to collab-orate with over-the-top providers and establish wholesale pricing schemes for network use based on different levels of service.

the magnitude and speed of change we’ve seen with the rise of smartphone use has never been experienced with any innovation before.

•••1 youtube is a trademark of google, inc. 2 facebook is a trademark of facebook, inc. 3 google is a trademark of google, inc.

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182010 AnnuAl report

192010 AnnuAl report

aution: disruptive change aheadIndustry observers have

called the recent rapid increase in mobile data an ‘explosion’ with good reason. the magnitude and speed of change we’ve seen with the rise of smartphone use has never been experienced with any innovation before—and we are still just on the eve of the mobile Internet.

How did it come about? the first contributor was extremely fast adoption of new technology. In 1999, one human being out of six had a mobile phone. By 2010, it was seven out of 10. the second is the enhanced capability of the devices themselves: roughly 10 percent of all mobile phones today can connect to the Internet, and 70 percent will be able to do so by 2015. the 400 biggest cit-ies in the world will be home to 13,000 smartphones for every square kilometer in 2015, com-pared to 400 today.

europe: fALLINg behINd?

last but not least, some 90 per-cent of mobile usage by 2015 will be able to send and receive video. If just one of every five smart-phones were to simultaneously connect to the network in such a scenario, demand would soar by a factor of 30. this means signifi-cant investments are needed in every area of the network to increase capacity. estimates for europe alone put that investment at around 380 billion euros over the coming decade, 100 billion of which will be for wireless access. And in fact most regions of the world are seeing this spending happen: in Asia, the u.S., russia

and eastern europe. It seems that Central and Western europe are lagging behind.

this is not Alexander graham bell’s business modelthe traditional business model for telecommunications, which goes back all the way to the tele-phone’s inventor, Alexander Graham Bell, is coming to an end. network companies today can no longer make enough money sell-ing voice minutes that are priced based on the distance a call trav-els, and can’t turn the data cours-ing through their systems into revenue even though the volume

Favorite saying: “turbulence ahead: disruptive thinking urgently needed.”

gabrielle gautHeystats: 19 years in the industryposition: executive vp, global government and public affairs, alcatel-lucent

It’s been a marathon of change for european telcos over the past five years—and the biggest disruptions are still to come. they have to overhaul their business models, and fast. What will it take? A change-ready environment, starting with a common european vision for the industry.

c

techNological chaNge of voice, data and video is grow-ing. As a result, telecommunica-tions companies are reluctant and even unable to finance the net-work upgrades they need to make to keep up with user demand.

outdated interconnection agree-ments—which govern how they allow others to use their net-works—and services piggyback-ing on their networks from so-called ‘over-the-top’ providers who deliver applications like Youtube,1 Facebook2 and Google3 to telco customers without any fees for network use, are com-pounding the problem. Most

painful is the fact that these over-the-toppers are enjoying fast revenue growth, a stunning increase in market capitalization, and a very different price-to-earnings ratio than the network operators. they have very dif-ferent business models and are often global players, while telcos remain mainly local. While this is so, the future of the telcos and the over-the-top providers is closely linked: for all the imbal-ance between them, they are in fact highly interdependent.

how do we create a digital society?What’s desperately needed is a shared vision, especially in europe, to ensure that society continues to explore and reap the benefits of digital technology. Why? Because the telecommuni-cations sector is no longer a scat-tering of independent companies but rather a matrix of intercon-nected businesses. this is largely because Ip is the technology that will underpin the networks of tomorrow. Ip is the Internet pro-tocol, a digital way of exchanging information no matter what kind of information it is. In the past,

voice, data and video needed dif-ferent kinds of networks to carry them: Ip can do it all.

But quality remains an issue. tra-ditional fixed-line telephone ser-vice comes with quality guaran-tees: your call gets through, doesn’t get dropped, and the sound is good. Ip technologies, however, have been developed without standard rules for quality of service or for interconnection between Internet Service provid-ers (ISps). ISps just promise to

make their ‘best effort’ to deliver. Standardization is essential to guarantee that quality of service remains consistent from end to end—from the point a message is sent to the point where it is received. And quality is exactly what consumers expect.

What is the solution to finance the huge investment gap? there are only 3 options:

1. We have to increase end-user revenues through new, enhanced services priced according to each user’s needs and expectations of quality. this ability to distinguish

service quality is at the heart of the so-called ‘net-neutrality’ debate.

2. We have to make sure telecoms companies can contribute value and earn money by providing—or enabling others to provide—new kinds of digital services. Key to this will be their ability to collab-orate with over-the-top providers and establish wholesale pricing schemes for network use based on different levels of service.

the magnitude and speed of change we’ve seen with the rise of smartphone use has never been experienced with any innovation before.

•••1 youtube is a trademark of google, inc. 2 facebook is a trademark of facebook, inc. 3 google is a trademark of google, inc.

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202010 AnnuAl report

very decade seems to bring its own technol-ogy trend. Broadband

and the Internet were the phe-nomena of the 1990s; wireless broadband and smart devices the hot stuff of the 2000s. My sug-gestion is that in 10 years’ time we’ll be looking back at this as the decade of the network—but a network unlike any we’ve experi-enced before. the way I see it, by 2015 there will be five big shifts underway.

thIs Is Not Your fAther’s Network

the network will be your computerthink of a pC today: it has a proc-essor, some memory and storage

(a hard drive). It also has an inter-nal communications network— circuitry that shuffles informa-tion around inside the machine.

Favorite saying: “Simplify the complex, connect different ideas, and therein lies the technological magic.”

marcus weldonstats: 15 years in the industryposition: chief technology officer, alcatel-lucent

Smarter, more streamlined and far more efficient, networks in 2015 are going to look and act very differently than the ones we know today. Here are five ways we can expect them to change.

e

techNological chaNge

Any arrangements, of course, have to be governed by protec-tive conditions: telecommunica-tions companies should not be able to discriminate harmfully against competitors or customers in their wholesale pricing, and they should be transparent about network performance.

3. But we also have to imagine new investment models that allow telecommunications com-panies to secure the funds they need to upgrade their networks

to meet new service and perfor-mance demands. the previous two points will certainly contrib-ute to this, but in addition it seems clear that sharing the net-work infrastructure in a profit-able way also has to be part of the mix.

taking these steps is the only way to guarantee europe does not fall behind the rest of the world as i t goes dig i ta l in the coming years. While we can-not afford to underestimate the

difficulties associated with potentially conflicting interests among the different players, the fact is their futures are intercon-nected and telcos and over-the-top providers must come togeth-er to move forward. this will no doubt require a clear strategic vision and a strong political will to encourage and foster a global and broad commitment.

gabrielle gauthey

•••

212010 AnnuAl report

Applications run in the pC on its processor. Cloud computing (this is the ‘cloud’ everyone keeps talk-ing about) takes the same princi-ple and moves the pieces hun-dreds or even thousands of kilometers apart, so the storage can be in one place, the comput-ing power in another and the dis-play (e.g. your smartphone) somewhere—anywhere—else. And all this is connected together by a very high performance telecom-munications network to deliver the app. Since the network is really at the heart of this new comput-ing paradigm, and will connect you to whatever you need, when-ever you need it, in a very real sense, the network will be the basic building block of your com-puter. And a very important ben-efit of this new structure is that even simple devices can deliver a rich set of apps, since all the com-plex processing is done in the cloud. So now someone sitting in South Africa using a simpler smartphone will have access to the same capabilities as someone in South Carolina using the latest tablet. this digital ‘inclusiveness’ will be one of the most profound changes we have ever observed in global commerce and commu-nities.

the network will be smartthe costs of computer processing, memory and storage are all com-ing down according to Moore’s law, which essentially says the number of components on a com-puter chip doubles every two years. this leads to ever decreas-ing device costs with increasing capabilities. In telecommunica-tions this has led to the remark-able evolution in mobile devices

such as smartphones and tablets, but also in the capacity or ‘band-width’ of the network. And what we are now seeing is that it’s starting to make economic sense to actually run applications in the cloud—as well as in the network itself. that sounds cool, but what does it mean? It means that the network learns about the applica-tions running over it and dynam-ically improves the app delivery to create the best user experi-ence. We are already seeing this trend with video, where network elements cache (temporarily store) video files and handle

some of the processing that used to have to be done on the user’s machine, making the video work better and stream anywhere, anytime, to any device.

the network will be ‘open’ For many years, the providers of traditional communications ser-vices (voice, data, and tV/video) operated their networks in an iso-lated, closed-off way. that’s start-ing to change. More and more of them are opening up their net-works to third-party and web application developers, allowing

with the cloud, someone in south africa using a simple smartphone will have access to the same capabilities as someone in south carolina using the latest tablet.

•••

th

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th

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202010 AnnuAl report

very decade seems to bring its own technol-ogy trend. Broadband

and the Internet were the phe-nomena of the 1990s; wireless broadband and smart devices the hot stuff of the 2000s. My sug-gestion is that in 10 years’ time we’ll be looking back at this as the decade of the network—but a network unlike any we’ve experi-enced before. the way I see it, by 2015 there will be five big shifts underway.

thIs Is Not Your fAther’s Network

the network will be your computerthink of a pC today: it has a proc-essor, some memory and storage

(a hard drive). It also has an inter-nal communications network— circuitry that shuffles informa-tion around inside the machine.

Favorite saying: “Simplify the complex, connect different ideas, and therein lies the technological magic.”

marcus weldonstats: 15 years in the industryposition: chief technology officer, alcatel-lucent

Smarter, more streamlined and far more efficient, networks in 2015 are going to look and act very differently than the ones we know today. Here are five ways we can expect them to change.

e

techNological chaNge

Any arrangements, of course, have to be governed by protec-tive conditions: telecommunica-tions companies should not be able to discriminate harmfully against competitors or customers in their wholesale pricing, and they should be transparent about network performance.

3. But we also have to imagine new investment models that allow telecommunications com-panies to secure the funds they need to upgrade their networks

to meet new service and perfor-mance demands. the previous two points will certainly contrib-ute to this, but in addition it seems clear that sharing the net-work infrastructure in a profit-able way also has to be part of the mix.

taking these steps is the only way to guarantee europe does not fall behind the rest of the world as i t goes dig i ta l in the coming years. While we can-not afford to underestimate the

difficulties associated with potentially conflicting interests among the different players, the fact is their futures are intercon-nected and telcos and over-the-top providers must come togeth-er to move forward. this will no doubt require a clear strategic vision and a strong political will to encourage and foster a global and broad commitment.

gabrielle gauthey

•••

212010 AnnuAl report

Applications run in the pC on its processor. Cloud computing (this is the ‘cloud’ everyone keeps talk-ing about) takes the same princi-ple and moves the pieces hun-dreds or even thousands of kilometers apart, so the storage can be in one place, the comput-ing power in another and the dis-play (e.g. your smartphone) somewhere—anywhere—else. And all this is connected together by a very high performance telecom-munications network to deliver the app. Since the network is really at the heart of this new comput-ing paradigm, and will connect you to whatever you need, when-ever you need it, in a very real sense, the network will be the basic building block of your com-puter. And a very important ben-efit of this new structure is that even simple devices can deliver a rich set of apps, since all the com-plex processing is done in the cloud. So now someone sitting in South Africa using a simpler smartphone will have access to the same capabilities as someone in South Carolina using the latest tablet. this digital ‘inclusiveness’ will be one of the most profound changes we have ever observed in global commerce and commu-nities.

the network will be smartthe costs of computer processing, memory and storage are all com-ing down according to Moore’s law, which essentially says the number of components on a com-puter chip doubles every two years. this leads to ever decreas-ing device costs with increasing capabilities. In telecommunica-tions this has led to the remark-able evolution in mobile devices

such as smartphones and tablets, but also in the capacity or ‘band-width’ of the network. And what we are now seeing is that it’s starting to make economic sense to actually run applications in the cloud—as well as in the network itself. that sounds cool, but what does it mean? It means that the network learns about the applica-tions running over it and dynam-ically improves the app delivery to create the best user experi-ence. We are already seeing this trend with video, where network elements cache (temporarily store) video files and handle

some of the processing that used to have to be done on the user’s machine, making the video work better and stream anywhere, anytime, to any device.

the network will be ‘open’ For many years, the providers of traditional communications ser-vices (voice, data, and tV/video) operated their networks in an iso-lated, closed-off way. that’s start-ing to change. More and more of them are opening up their net-works to third-party and web application developers, allowing

with the cloud, someone in south africa using a simple smartphone will have access to the same capabilities as someone in south carolina using the latest tablet.

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232010 AnnuAl report

222010 AnnuAl report

those partners to mash up the network’s capabilities with other web services to create new, previ-ously unimaginable applications. new business models emerging from this will allow networks to grow in a sustainable way (mean-ing the operators won’t have to overspend or build an excess of infrastructure to keep pace with demand). this creates a ‘win-win-win’ scenario: better economics for network operators, better-functioning applications, and a compelling new experience for the end user. We are already see-ing this with the emergence of partnerships between operators and application providers in online gaming and video delivery, and in the momentum building around the Wholesale Applica-tions Community (WAC)—an alli-ance of operators and network and device vendors working to define a common set of program-ming tools that will give develop-ers access to network capabilities in a consistent, unified way.

the network will be unifiedright now there are separate transport networks for wireless and traditional wire-based voice and data communication, but by 2015 they’ll have been combined into a single, high-performance network with wireless (3G and lte) and wired (DSl and Fiber) ‘access edges’ that connect to the end users. this will allow users to access their favorite apps and services whenever and however they like: maybe by a ’wired’ computer connection; maybe wirelessly using a smartphone or tablet, or even from the screen in their lte connected car—what-ever device they choose. the

point is we will no longer have to even think about connectivity: our devices and the network will hook us up in a way that best suits our needs at any given moment, and allows us to move seamlessly from one device to another with the same experi-ence and with access to all our favorite apps and content.

the network will be greenBell labs predicts that in the next several years network capacity is going to have to grow to 30 times its present level to handle all the activity generated by smart devices and tablets. there will also be more information to pro-cess as machine-to-machine com-munication (devices talking to other devices) exceeds person-to-person communication (people sending messages to each other). this could cause a huge increase in energy consumption—and relat-ed costs for operators—if we don’t find ways of making networks more energy efficient. Some fig-ures to put this in context: pub-lished data shows that the two largest telecom operators in the u.S. accounted for 0.6 percent of the country’s energy consumption in 2008. Imagine what that would climb to with a 30 times increase in network capacity! Fortunately, many organizations are putting a real focus on reining in the energy costs of networks. It’s a challenge that transcends a single vendor or operator—collaboration is needed, which is why Alcatel-lucent decided to bring players together to come up with solutions through the Greentouch™ consortium.

With these five developments, we’ll see an unprecedented rise of

new applications and capabilities with accessibility for all, inde–pendent of location or socio– economics. We’ll have more free-dom and choice in the ways we connect. And innovative compa-nies and individuals everywhere will have the opportunity to explore the possibilities of solu-tions and services that never before existed.

marcus weldoN

•••

ven people who don’t closely follow the ups and downs of the tech-

nology industry know telecom-munications is evolving at a blis-tering pace.

What was breakthrough innova-tion just a few years ago is now commonplace or discarded. Seemly overnight we are seeing radically new business models, incredible social interactions and environmentally sustainable solutions on an unprecedented scale. even more astonishing, the pace of these changes continues to accelerate.

As technology’s ability to support ever more complex features and interactions evolves, industry thought leaders are losing their ability to predict the speed and scale of the impact these new capabilities make on the way the world communicates. the tech-nology landscape is littered with the whitepapers and predictions of technologists who failed to see the next curve.

the future Is CLoser thAN You thINk

Seeing ahead is naturally always a challenge. We as humans tend to think linearly in terms of time, progress and consequences—even though we know from life’s everyday experiences that the world does not evolve in an orderly, easy-to-predict manner.

this doesn’t mean we should give up trying to visualize the future. In fact, we do a fairly good job at predicting general trends—much better, anyway, than we can pre-cisely predict whether a particu-lar protocol, application or device will be the next big thing or not. trends evolve more slowly.

We at Bell labs spend a lot of time thinking about and discuss-ing the future. But rather than coming at it from a technology perspective and trying to guess how a current technology will evolve over time, we prefer to observe human nature, which is fairly constant; to listen to our customers’ concerns and then focus on the fundamental ele-ments of the problem. this allows us to simultaneously come up with unique solutions to relevant problems but also create inven-tions and insights that transform our industry.

Favorite saying: “In times of change, learners inherit the earth, while the learned find themselves beautifully equipped to deal with a world that no longer exists.” • eric Hoffer

gee rittenHousestats: 18 years in the industryposition: vp, Bell labs research chairman, greentouch™ consortium

Alexander Graham Bell predicted in 1891 that “...the day would come when the man at the telephone would be able to see the distant person to whom he was speaking.” As right as he was, he’d probably be amazed at what his invention has become. And at what it’s going to be—sooner than we think.

e

our shared Future

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232010 AnnuAl report

222010 AnnuAl report

those partners to mash up the network’s capabilities with other web services to create new, previ-ously unimaginable applications. new business models emerging from this will allow networks to grow in a sustainable way (mean-ing the operators won’t have to overspend or build an excess of infrastructure to keep pace with demand). this creates a ‘win-win-win’ scenario: better economics for network operators, better-functioning applications, and a compelling new experience for the end user. We are already see-ing this with the emergence of partnerships between operators and application providers in online gaming and video delivery, and in the momentum building around the Wholesale Applica-tions Community (WAC)—an alli-ance of operators and network and device vendors working to define a common set of program-ming tools that will give develop-ers access to network capabilities in a consistent, unified way.

the network will be unifiedright now there are separate transport networks for wireless and traditional wire-based voice and data communication, but by 2015 they’ll have been combined into a single, high-performance network with wireless (3G and lte) and wired (DSl and Fiber) ‘access edges’ that connect to the end users. this will allow users to access their favorite apps and services whenever and however they like: maybe by a ’wired’ computer connection; maybe wirelessly using a smartphone or tablet, or even from the screen in their lte connected car—what-ever device they choose. the

point is we will no longer have to even think about connectivity: our devices and the network will hook us up in a way that best suits our needs at any given moment, and allows us to move seamlessly from one device to another with the same experi-ence and with access to all our favorite apps and content.

the network will be greenBell labs predicts that in the next several years network capacity is going to have to grow to 30 times its present level to handle all the activity generated by smart devices and tablets. there will also be more information to pro-cess as machine-to-machine com-munication (devices talking to other devices) exceeds person-to-person communication (people sending messages to each other). this could cause a huge increase in energy consumption—and relat-ed costs for operators—if we don’t find ways of making networks more energy efficient. Some fig-ures to put this in context: pub-lished data shows that the two largest telecom operators in the u.S. accounted for 0.6 percent of the country’s energy consumption in 2008. Imagine what that would climb to with a 30 times increase in network capacity! Fortunately, many organizations are putting a real focus on reining in the energy costs of networks. It’s a challenge that transcends a single vendor or operator—collaboration is needed, which is why Alcatel-lucent decided to bring players together to come up with solutions through the Greentouch™ consortium.

With these five developments, we’ll see an unprecedented rise of

new applications and capabilities with accessibility for all, inde–pendent of location or socio– economics. We’ll have more free-dom and choice in the ways we connect. And innovative compa-nies and individuals everywhere will have the opportunity to explore the possibilities of solu-tions and services that never before existed.

marcus weldoN

•••

ven people who don’t closely follow the ups and downs of the tech-

nology industry know telecom-munications is evolving at a blis-tering pace.

What was breakthrough innova-tion just a few years ago is now commonplace or discarded. Seemly overnight we are seeing radically new business models, incredible social interactions and environmentally sustainable solutions on an unprecedented scale. even more astonishing, the pace of these changes continues to accelerate.

As technology’s ability to support ever more complex features and interactions evolves, industry thought leaders are losing their ability to predict the speed and scale of the impact these new capabilities make on the way the world communicates. the tech-nology landscape is littered with the whitepapers and predictions of technologists who failed to see the next curve.

the future Is CLoser thAN You thINk

Seeing ahead is naturally always a challenge. We as humans tend to think linearly in terms of time, progress and consequences—even though we know from life’s everyday experiences that the world does not evolve in an orderly, easy-to-predict manner.

this doesn’t mean we should give up trying to visualize the future. In fact, we do a fairly good job at predicting general trends—much better, anyway, than we can pre-cisely predict whether a particu-lar protocol, application or device will be the next big thing or not. trends evolve more slowly.

We at Bell labs spend a lot of time thinking about and discuss-ing the future. But rather than coming at it from a technology perspective and trying to guess how a current technology will evolve over time, we prefer to observe human nature, which is fairly constant; to listen to our customers’ concerns and then focus on the fundamental ele-ments of the problem. this allows us to simultaneously come up with unique solutions to relevant problems but also create inven-tions and insights that transform our industry.

Favorite saying: “In times of change, learners inherit the earth, while the learned find themselves beautifully equipped to deal with a world that no longer exists.” • eric Hoffer

gee rittenHousestats: 18 years in the industryposition: vp, Bell labs research chairman, greentouch™ consortium

Alexander Graham Bell predicted in 1891 that “...the day would come when the man at the telephone would be able to see the distant person to whom he was speaking.” As right as he was, he’d probably be amazed at what his invention has become. And at what it’s going to be—sooner than we think.

e

our shared Future

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252010 AnnuAl report

242010 AnnuAl report

hot trends on the way

VideoIn the foreseeable future we see the emergence of three large-scale trends, starting with video. We have watched movies for over 100 years. the first videophone (the picturephone®) was invented more than 40 years ago. now with mobile devices having the capa-bility to support video communi-cations, and with new wireless technology increasing the capac-ity of networks to deliver video to customers, widespread video communication is a reality. this is not just an extension of two-way voice communications; it is the opportunity to create an entirely new experience.

As an example, imagine walking into a large store and instantly a video-based store applet (mini application) is downloaded to your phone. now you have a ‘per-sonal attendant’ that can help you navigate to the products you are interested in or find the nearest sale item.

Coupling this with machine-to-machine communications, the store ‘recognizes’ the product you have picked up and shown inter-est in. It can then send you recom-mendations about similar prod-ucts that complement the item, and can direct you to the section in the store where they are locat-ed. You’ll even receive an image

of the item to help you recognize it on the shelf. When you leave the store, the application is imme-diately deleted from your device.

We know that devices and capac-ity alone won’t make the video transformation happen. Video has to become much easier to use and integrate into daily life, along with the latest techniques for ‘virtual reality.’ So Bell labs is also working on new technologies that allow people to be immersed in a meeting, conversation, or activity as if they were actually physically present. We call this immersive experience “better than being there.”

seNsor Networksthe second major trend we fore-see is the deployment of sensors throughout the environment. this will significantly increase the interaction between people and objects. the initial sensor deploy-ment wil l be in c lusters to improve the efficiency of trans-portation, energy, healthcare and the home, and then will spread farther. the sensors will be installed on any object and inte-grated with other programs using simple web interfaces—making it easy for parents, as an example, to monitor children and appli-ances within their homes.

coNNectiVitythe final trend is an increase in connectivity—for instance, giving

fiber optic or wireless networks more capacity. technologies are emerging that will substantially expand connectivity at a lower cost than has been possible up to now. And these technologies will be virtually invisible—not mar-ring the cityscape with antennas or bulky equipment—and sustain-able. Beyond providing a simple connection with increased capac-ity, future network connectivity will also be able to process video streams, collect sensor data and personalize information for users, all while reducing the net-work’s environmental impact. these trends are not just exciting but are also fully interwoven with each other, together bringing about a richer communication experience. large-scale connec-tivity, with video communications technologies that are easy to use and sensors that are seamlessly integrated in the local environ-ment, will create an experience that is very different than the one we have today.

When will all this be available? Sooner than we think. Given the speed at which the world evolves, what we might imagine 15 years from now will likely become real-ity in just five.

gee ritteNhouse

we know devices and capacity alone won’t make the video transformation happen. video has to become much easier to use and integrate into daily life.

•••

e begin our journey into the digital future on a train. traveling across

europe, let’s say. We made our bookings online, from a smart-phone, between business meet-ings. In the station, we were greeted by interactive kiosks offering round-the-clock informa-tion and ‘augmented reality applications’ that provide virtual, 3D directions to our departure platform. now, relaxing on board, we can take advantage of multi-media screens that deliver up-to-date schedule and traffic infor-mation, weather forecasts for our intended destination and enter-tainment services including tV, video on demand and online shopping. When we arrive, our smartphones automatical ly receive information at the station about nearby hotels, restaurants and other services—all delivered wirelessly.

this is the picture of life in a digi-tal world, and it extends virtually everywhere.

You AIN’t seeN NothINg Yet

Your environment will be awarepeople feel there’s been a revolu-tion going on the past five years, but it’s happened mostly within the communications industry. We haven’t seen it spread out to other aspects of our lives: But it’s going to—starting now.

Automated systems in cities will manage traffic, operating light changes at the busiest intersec-tions to reduce commuting times and congestion—not only keeping traffic flowing smoothly but also helping reduce the harmful envi-ronmental effects of idl ing engines. Intelligent highways will direct drivers to the nearest park-

and-ride for transfer to public transport. Information streamed to vehicles will help drivers find parking spots without having to circle the block 15 times. When accidents occur, the ‘aware’ urban environment will ensure that police or ambulance services are dispatched appropriately—and that traffic is redirected to avoid jams.

broadband: Not just for telcos anymorenew technology such as lte (long-term evolution, the next generation of wireless, also called 4G) will provide public safety and emergency services with high-

Favorite saying: “enjoy the difficulties—and have fun!”

olivia Qiustats: 14 years in the industryposition: global sales head, alcatel-lucent strategic industries

technology revolutions, unlike others, don’t happen overnight. Innovations combine, are fine-tuned, and finally reveal new possibilities. that’s when they produce significant changes. And that’s exactly the point digital technologies are at today.

w

our shared Future

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252010 AnnuAl report

242010 AnnuAl report

hot trends on the way

VideoIn the foreseeable future we see the emergence of three large-scale trends, starting with video. We have watched movies for over 100 years. the first videophone (the picturephone®) was invented more than 40 years ago. now with mobile devices having the capa-bility to support video communi-cations, and with new wireless technology increasing the capac-ity of networks to deliver video to customers, widespread video communication is a reality. this is not just an extension of two-way voice communications; it is the opportunity to create an entirely new experience.

As an example, imagine walking into a large store and instantly a video-based store applet (mini application) is downloaded to your phone. now you have a ‘per-sonal attendant’ that can help you navigate to the products you are interested in or find the nearest sale item.

Coupling this with machine-to-machine communications, the store ‘recognizes’ the product you have picked up and shown inter-est in. It can then send you recom-mendations about similar prod-ucts that complement the item, and can direct you to the section in the store where they are locat-ed. You’ll even receive an image

of the item to help you recognize it on the shelf. When you leave the store, the application is imme-diately deleted from your device.

We know that devices and capac-ity alone won’t make the video transformation happen. Video has to become much easier to use and integrate into daily life, along with the latest techniques for ‘virtual reality.’ So Bell labs is also working on new technologies that allow people to be immersed in a meeting, conversation, or activity as if they were actually physically present. We call this immersive experience “better than being there.”

seNsor Networksthe second major trend we fore-see is the deployment of sensors throughout the environment. this will significantly increase the interaction between people and objects. the initial sensor deploy-ment wil l be in c lusters to improve the efficiency of trans-portation, energy, healthcare and the home, and then will spread farther. the sensors will be installed on any object and inte-grated with other programs using simple web interfaces—making it easy for parents, as an example, to monitor children and appli-ances within their homes.

coNNectiVitythe final trend is an increase in connectivity—for instance, giving

fiber optic or wireless networks more capacity. technologies are emerging that will substantially expand connectivity at a lower cost than has been possible up to now. And these technologies will be virtually invisible—not mar-ring the cityscape with antennas or bulky equipment—and sustain-able. Beyond providing a simple connection with increased capac-ity, future network connectivity will also be able to process video streams, collect sensor data and personalize information for users, all while reducing the net-work’s environmental impact. these trends are not just exciting but are also fully interwoven with each other, together bringing about a richer communication experience. large-scale connec-tivity, with video communications technologies that are easy to use and sensors that are seamlessly integrated in the local environ-ment, will create an experience that is very different than the one we have today.

When will all this be available? Sooner than we think. Given the speed at which the world evolves, what we might imagine 15 years from now will likely become real-ity in just five.

gee ritteNhouse

we know devices and capacity alone won’t make the video transformation happen. video has to become much easier to use and integrate into daily life.

•••

e begin our journey into the digital future on a train. traveling across

europe, let’s say. We made our bookings online, from a smart-phone, between business meet-ings. In the station, we were greeted by interactive kiosks offering round-the-clock informa-tion and ‘augmented reality applications’ that provide virtual, 3D directions to our departure platform. now, relaxing on board, we can take advantage of multi-media screens that deliver up-to-date schedule and traffic infor-mation, weather forecasts for our intended destination and enter-tainment services including tV, video on demand and online shopping. When we arrive, our smartphones automatical ly receive information at the station about nearby hotels, restaurants and other services—all delivered wirelessly.

this is the picture of life in a digi-tal world, and it extends virtually everywhere.

You AIN’t seeN NothINg Yet

Your environment will be awarepeople feel there’s been a revolu-tion going on the past five years, but it’s happened mostly within the communications industry. We haven’t seen it spread out to other aspects of our lives: But it’s going to—starting now.

Automated systems in cities will manage traffic, operating light changes at the busiest intersec-tions to reduce commuting times and congestion—not only keeping traffic flowing smoothly but also helping reduce the harmful envi-ronmental effects of idl ing engines. Intelligent highways will direct drivers to the nearest park-

and-ride for transfer to public transport. Information streamed to vehicles will help drivers find parking spots without having to circle the block 15 times. When accidents occur, the ‘aware’ urban environment will ensure that police or ambulance services are dispatched appropriately—and that traffic is redirected to avoid jams.

broadband: Not just for telcos anymorenew technology such as lte (long-term evolution, the next generation of wireless, also called 4G) will provide public safety and emergency services with high-

Favorite saying: “enjoy the difficulties—and have fun!”

olivia Qiustats: 14 years in the industryposition: global sales head, alcatel-lucent strategic industries

technology revolutions, unlike others, don’t happen overnight. Innovations combine, are fine-tuned, and finally reveal new possibilities. that’s when they produce significant changes. And that’s exactly the point digital technologies are at today.

w

our shared Future

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272010 AnnuAl report

262010 AnnuAl report

definition views of incidents to enable a fast and appropriate response. live video from the scene of a fire, for example, will make first responders fully aware of the situation they’re going to face: they’ll know in advance how severe the fire is, how many trucks to send to the scene, and how many people may be still inside the building. Authorities will connect quickly via video to civilians and others at the scene for close coordination, with infor-mation rapidly exchanged to ensure victims receive the right assistance and care.

When broadband gets picked up in these kinds of ways—by other sectors, for public safety, health-care, transportation and more—it will cease to be just the domain of the communications technology industry. everyone will have a share, a stake, a say.

the one thing we can’t do withouteverything I’ve described so far will depend on the availability of one essential resource: electricity. We are all aware today about the concerns of having a stable, reli-able energy supply long into the future. those concerns are putting terrific pressure on us to secure new energy sources, avoid wasting the energy that is currently avail-able, and respect the environment.

If we’re going to ask utility com-panies to better manage their energy resources, we need to give them the right tools. they’ll need more detailed knowledge of what customers need, and of how they’re using energy on a daily basis. enter the smart grid—a

power network that provides two-way communication between electricity users and utilities for superior energy management. Smart grids will become one of the most attractive areas of green innovation and investment in the coming years. not only do they give utilities more control over their energy resources, but they also will help energy service pro-viders keep their operating costs down. (even the energy explora-tion sector, which extracts oil, gas, coal and the like, is feeling the pressure and trying to become more efficient at exploring, min-ing, transporting and delivering raw energy sources.)

the transformation imperativeto adopt smart grid technology, utilities will have to transform themselves similar to the way tel-cos have done in the years since 1960. the difference is that while the phone companies took 50 years to move from traditional

technology to today’s digitally driven infrastructure, utilities don’t have this luxury: they have 10 to 15 years at the most to change, to capitalize on the oppor-tunity and remain in control of the supply and demand process.

When they do take the leap, the payback will be rapid: outages will be reported automatically and service restoration will be faster, resulting in a more reliable energy supply. Consumers will become ‘partners’ in the grid: generating their own energy through small-scale renewable sources such as solar panels; storing energy more effectively through the use of electric vehicles and the like; and reducing their consumption to provide overall energy savings. energy equipment in the field will signal its status, meaning its useful life will be measured accurately instead of calculated theoretically and technicians will have all the knowledge and support they need to go to the site to fix a problem.

everything i’ve described so far will depend on the availability of one essential resource: electricity.

•••

Next stop: 2015Greener. More connected. More intuitive. that’s the future we’re heading toward. So the next time you ease yourself back into a seat on a train, just think: in a few years’ time you won’t even have to connect to its onboard WiFi

system to be hooked up to the Internet. By the time you crack open your laptop or switch on your smartphone, it will already have happened for you. And you’ll probably be greeted with some unexpected bit of news or helpful information. We’ve seen

some amazing changes in the last few years thanks to communica-tions technology. But we ain’t seen nothing yet.

oliVia Qiu

eering into the unknownAt Bell labs, we research

the technologies that will drive the next great innovations. this involves a fair bit of trying to envision the future. our expertise in key technical areas provides a good guide, but of course, there are still many categories of unknowns.

one such category is known unknowns : knowing, for example, that the current explosion in the

the worLd Is mY smArtphoNe

use of video on the Internet is straining the capacity of networks, but perhaps not yet knowing which specific technology will pro-vide the best solution. then there are the unknown unknowns—

unknown needs that will be met by unknown technologies. these are among the many reasons why we persistently interact with cus-tomers and nourish our research

Favorite saying: “the future—make it happen!”

Jeong kimstats: 30 years in the industryposition: president Bell labs

one hundred years ago, a telephone was a box on a wall. now it’s a wallet-sized device that captures video, surfs the web, and manages hundreds of applications. tomorrow you may not always need your own device: the environment around you will offer those personalized capabilities—and more.

p

our shared Future

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272010 AnnuAl report

262010 AnnuAl report

definition views of incidents to enable a fast and appropriate response. live video from the scene of a fire, for example, will make first responders fully aware of the situation they’re going to face: they’ll know in advance how severe the fire is, how many trucks to send to the scene, and how many people may be still inside the building. Authorities will connect quickly via video to civilians and others at the scene for close coordination, with infor-mation rapidly exchanged to ensure victims receive the right assistance and care.

When broadband gets picked up in these kinds of ways—by other sectors, for public safety, health-care, transportation and more—it will cease to be just the domain of the communications technology industry. everyone will have a share, a stake, a say.

the one thing we can’t do withouteverything I’ve described so far will depend on the availability of one essential resource: electricity. We are all aware today about the concerns of having a stable, reli-able energy supply long into the future. those concerns are putting terrific pressure on us to secure new energy sources, avoid wasting the energy that is currently avail-able, and respect the environment.

If we’re going to ask utility com-panies to better manage their energy resources, we need to give them the right tools. they’ll need more detailed knowledge of what customers need, and of how they’re using energy on a daily basis. enter the smart grid—a

power network that provides two-way communication between electricity users and utilities for superior energy management. Smart grids will become one of the most attractive areas of green innovation and investment in the coming years. not only do they give utilities more control over their energy resources, but they also will help energy service pro-viders keep their operating costs down. (even the energy explora-tion sector, which extracts oil, gas, coal and the like, is feeling the pressure and trying to become more efficient at exploring, min-ing, transporting and delivering raw energy sources.)

the transformation imperativeto adopt smart grid technology, utilities will have to transform themselves similar to the way tel-cos have done in the years since 1960. the difference is that while the phone companies took 50 years to move from traditional

technology to today’s digitally driven infrastructure, utilities don’t have this luxury: they have 10 to 15 years at the most to change, to capitalize on the oppor-tunity and remain in control of the supply and demand process.

When they do take the leap, the payback will be rapid: outages will be reported automatically and service restoration will be faster, resulting in a more reliable energy supply. Consumers will become ‘partners’ in the grid: generating their own energy through small-scale renewable sources such as solar panels; storing energy more effectively through the use of electric vehicles and the like; and reducing their consumption to provide overall energy savings. energy equipment in the field will signal its status, meaning its useful life will be measured accurately instead of calculated theoretically and technicians will have all the knowledge and support they need to go to the site to fix a problem.

everything i’ve described so far will depend on the availability of one essential resource: electricity.

•••

Next stop: 2015Greener. More connected. More intuitive. that’s the future we’re heading toward. So the next time you ease yourself back into a seat on a train, just think: in a few years’ time you won’t even have to connect to its onboard WiFi

system to be hooked up to the Internet. By the time you crack open your laptop or switch on your smartphone, it will already have happened for you. And you’ll probably be greeted with some unexpected bit of news or helpful information. We’ve seen

some amazing changes in the last few years thanks to communica-tions technology. But we ain’t seen nothing yet.

oliVia Qiu

eering into the unknownAt Bell labs, we research

the technologies that will drive the next great innovations. this involves a fair bit of trying to envision the future. our expertise in key technical areas provides a good guide, but of course, there are still many categories of unknowns.

one such category is known unknowns : knowing, for example, that the current explosion in the

the worLd Is mY smArtphoNe

use of video on the Internet is straining the capacity of networks, but perhaps not yet knowing which specific technology will pro-vide the best solution. then there are the unknown unknowns—

unknown needs that will be met by unknown technologies. these are among the many reasons why we persistently interact with cus-tomers and nourish our research

Favorite saying: “the future—make it happen!”

Jeong kimstats: 30 years in the industryposition: president Bell labs

one hundred years ago, a telephone was a box on a wall. now it’s a wallet-sized device that captures video, surfs the web, and manages hundreds of applications. tomorrow you may not always need your own device: the environment around you will offer those personalized capabilities—and more.

p

our shared Future

•••

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292010 AnnuAl report

282010 AnnuAl report

capacity across multiple disci-plines of science.

even so, predicting the future is by no means a sure bet. Five years ago, who would have thought that so many people around the globe would spend so much time on social networks like MySpace1 and Facebook?2 And it’s certainly pos-sible that in the next five years, other similarly unanticipated sur-prises will arise. nevertheless, we can still identify several key trends likely to shape that future.

Video: a driving force for the networksVideo-based content—streamed to your desktop, your laptop, your smartphone, wherever—will be an even more fundamental

component of how we communi-cate in 2015. I realized how important video had become last year when I asked my daughter which website she visited the most. Her response: “Youtube.”3 It’s where she does her learning—whether how to play the guitar or speak Spanish. I had always thought of Youtube3 as a substi-tute for tV; I never considered its other possible uses. It can be used to share ideas, to find out how to perform a task, or where students can watch lectures they might have missed.

the video boom is not just about Youtube3-like sites. Video confer-encing applications like Skype4 have become increasingly popu-lar and part of our everyday

interactions. I believe communi-cations will migrate over the next five years to far more ‘immersive’ experiences that make it seem as if we are all sharing the same physical place even while being continents apart.

many, many sensors —everywhereMost of us connect over a net-work of networks—the most com-mon being the Internet. usually we go looking for information and these networks take us to it. But an alternative pattern is emerging, one in which a network of sensors continuously gathers information and, if relevant, pushes it out to us. What sort of sensors? Some will detect motion or sounds; others temperature or chemicals. they might employ radio-frequency ID (rFID) devices or video technologies. When cer-tain conditions occur, these sen-sor networks will trigger an alert over the Internet to other machines or people.

We’ll see these networks in our homes, along our roads, in our cars, and on our very person. Sometime after 2015, I can imag-ine sensors so small they reside in our bloodstream and form a self-organizing network that can detect abnormal events, sending messages to our doctor’s office or to another device in our body authorized to take corrective action. this is the ‘somatic net-work’, a network that operates in the body. Sound far-fetched? there are already numerous implanted sensors in the market for detecting the movements of replacement joints, or measuring electrical pulses of the heart.

an alternative pattern is emerging, one in which a network of sensors continuously gathers information and pushes it out to us.

•••

1 MySpace is a trademark of MySpace, Inc. 2 Facebook is a trademark of Facebook, Inc. 3 Youtube is a trademark of Google, Inc. 4 Skype is a trademark of Skype limited and other related companies.

device at the hotel you’re visiting the next day. It’s a compelling vision in which we can enjoy all of these capabilities without being limited by one’s personal device.

JeoNg kim

the value of the cloudFor some, ‘cloud computing’ is just the latest name for services in which you access a remote computer instead of processing on your own computer. that’s not quite right. the cloud is like tak-ing all of the parts of a super computer, scattering them to the wind and still using it as if it was a single asset right next to you. All of the complex synchroniza-tions among those parts are retained in spite of being physi-cally dispersed.

the beauty of this is that you’re no longer confined to the capabilities of your one machine, or cluster of machines as is the case in a data center. So when you need more computing power, or more stor-age, instead of buying expensive hardware and plunking it in the corner, you just reach out to more pieces in the cloud for only as long as you need them. the capabilities of the cloud allow those pieces to be fully integrated and synchro-nized with your own resources.

Companies that provide commu-nication services are beginning to use cloud architectures in their own networks. By 2015, many of those service providers will likely offer highly rel iable c loud resources to consumers.

energy efficiency will be vitalthroughout the information tech-nology landscape, there is a new menace stalking computers and data centers. I’m not referring to viruses or malware, but rather the costs of the power to run ever-faster and more powerful computers. Dollars or euros are

only part of those costs. the larg-er concerns are the associated heat that can literally melt pro-cessors and the unsustainable level of carbon emissions from the generation of that power.

As they serve growing numbers of mobile users, video consumers and data centers, these costs have risen to levels where many service providers are now consid-ering radical changes in their net-work infrastructures. this is one of the reasons for the strong interest in Alcatel-lucent ’s recently announced lightradio™, which doubles network capacity while halving energy consump-tion. programs such as the Green-touch™ initiative, whose goal is to improve networks’ energy effi-ciency by a factor of 1,000 will also play a major role in achiev-ing a sustainable future.

After 2015: communicating without a personal device?let me conclude with a slightly controversial opinion. I can envi-sion a scenario where people no longer fully depend on their own smartphones or other personal computing devices. rather, as they make themselves known via sensor networks, they interact with connected information dis-plays and other appliances locat-ed throughout their environ-ment—no matter where they find themselves. Individuals have access to all of the same capabili-ties (or “apps”) and personal set-tings they would at home or in the office. Sessions are trans-ferred from device to device, so that the last page of an e-book you were reading at home is the first page that appears on a

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292010 AnnuAl report

282010 AnnuAl report

capacity across multiple disci-plines of science.

even so, predicting the future is by no means a sure bet. Five years ago, who would have thought that so many people around the globe would spend so much time on social networks like MySpace1 and Facebook?2 And it’s certainly pos-sible that in the next five years, other similarly unanticipated sur-prises will arise. nevertheless, we can still identify several key trends likely to shape that future.

Video: a driving force for the networksVideo-based content—streamed to your desktop, your laptop, your smartphone, wherever—will be an even more fundamental

component of how we communi-cate in 2015. I realized how important video had become last year when I asked my daughter which website she visited the most. Her response: “Youtube.”3 It’s where she does her learning—whether how to play the guitar or speak Spanish. I had always thought of Youtube3 as a substi-tute for tV; I never considered its other possible uses. It can be used to share ideas, to find out how to perform a task, or where students can watch lectures they might have missed.

the video boom is not just about Youtube3-like sites. Video confer-encing applications like Skype4 have become increasingly popu-lar and part of our everyday

interactions. I believe communi-cations will migrate over the next five years to far more ‘immersive’ experiences that make it seem as if we are all sharing the same physical place even while being continents apart.

many, many sensors —everywhereMost of us connect over a net-work of networks—the most com-mon being the Internet. usually we go looking for information and these networks take us to it. But an alternative pattern is emerging, one in which a network of sensors continuously gathers information and, if relevant, pushes it out to us. What sort of sensors? Some will detect motion or sounds; others temperature or chemicals. they might employ radio-frequency ID (rFID) devices or video technologies. When cer-tain conditions occur, these sen-sor networks will trigger an alert over the Internet to other machines or people.

We’ll see these networks in our homes, along our roads, in our cars, and on our very person. Sometime after 2015, I can imag-ine sensors so small they reside in our bloodstream and form a self-organizing network that can detect abnormal events, sending messages to our doctor’s office or to another device in our body authorized to take corrective action. this is the ‘somatic net-work’, a network that operates in the body. Sound far-fetched? there are already numerous implanted sensors in the market for detecting the movements of replacement joints, or measuring electrical pulses of the heart.

an alternative pattern is emerging, one in which a network of sensors continuously gathers information and pushes it out to us.

•••

1 MySpace is a trademark of MySpace, Inc. 2 Facebook is a trademark of Facebook, Inc. 3 Youtube is a trademark of Google, Inc. 4 Skype is a trademark of Skype limited and other related companies.

device at the hotel you’re visiting the next day. It’s a compelling vision in which we can enjoy all of these capabilities without being limited by one’s personal device.

JeoNg kim

the value of the cloudFor some, ‘cloud computing’ is just the latest name for services in which you access a remote computer instead of processing on your own computer. that’s not quite right. the cloud is like tak-ing all of the parts of a super computer, scattering them to the wind and still using it as if it was a single asset right next to you. All of the complex synchroniza-tions among those parts are retained in spite of being physi-cally dispersed.

the beauty of this is that you’re no longer confined to the capabilities of your one machine, or cluster of machines as is the case in a data center. So when you need more computing power, or more stor-age, instead of buying expensive hardware and plunking it in the corner, you just reach out to more pieces in the cloud for only as long as you need them. the capabilities of the cloud allow those pieces to be fully integrated and synchro-nized with your own resources.

Companies that provide commu-nication services are beginning to use cloud architectures in their own networks. By 2015, many of those service providers will likely offer highly rel iable c loud resources to consumers.

energy efficiency will be vitalthroughout the information tech-nology landscape, there is a new menace stalking computers and data centers. I’m not referring to viruses or malware, but rather the costs of the power to run ever-faster and more powerful computers. Dollars or euros are

only part of those costs. the larg-er concerns are the associated heat that can literally melt pro-cessors and the unsustainable level of carbon emissions from the generation of that power.

As they serve growing numbers of mobile users, video consumers and data centers, these costs have risen to levels where many service providers are now consid-ering radical changes in their net-work infrastructures. this is one of the reasons for the strong interest in Alcatel-lucent ’s recently announced lightradio™, which doubles network capacity while halving energy consump-tion. programs such as the Green-touch™ initiative, whose goal is to improve networks’ energy effi-ciency by a factor of 1,000 will also play a major role in achiev-ing a sustainable future.

After 2015: communicating without a personal device?let me conclude with a slightly controversial opinion. I can envi-sion a scenario where people no longer fully depend on their own smartphones or other personal computing devices. rather, as they make themselves known via sensor networks, they interact with connected information dis-plays and other appliances locat-ed throughout their environ-ment—no matter where they find themselves. Individuals have access to all of the same capabili-ties (or “apps”) and personal set-tings they would at home or in the office. Sessions are trans-ferred from device to device, so that the last page of an e-book you were reading at home is the first page that appears on a

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ideas that deliver

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ideas that deliver

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322010 AnnuAl report

332010 AnnuAl report

letter from philippe cAmus, chairman of alcatel-lucent

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he new Alcatel-lucent is on the march. 2010, the second year of our transformation program,

has given us tangible signs of this. our efforts in financial discipline have borne fruit, our operational performance has improved, and our stock has generated renewed interest from investors. these are indications of the soundness of our strategy and reflect the re-emerging core strength in our business.

our customers have expressed their sat-isfaction with the steps we are taking. that endorsement strengthens our abil-ity to support them in their ongoing changes. it has also increased our mar-ket share and solidified our leadership in technological innovation—whether internet protocol (ip), which is at the heart of network evolution, one of our strategic pillars; or fourth-generation wireless technologies, which provide ultra high-speed mobile access.

We could not have the quality of prod-ucts and technology we do without equal or greater quality in our people.

i take this opportunity to applaud the commitment of all our staff, and to rec-ognize the astute leadership of our man-agement team, which has successfully implemented our corporate transforma-tion program harmoniously, credibly and transparently.

it is also important to emphasize the cohesiveness of our corporate gover-nance. from the Board of Directors and its various committees—including the technology committee i was eager to put in place—to operational management and leadership bodies, each has assumed its responsibilities, worked with the others, and ensured the conti-nuity of our decision-making process.

now the third year of our transforma-tion program is well underway and we remain firmly focused on delivery. Going forward, we will demonstrate our full potential and deepen our relation-ships with customers while ensuring the development of a resource that is just as essential as our technological capital: our human capital, today based on over 79,000 employees. Attracting talented people, creating an environment that encourages the creativity of each of our colleagues, drawing on the strength of our diversity and international scale—all of these are essential. By building a sus-tainable international business that understands how to apply the full capa-bility of its talent—an organ ization whose employees are challenged and engaged—we will follow our path of progress over the long term.

t

board of directorsPhilippe Camus chairman of the board of directors

Ben Verwaayen chief executive officer and director

Daniel Bernard independent director

W. Frank Blount independent director

Carla Cico independent director

Stuart E. Eizenstat independent director

Louis R. Hughes independent director

Lady Sylvia Jay independent director

Jean C. Monty independent director

Olivier Piou independent director

Jean-Cyril Spinetta independent director

Jean-Pierre Desbois board observer

Bertrand Lapraye board observer

Yohann Bénard secretary-General and secretary to the board of directors

Nathalie Trolez Mazurier deputy secretary to the board of directors

corporate Governancealcatel-lucent strictly complies with the applicable rules of corporate governance in france and in the united states.

the composition of the board of directors is aligned with alcatel-lucent’s business. the diver-sity of its members’ profiles gives the board a set of values, skills and expertise that enriches its discussions.

in the course of carrying out its various responsibilities, the board of directors has created specialized committees mainly composed of directors appointed by the board: the audit and finance committee, the corporate Governance and nominating committee, the compensation committee and, more recently, the technology committee, created in october 2008. each director is asked to be a member of one or more of these four committees.

in addition to performing its legal and regulatory duties, the board of directors regularly provides input on alcatel-lucent’s strategic direction and the key decisions affecting its activities; it ana-lyzes the opportunities resulting from alcatel-lucent’s research and development activities and provides input on the main technology options selected.

the path of progress

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322010 AnnuAl report

332010 AnnuAl report

letter from philippe cAmus, chairman of alcatel-lucent

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he new Alcatel-lucent is on the march. 2010, the second year of our transformation program,

has given us tangible signs of this. our efforts in financial discipline have borne fruit, our operational performance has improved, and our stock has generated renewed interest from investors. these are indications of the soundness of our strategy and reflect the re-emerging core strength in our business.

our customers have expressed their sat-isfaction with the steps we are taking. that endorsement strengthens our abil-ity to support them in their ongoing changes. it has also increased our mar-ket share and solidified our leadership in technological innovation—whether internet protocol (ip), which is at the heart of network evolution, one of our strategic pillars; or fourth-generation wireless technologies, which provide ultra high-speed mobile access.

We could not have the quality of prod-ucts and technology we do without equal or greater quality in our people.

i take this opportunity to applaud the commitment of all our staff, and to rec-ognize the astute leadership of our man-agement team, which has successfully implemented our corporate transforma-tion program harmoniously, credibly and transparently.

it is also important to emphasize the cohesiveness of our corporate gover-nance. from the Board of Directors and its various committees—including the technology committee i was eager to put in place—to operational management and leadership bodies, each has assumed its responsibilities, worked with the others, and ensured the conti-nuity of our decision-making process.

now the third year of our transforma-tion program is well underway and we remain firmly focused on delivery. Going forward, we will demonstrate our full potential and deepen our relation-ships with customers while ensuring the development of a resource that is just as essential as our technological capital: our human capital, today based on over 79,000 employees. Attracting talented people, creating an environment that encourages the creativity of each of our colleagues, drawing on the strength of our diversity and international scale—all of these are essential. By building a sus-tainable international business that understands how to apply the full capa-bility of its talent—an organ ization whose employees are challenged and engaged—we will follow our path of progress over the long term.

t

board of directorsPhilippe Camus chairman of the board of directors

Ben Verwaayen chief executive officer and director

Daniel Bernard independent director

W. Frank Blount independent director

Carla Cico independent director

Stuart E. Eizenstat independent director

Louis R. Hughes independent director

Lady Sylvia Jay independent director

Jean C. Monty independent director

Olivier Piou independent director

Jean-Cyril Spinetta independent director

Jean-Pierre Desbois board observer

Bertrand Lapraye board observer

Yohann Bénard secretary-General and secretary to the board of directors

Nathalie Trolez Mazurier deputy secretary to the board of directors

corporate Governancealcatel-lucent strictly complies with the applicable rules of corporate governance in france and in the united states.

the composition of the board of directors is aligned with alcatel-lucent’s business. the diver-sity of its members’ profiles gives the board a set of values, skills and expertise that enriches its discussions.

in the course of carrying out its various responsibilities, the board of directors has created specialized committees mainly composed of directors appointed by the board: the audit and finance committee, the corporate Governance and nominating committee, the compensation committee and, more recently, the technology committee, created in october 2008. each director is asked to be a member of one or more of these four committees.

in addition to performing its legal and regulatory duties, the board of directors regularly provides input on alcatel-lucent’s strategic direction and the key decisions affecting its activities; it ana-lyzes the opportunities resulting from alcatel-lucent’s research and development activities and provides input on the main technology options selected.

the path of progress

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342010 AnnuAl report

352010 AnnuAl report

No. 1

No. 2

2010 kEY FiguRES

1 revenue 16 billion (up 5.5% year-over-year)

1 high leverage network™ sales: 46% of networks sales in Q4’10 (versus 32% in Q1’09)

1 adjusted1 gross profit of 5.572 billion (or 34.8% of revenues)

1 adjusted1 operating income of 288 million (or 1.8% of revenues)

1 300 million of fixed costs reduction

1 adjusted1 r&d expenses 2.50 billion 1 operating cash flow of 851 million 1 net cash 377 million (as of december 31, 2010)

1 cash and equivalents 5.7 billion (as of december 31, 2010)

• gPON ports with 32% market share2

• CDMA with 39% market share2

• DSL access with 39% market share2

• Submarine optical networking with estimated 35% to 40% market share6

• Packet microwave transmission with 40% market share2 • Multivendor maintenance with 20% market share5

1 “adjusted” means that it excludes the main impacts from lucent’s purchase price allocation. 2 dell’oro Group. 3 ovum. 4 infonetics. 5 idc. 6 alcatel-lucent estimate.

• 4g/LTE with 30% market share2

• iP edge routers with 23% market share4

• Terrestrial optical networking with 18% market share2

• Backbone WDM with 15% market share3

2010 market share hiGhliGhts

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● north america ● europe ● asia-pacific ● rest of world

n 2010, we successfully executed the second year of our three-year transformation plan with improved

financial results and very strong momentum at year-end.

We outperformed the market and delivered on our projections to the financial commu-nity. that achievement was driven by a port-folio of next-generation products and ser-vices that is enjoying strong market traction and the resilience of existing technologies. all three business segments—networks, applica-tions and services—contributed to the increase in 2010 revenue, and each recorded positive operating income.

the 2010 rise in operating income reflects higher volumes, favorable shifts in our sales mix and ongoing efforts to improve our cost base. r&d spending increased as we contin-ued to invest in the next-generation tech-nologies driving our growth.

our strategy has been gaining traction for the past two years, and we are enjoying renewed relevance across our customer base. We closed 2010 with a very strong fourth quar-ter—the most profitable since the merger. We anticipate continuing that growth in 2011, while streamlining the business to further reduce costs and drive more revenue to the bottom line.

alcatel-lucent revenues are fairly evenly distributed geographically among north america; europe; and asia-pacific and rest of world.

message from pAul tufAno, chief financial officer

I

the story in numbers: a year of growth

revenues: geographical breakdown

14%

36%

18%

32%

● networks● services● applications● other

12%4%

23%60%

revenues: breakdown by operating segment

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342010 AnnuAl report

352010 AnnuAl report

No. 1

No. 2

2010 kEY FiguRES

1 revenue 16 billion (up 5.5% year-over-year)

1 high leverage network™ sales: 46% of networks sales in Q4’10 (versus 32% in Q1’09)

1 adjusted1 gross profit of 5.572 billion (or 34.8% of revenues)

1 adjusted1 operating income of 288 million (or 1.8% of revenues)

1 300 million of fixed costs reduction

1 adjusted1 r&d expenses 2.50 billion 1 operating cash flow of 851 million 1 net cash 377 million (as of december 31, 2010)

1 cash and equivalents 5.7 billion (as of december 31, 2010)

• gPON ports with 32% market share2

• CDMA with 39% market share2

• DSL access with 39% market share2

• Submarine optical networking with estimated 35% to 40% market share6

• Packet microwave transmission with 40% market share2 • Multivendor maintenance with 20% market share5

1 “adjusted” means that it excludes the main impacts from lucent’s purchase price allocation. 2 dell’oro Group. 3 ovum. 4 infonetics. 5 idc. 6 alcatel-lucent estimate.

• 4g/LTE with 30% market share2

• iP edge routers with 23% market share4

• Terrestrial optical networking with 18% market share2

• Backbone WDM with 15% market share3

2010 market share hiGhliGhts

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● north america ● europe ● asia-pacific ● rest of world

n 2010, we successfully executed the second year of our three-year transformation plan with improved

financial results and very strong momentum at year-end.

We outperformed the market and delivered on our projections to the financial commu-nity. that achievement was driven by a port-folio of next-generation products and ser-vices that is enjoying strong market traction and the resilience of existing technologies. all three business segments—networks, applica-tions and services—contributed to the increase in 2010 revenue, and each recorded positive operating income.

the 2010 rise in operating income reflects higher volumes, favorable shifts in our sales mix and ongoing efforts to improve our cost base. r&d spending increased as we contin-ued to invest in the next-generation tech-nologies driving our growth.

our strategy has been gaining traction for the past two years, and we are enjoying renewed relevance across our customer base. We closed 2010 with a very strong fourth quar-ter—the most profitable since the merger. We anticipate continuing that growth in 2011, while streamlining the business to further reduce costs and drive more revenue to the bottom line.

alcatel-lucent revenues are fairly evenly distributed geographically among north america; europe; and asia-pacific and rest of world.

message from pAul tufAno, chief financial officer

I

the story in numbers: a year of growth

revenues: geographical breakdown

14%

36%

18%

32%

● networks● services● applications● other

12%4%

23%60%

revenues: breakdown by operating segment

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362010 AnnuAl report

372010 AnnuAl report

1 ben verwaayen*chief executive officer

2 pierre barnabé*executive vice president corporate human resources and transformation

3 tom burns*president enterprise and strategic industries

4 stephen a. carter*chief marketing, strategy and communications officer

5 robin dargue*executive vice president business and it transformation

6 Janet davidson*executive vice president Quality assurance and customer care

7 John dickson*executive vice president operations

8 kenneth frank*president solutions

9 gabrielle gautheyexecutive vice president Global Government and public affairs

10 adolfo hernandez*president europe, middle east and africa region

11 philippe keryer*president networks

12 Jeong kim*president bell labs

13 vivek mohan*president services

14 steve reynoldssenior vice president and General counsel

15 paul segre*president applications

16 rajeev singh-molares*president asia-pacific region

17 paul tufano*chief financial officer

18 robert vrij*president americas region

ethics and complianceAlcatel-lucent is committed to doing business ethically, as a trusted partner and as a company where employees want to work. its ethics and compliance program is designed to prevent and detect violations of law, regulation and com-pany policy, and to promote an ethical business culture. to reduce the risk of corruption, Alcatel-lucent enforces a strict zero-tolerance policy against the use of sales agents and consultants, with a new sales channel screening and selec-tion process designed to ensure that resellers, distributors and other third parties are used appropriately.

* management committee

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the direction setters

MANAgEMENT TEAM

With 18 executives representing six nationalities, alcatel-lucent’s international management team is focused on one goal: the successful transformation of the company.

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362010 AnnuAl report

372010 AnnuAl report

1 ben verwaayen*chief executive officer

2 pierre barnabé*executive vice president corporate human resources and transformation

3 tom burns*president enterprise and strategic industries

4 stephen a. carter*chief marketing, strategy and communications officer

5 robin dargue*executive vice president business and it transformation

6 Janet davidson*executive vice president Quality assurance and customer care

7 John dickson*executive vice president operations

8 kenneth frank*president solutions

9 gabrielle gautheyexecutive vice president Global Government and public affairs

10 adolfo hernandez*president europe, middle east and africa region

11 philippe keryer*president networks

12 Jeong kim*president bell labs

13 vivek mohan*president services

14 steve reynoldssenior vice president and General counsel

15 paul segre*president applications

16 rajeev singh-molares*president asia-pacific region

17 paul tufano*chief financial officer

18 robert vrij*president americas region

ethics and complianceAlcatel-lucent is committed to doing business ethically, as a trusted partner and as a company where employees want to work. its ethics and compliance program is designed to prevent and detect violations of law, regulation and com-pany policy, and to promote an ethical business culture. to reduce the risk of corruption, Alcatel-lucent enforces a strict zero-tolerance policy against the use of sales agents and consultants, with a new sales channel screening and selec-tion process designed to ensure that resellers, distributors and other third parties are used appropriately.

* management committee

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the direction setters

MANAgEMENT TEAM

With 18 executives representing six nationalities, alcatel-lucent’s international management team is focused on one goal: the successful transformation of the company.

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382010 AnnuAl report

392010 AnnuAl report

ALCATEL-LuCENT WORLDWiDE

we build connectionsevery day across the globe, more than 79,000 people pour their energy, cre-ativity and technical knowledge into inventing the future of communications at Alcatel-lucent. tackling the toughest technology challenges facing the world’s network companies, enterprises, indus-tries and governments, we help our cus-tomers connect people to an ever-expanding world of digital information, entertainment and vital services.

our strength in innovation stems from Bell labs—a peerless research and development organization with more than 27,000 active patents worldwide and a brilliant team of researchers and technical experts in a broad variety of fields.

we engineer opportunitiesA leader in mobile, fixed, ip and optical technologies and a pioneer in applica-tions and services, Alcatel-lucent serves the world through regional businesses in the Americas, Asia-pacific, and europe, the middle east and Africa.

our networks division provides the com-plete set of technologies customers need to meet subscriber expectations, wheth-er their services are wireless, wireline or both. our services division designs, inte-grates, manages and maintains networks worldwide. Applications and solutions rounds out the mix, developing and maintaining software products that allow communications companies to offer new, high-demand services for any type of device—and providing voice, data and call center solutions to enterprises.

our customers today are experiencing the most significant period of change in the recent history of telecommunica-tions. With our support, they are trans-forming their operations and evolving their networks, offering universal access to the digital services their subscribers want—and reestablishing their place as providers of value by enabling the cre-ation of new applications.

our businesses

Worldwide presencemore than 130 countries

employeesmore than 79,000

employee nationalitiesmore than 100

the international innovator

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● americas ● europe, middle east and africa (emea)● asia-pacific (apac)

●●canada

●●●● usA

●●Brazil

● ireland ● united Kingdom ●●●●Belgium ●●●france ●●Germany ● netherlands ● italy ● spain

● russia ● romania ● poland ● slovakia

● turkey

● israel

●●●india

● singapore

●●● china

●● Australia

● south Korea

● taiwan

●executive briefing centers ●research centers ●product & solution development centers ●ip transformation centers

With headquarters in paris and operations in 130 countries, alcatel-lucent is helping the world’s biggest communications companies meet growing demand for video, data and voice services.

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382010 AnnuAl report

392010 AnnuAl report

ALCATEL-LuCENT WORLDWiDE

we build connectionsevery day across the globe, more than 79,000 people pour their energy, cre-ativity and technical knowledge into inventing the future of communications at Alcatel-lucent. tackling the toughest technology challenges facing the world’s network companies, enterprises, indus-tries and governments, we help our cus-tomers connect people to an ever-expanding world of digital information, entertainment and vital services.

our strength in innovation stems from Bell labs—a peerless research and development organization with more than 27,000 active patents worldwide and a brilliant team of researchers and technical experts in a broad variety of fields.

we engineer opportunitiesA leader in mobile, fixed, ip and optical technologies and a pioneer in applica-tions and services, Alcatel-lucent serves the world through regional businesses in the Americas, Asia-pacific, and europe, the middle east and Africa.

our networks division provides the com-plete set of technologies customers need to meet subscriber expectations, wheth-er their services are wireless, wireline or both. our services division designs, inte-grates, manages and maintains networks worldwide. Applications and solutions rounds out the mix, developing and maintaining software products that allow communications companies to offer new, high-demand services for any type of device—and providing voice, data and call center solutions to enterprises.

our customers today are experiencing the most significant period of change in the recent history of telecommunica-tions. With our support, they are trans-forming their operations and evolving their networks, offering universal access to the digital services their subscribers want—and reestablishing their place as providers of value by enabling the cre-ation of new applications.

our businesses

Worldwide presencemore than 130 countries

employeesmore than 79,000

employee nationalitiesmore than 100

the international innovator

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e b

usi

ne

ss b

oo

k

● americas ● europe, middle east and africa (emea)● asia-pacific (apac)

●●canada

●●●● usA

●●Brazil

● ireland ● united Kingdom ●●●●Belgium ●●●france ●●Germany ● netherlands ● italy ● spain

● russia ● romania ● poland ● slovakia

● turkey

● israel

●●●india

● singapore

●●● china

●● Australia

● south Korea

● taiwan

●executive briefing centers ●research centers ●product & solution development centers ●ip transformation centers

With headquarters in paris and operations in 130 countries, alcatel-lucent is helping the world’s biggest communications companies meet growing demand for video, data and voice services.

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402010 AnnuAl report

23%year-on-year

growth in 2010 for north America

Deploying 4G LtE networks

for 2 of the world's largest

telcos

home of

bell labs

412010 AnnuAl report

Putting our energy into green wirelessif we want to enjoy a future of everywhere, all-the-time wireless communications, we need to reduce the rapidly rising energy demands of wireless networks. Alcatel-Lucent’s efforts on this front were recognized with three LTE North America Awards—including “Best green LTE Product or initiative” for developing small, energy-efficient wireless cells, as well as for solutions that allow telcos to set up wireless networks in areas without reliable power and the greenTouch™ global consortium on the environmental impact of communications.

alcatel-lucent demonstrated they are ready to deliver innovative, cost-effective, state-of-the art technology and financial value to sprint. STEVE ELFMAN, president, sprint

a market at top speed

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markEt trENdsWallet, keys…smartphone. these days in the americas, when people leave home they want to go connected. demand for 24/7 access has saturated networks with video, application and data traffic—posing both a challenge and an opportunity for service providers.

Capacity is one part of the equation. providers need to grow their networks to serve more users and carry more content. but they can’t do so the way they used to. the old ways make networks more complex, not less, and spike operators’ costs. the alcatel-lucent high leverage network™ does exactly the reverse, enabling operators to offer a whole new world of services.

Changing the business model is the other part. by opening up and partner-ing with other players—application developers, content providers, device makers and enterprises—operators can turn the built-in capabilities of their networks into new streams of revenue, rapidly delivering more of what their customers want and accessing a market that in the u.s. alone amounts to $100 billion.

ROBERT VRiJpresident americas reGion

stretching the length of the western hemisphere, the americas region is home to some of the world’s most innovative communications service providers and fastest growing markets.

america movil faster, better, smarteramerica movil is one of the biggest mobile operators in latin america. With customers in 11 countries eager to make video and multimedia part of their daily user experience, the company brought in alcatel-lucent to help deliver high-speed mobile internet, video calling and other multimedia services while keeping operating costs to a minimum. thanks to alcatel-lucent’s experience in ip transformation—making networks leaner and more powerful through ip technology—america movil is poised to be an out-in-front provider of the next wave of high-speed services to enrich users’ lives.

at&t from 3g to 4galcatel-lucent was selected as equipment supplier for at&t’s lte (long-term evolution) mobile broadband network. continued work with at&t through this multi-year agreement will allow the company to take full advantage of compatibility between existing 3G equipment and forthcoming lte upgrades.

sprint’s “netWork vision” realizing the value to keep up with never-before-seen growth in mobile service usage, sprint called on alcatel-lucent to bring its multiple solutions together into one seamless network with a single type of base station to handle every different kind of wireless signal. drawing on alcatel-lucent’s complete understanding of sprint’s existing network technologies, these changes will make it easier for the company to meet customers’ expectations— without skyrocketing operating costs.

CuSTOMER STORiES

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402010 AnnuAl report

23%year-on-year

growth in 2010 for north America

Deploying 4G LtE networks

for 2 of the world's largest

telcos

home of

bell labs

412010 AnnuAl report

Putting our energy into green wirelessif we want to enjoy a future of everywhere, all-the-time wireless communications, we need to reduce the rapidly rising energy demands of wireless networks. Alcatel-Lucent’s efforts on this front were recognized with three LTE North America Awards—including “Best green LTE Product or initiative” for developing small, energy-efficient wireless cells, as well as for solutions that allow telcos to set up wireless networks in areas without reliable power and the greenTouch™ global consortium on the environmental impact of communications.

alcatel-lucent demonstrated they are ready to deliver innovative, cost-effective, state-of-the art technology and financial value to sprint. STEVE ELFMAN, president, sprint

a market at top speed

th

e b

usi

ne

ss b

oo

k AMERiCAS

markEt trENdsWallet, keys…smartphone. these days in the americas, when people leave home they want to go connected. demand for 24/7 access has saturated networks with video, application and data traffic—posing both a challenge and an opportunity for service providers.

Capacity is one part of the equation. providers need to grow their networks to serve more users and carry more content. but they can’t do so the way they used to. the old ways make networks more complex, not less, and spike operators’ costs. the alcatel-lucent high leverage network™ does exactly the reverse, enabling operators to offer a whole new world of services.

Changing the business model is the other part. by opening up and partner-ing with other players—application developers, content providers, device makers and enterprises—operators can turn the built-in capabilities of their networks into new streams of revenue, rapidly delivering more of what their customers want and accessing a market that in the u.s. alone amounts to $100 billion.

ROBERT VRiJpresident americas reGion

stretching the length of the western hemisphere, the americas region is home to some of the world’s most innovative communications service providers and fastest growing markets.

america movil faster, better, smarteramerica movil is one of the biggest mobile operators in latin america. With customers in 11 countries eager to make video and multimedia part of their daily user experience, the company brought in alcatel-lucent to help deliver high-speed mobile internet, video calling and other multimedia services while keeping operating costs to a minimum. thanks to alcatel-lucent’s experience in ip transformation—making networks leaner and more powerful through ip technology—america movil is poised to be an out-in-front provider of the next wave of high-speed services to enrich users’ lives.

at&t from 3g to 4galcatel-lucent was selected as equipment supplier for at&t’s lte (long-term evolution) mobile broadband network. continued work with at&t through this multi-year agreement will allow the company to take full advantage of compatibility between existing 3G equipment and forthcoming lte upgrades.

sprint’s “netWork vision” realizing the value to keep up with never-before-seen growth in mobile service usage, sprint called on alcatel-lucent to bring its multiple solutions together into one seamless network with a single type of base station to handle every different kind of wireless signal. drawing on alcatel-lucent’s complete understanding of sprint’s existing network technologies, these changes will make it easier for the company to meet customers’ expectations— without skyrocketing operating costs.

CuSTOMER STORiES

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422010 AnnuAl report

market leader in IP and optical networking

center of Alcatel-lucent

submarine expertise

serving every major

telecoms service

provider

432010 AnnuAl report

the office is wherever you areTeleworking—using email, teleconferencing, videoconferencing and the like—significantly reduces the environmental impact associated with commuter travel. in France, nearly a third of all Alcatel-Lucent staff work from home at least one day a week, cutting their collective greenhouse gas emissions by 2,600 tons per year. That’s roughly equal to removing nearly 500 passenger cars from the road. The company achieved further efficiencies worldwide through flexible office space arrangements last year, shrinking its total footprint by 300,000 square meters.

alcatel-lucent proposed the best technical solution from edge to core, along with strong services and its proven experience in transportation infrastructure deployments. TERJE STEiNSVik, head of technoloGY, Jernbaneverket (nordics)

connectivity is king

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k EuROPE, MiDDLE EAST, AFRiCA

from togolese entrepreneurs shaping their country’s economic future to teens in paris enjoying mobile gaming, the people of europe, the middle east and africa thrive on being connected.

markEt trENdsThe broadband revolution is on. europe, the middle east and africa (emea) is as diverse a slice of the globe as you can get, home to some of the world’s key developing economies and some of its most mature. forget the differ-ences, though—no matter where you go one thing is constant: the desire for high-speed connectivity.

Telcos are stepping up. to deliver the services customers are clamoring for, communication companies are well on the way to turning their networks into high-speed ip (internet protocol) networks, using digital technology to be faster, more flexible and more responsive to changing consumer needs. to keep costs low and capacity high, they’re also sharing network equipment with each other.

Content is everywhere. in europe alone, smartphone use has more than doubled in the space of two years. alcatel-lucent is helping mobile compa-nies capitalize on that growth by making sure they’re poised to profit from rocketing demand for mobile applications.

ADOLFO HERNANDEzpresident europe, middle east and africa reGion

bdbos the definition of trustno systems are more mission critical than the ones people count on for safety—which is why Germany’s federal agency for digital radio (bdbos), which runs the nation's public safety network, appointed alcatel-lucent to enhance and operate its communications infrastructure. partnering with ibm and Germany’s iabG (industrieanlagen-betriebsgesellschaft), alcatel-lucent was chosen for its unmatched ability to handle complex, large-scale projects and so ensure more than half a million police, fire, rescue, customs and other government users stay connected.

bt’s 21cnblueprint for the network of the futureas demand for video-rich content continues to boom, bt is embracing radical change by accelerating its move toward a unified, smart ip network and an open application environment that will support the development of new business models. to quickly and cost–effectively introduce new rich-media services to a growing base of wholesale and retail subscribers, bt is taking advantage of alcatel-lucent’s high leverage network™ (hln) architecture and transformational services. this evolution of bt’s infrastructure will increase capacity and bandwidth while providing an enhanced customer experience.

mts-ukraine bring on the futurealcatel-lucent and mts-ukraine are building on their longstanding partnership to ready the ukrainian mobile communications company’s network for the future. in 2010, the two collaborated on a trial of alcatel-lucent’s long-term evolution (lte), giving mts-ukraine the opportunity to assess the benefits of next-generation (4G) mobile technology. last year as well, mts-ukraine chose alcatel-lucent to outfit its network with intelligent digital ip/mpls mobile backhaul capabilities—enabling the company to offer customers high-speed next-generation mobile and premium ip-based services while cutting costs, increasing capacity and boosting overall quality.

CuSTOMER STORiES

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422010 AnnuAl report

market leader in IP and optical networking

center of Alcatel-lucent

submarine expertise

serving every major

telecoms service

provider

432010 AnnuAl report

the office is wherever you areTeleworking—using email, teleconferencing, videoconferencing and the like—significantly reduces the environmental impact associated with commuter travel. in France, nearly a third of all Alcatel-Lucent staff work from home at least one day a week, cutting their collective greenhouse gas emissions by 2,600 tons per year. That’s roughly equal to removing nearly 500 passenger cars from the road. The company achieved further efficiencies worldwide through flexible office space arrangements last year, shrinking its total footprint by 300,000 square meters.

alcatel-lucent proposed the best technical solution from edge to core, along with strong services and its proven experience in transportation infrastructure deployments. TERJE STEiNSVik, head of technoloGY, Jernbaneverket (nordics)

connectivity is king

th

e b

usi

ne

ss b

oo

k EuROPE, MiDDLE EAST, AFRiCA

from togolese entrepreneurs shaping their country’s economic future to teens in paris enjoying mobile gaming, the people of europe, the middle east and africa thrive on being connected.

markEt trENdsThe broadband revolution is on. europe, the middle east and africa (emea) is as diverse a slice of the globe as you can get, home to some of the world’s key developing economies and some of its most mature. forget the differ-ences, though—no matter where you go one thing is constant: the desire for high-speed connectivity.

Telcos are stepping up. to deliver the services customers are clamoring for, communication companies are well on the way to turning their networks into high-speed ip (internet protocol) networks, using digital technology to be faster, more flexible and more responsive to changing consumer needs. to keep costs low and capacity high, they’re also sharing network equipment with each other.

Content is everywhere. in europe alone, smartphone use has more than doubled in the space of two years. alcatel-lucent is helping mobile compa-nies capitalize on that growth by making sure they’re poised to profit from rocketing demand for mobile applications.

ADOLFO HERNANDEzpresident europe, middle east and africa reGion

bdbos the definition of trustno systems are more mission critical than the ones people count on for safety—which is why Germany’s federal agency for digital radio (bdbos), which runs the nation's public safety network, appointed alcatel-lucent to enhance and operate its communications infrastructure. partnering with ibm and Germany’s iabG (industrieanlagen-betriebsgesellschaft), alcatel-lucent was chosen for its unmatched ability to handle complex, large-scale projects and so ensure more than half a million police, fire, rescue, customs and other government users stay connected.

bt’s 21cnblueprint for the network of the futureas demand for video-rich content continues to boom, bt is embracing radical change by accelerating its move toward a unified, smart ip network and an open application environment that will support the development of new business models. to quickly and cost–effectively introduce new rich-media services to a growing base of wholesale and retail subscribers, bt is taking advantage of alcatel-lucent’s high leverage network™ (hln) architecture and transformational services. this evolution of bt’s infrastructure will increase capacity and bandwidth while providing an enhanced customer experience.

mts-ukraine bring on the futurealcatel-lucent and mts-ukraine are building on their longstanding partnership to ready the ukrainian mobile communications company’s network for the future. in 2010, the two collaborated on a trial of alcatel-lucent’s long-term evolution (lte), giving mts-ukraine the opportunity to assess the benefits of next-generation (4G) mobile technology. last year as well, mts-ukraine chose alcatel-lucent to outfit its network with intelligent digital ip/mpls mobile backhaul capabilities—enabling the company to offer customers high-speed next-generation mobile and premium ip-based services while cutting costs, increasing capacity and boosting overall quality.

CuSTOMER STORiES

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442010 AnnuAl report

452010 AnnuAl report

sharing experience, educating young people: alcatel-Lucent Foundation in ChinaAlcatel-Lucent volunteers visited primary schools in Shanghai and Beijing last year to help students better understand the basics of economics and global trade. Putting their creativity to the test, the children took part in a 24-team contest to design products and marketing programs for a country of their choice. The volunteers coached the students and served as judges, handing out awards for innovation, teamwork and best presentation. The young people’s inspired work was exhibited at the Shanghai World Expo.

this key contract enables nbn co to deliver a world-class, fibre-based, high-speed network for australia. kEViN BROWN, head of corporate services, nbn

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home of the communications technology revolutionWith two-thirds of the world’s population to connect, asia-pacific is a hotbed of activity when it comes to the uptake of communications technologies.

markEt trENdsMillions are on the move. every day, the number of mobile subscribers in china and india continues to skyrocket. in the last three months of 2010, the two countries added a total of 90 million mobile phone subscribers.

Connectivity abounds. south korea is the most connected country in the region, with Japan and singapore close behind—and australia in the middle of the biggest network installation project in the world. and there are still opportunities to grow, with 81 percent of homes eager for fixed high-speed connectivity and 1.2 billion more potential mobile phone subscribers ready to be served.

What will unleash universal access? communications companies in asia-pacific need to reduce their energy consumption and operating costs to go the next step and deliver universal connectivity. successfully putting broad-band in the hands of everyone in the region could boost asia-pacific’s gross domestic product by $19 billion.

RAJEEV SiNgH-MOLARESpresident asia-pacific reGion

Growth every quarter:

2010

highly diverse

customer base

unique joint venture: Alcatel-lucent shanghai Bell

bharti airtel breaking new ground in indiabharti airtel, the largest telecom operator in india with over 160 million subscribers, embarked on a program for ip transformation and sought the help of a global partner to transform, grow and manage its fixed-line access network. airtel chose to partner with alcatel-lucent for this task, based on their in-depth knowledge, relevant experience and superior competency. alcatel-lucent today supports airtel through a first-of-its kind joint venture in india, in their quest for providing service excellence to their fixed-line customers.

china mobile, china telecom and china unicom building china’s network futurethe chinese telecoms market is growing at breakneck speed. three of the country’s leading telcos—china mobile, china telecom and china unicom—together asked alcatel-lucent to enable next-generation voice and data services with ip and high-speed networking technology. respectful of the chinese context and culture, alcatel-lucent helped the three companies transform their networks and made a long-term commitment to strengthen the local presence of alcatel-lucent shanghai bell.

nbn the business of broadband for allaustralia has identified universal high-speed broadband access as a key enabler of its future digital economy. the national broadband network will connect all premises across the country, providing wholesale-only open access to support a new value chain of broadband providers, applications and innovative business models. alcatel-lucent is helping nbn co—the company assigned to design, build and operate the national broadband network—establish its infrastructure footprint and develop its capacity to meet australia’s future broadband needs.

CuSTOMER STORiES

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442010 AnnuAl report

452010 AnnuAl report

sharing experience, educating young people: alcatel-Lucent Foundation in ChinaAlcatel-Lucent volunteers visited primary schools in Shanghai and Beijing last year to help students better understand the basics of economics and global trade. Putting their creativity to the test, the children took part in a 24-team contest to design products and marketing programs for a country of their choice. The volunteers coached the students and served as judges, handing out awards for innovation, teamwork and best presentation. The young people’s inspired work was exhibited at the Shanghai World Expo.

this key contract enables nbn co to deliver a world-class, fibre-based, high-speed network for australia. kEViN BROWN, head of corporate services, nbn

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k ASiA-PACiFiC

home of the communications technology revolutionWith two-thirds of the world’s population to connect, asia-pacific is a hotbed of activity when it comes to the uptake of communications technologies.

markEt trENdsMillions are on the move. every day, the number of mobile subscribers in china and india continues to skyrocket. in the last three months of 2010, the two countries added a total of 90 million mobile phone subscribers.

Connectivity abounds. south korea is the most connected country in the region, with Japan and singapore close behind—and australia in the middle of the biggest network installation project in the world. and there are still opportunities to grow, with 81 percent of homes eager for fixed high-speed connectivity and 1.2 billion more potential mobile phone subscribers ready to be served.

What will unleash universal access? communications companies in asia-pacific need to reduce their energy consumption and operating costs to go the next step and deliver universal connectivity. successfully putting broad-band in the hands of everyone in the region could boost asia-pacific’s gross domestic product by $19 billion.

RAJEEV SiNgH-MOLARESpresident asia-pacific reGion

Growth every quarter:

2010

highly diverse

customer base

unique joint venture: Alcatel-lucent shanghai Bell

bharti airtel breaking new ground in indiabharti airtel, the largest telecom operator in india with over 160 million subscribers, embarked on a program for ip transformation and sought the help of a global partner to transform, grow and manage its fixed-line access network. airtel chose to partner with alcatel-lucent for this task, based on their in-depth knowledge, relevant experience and superior competency. alcatel-lucent today supports airtel through a first-of-its kind joint venture in india, in their quest for providing service excellence to their fixed-line customers.

china mobile, china telecom and china unicom building china’s network futurethe chinese telecoms market is growing at breakneck speed. three of the country’s leading telcos—china mobile, china telecom and china unicom—together asked alcatel-lucent to enable next-generation voice and data services with ip and high-speed networking technology. respectful of the chinese context and culture, alcatel-lucent helped the three companies transform their networks and made a long-term commitment to strengthen the local presence of alcatel-lucent shanghai bell.

nbn the business of broadband for allaustralia has identified universal high-speed broadband access as a key enabler of its future digital economy. the national broadband network will connect all premises across the country, providing wholesale-only open access to support a new value chain of broadband providers, applications and innovative business models. alcatel-lucent is helping nbn co—the company assigned to design, build and operate the national broadband network—establish its infrastructure footprint and develop its capacity to meet australia’s future broadband needs.

CuSTOMER STORiES

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462010 AnnuAl report

472010 AnnuAl report

european investment bankfinance on the movethe european investment bank (eib) serves the 27 member states of the european union. When moving into its new head office in luxembourg, it decided to provide its increasingly connected and mobile workforce with efficient productivity and communications solutions. combining its expertise in advanced telephony and collaboration applications with offerings from a rich variety of partners, alcatel-lucent worked with the eib to create exactly the right mix of tools, improving employee and customer engagement within the institution’s mobile environment.

four seasons hotelshave mobility, will travelWith 84 hotels in 34 countries, four seasons hotels is dedicated to perfecting the travel experience. for its new hotel in mumbai, the hospitality giant sought to provide guests with innovative communications services beyond high-speed internet—including mobility within the hotel and its shops, multilingual voice guides and Wifi access. thanks to the networking and mobility expertise of alcatel-lucent, four seasons is delivering its guests an optimal, secure communications experience.

when reliability is a mustt

he

bu

sin

ess

bo

ok STRATEgiC iNDuSTRiES

from autobahns and railways to emergency services and power grids, we rely on complex systems to keep us safe, secure and productive. and those systems rely on alcatel-lucent.

CuSTOMER STORiES

markEt trENdsThere’s no such thing as “good enough.” not when it comes to the systems societies depend on for essential services, safety and defense. that’s why customers around the world trust our networking experience and expertise—for reliable results, every time. alcatel-lucent strategic industries provides solu-tions for:

Transportation authorities—enabling smart systems that streamline operations and reduce environmental impacts.

Energy providers—allowing power utilities to manage ener-gy use in real time, conserving resources and providing for a cleaner environment.

Public-safety organizations—enabling police forces, fire departments and emergency medical services to ensure mis-sion-critical operations while reining in costs.

chattanooGa’s epbcommunities at the speed of ‘smart’a municipal utility and technology trailblazer, chattanooga’s epb is working with alcatel-lucent to build north america’s first smart grid on a fiber-optic network. the system, which can collect and process information about electricity use in real time, gives customers more control over their consumption by providing up-to-the-minute information about how much energy they’re using and what it costs.

eurotunneltrains for speed, network for safetyfor trains racing through the tunnel under the english channel between france and the u.k., reliable ground-to-train communications are essential. alcatel-lucent is taking the existing communications system to today’s highest technical standard, allowing authorities to manage cross-channel traffic more safely and efficiently while preparing for future signaling requirements.

TOM BuRNSpresident enterprise and strateGic industries

we’re in business

ENTERPRiSE

from education and healthcare to financial services and hospitality, enterprises understand exactly the benefits innovative communications can bring—and want them now.

markEt trENdsThere would be no business without communications. cus-tomer engagement, employee collaboration and productivity all depend on instant access to people and information. so does being present and competitive in a global market that never sleeps.

Enterprises are innovators. like the people who work in them, enterprises are embracing innovation in communication: social media, video, and mobility. they want real-time applications to be delivered over networks that know what users need and what device they need it on.

Everyone’s included. by bringing together their employees, partners and customers, alcatel-lucent is not only helping enterprises be more productive and collaborative but also allowing them to engage their business in a whole new kind of conversation.

CuSTOMER STORiES

our guests are extremely happy with the entire service value chain, including the communication systems. ADARSH JATiA, eXecutive director, four seasons hotel, mumbai

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462010 AnnuAl report

472010 AnnuAl report

european investment bankfinance on the movethe european investment bank (eib) serves the 27 member states of the european union. When moving into its new head office in luxembourg, it decided to provide its increasingly connected and mobile workforce with efficient productivity and communications solutions. combining its expertise in advanced telephony and collaboration applications with offerings from a rich variety of partners, alcatel-lucent worked with the eib to create exactly the right mix of tools, improving employee and customer engagement within the institution’s mobile environment.

four seasons hotelshave mobility, will travelWith 84 hotels in 34 countries, four seasons hotels is dedicated to perfecting the travel experience. for its new hotel in mumbai, the hospitality giant sought to provide guests with innovative communications services beyond high-speed internet—including mobility within the hotel and its shops, multilingual voice guides and Wifi access. thanks to the networking and mobility expertise of alcatel-lucent, four seasons is delivering its guests an optimal, secure communications experience.

when reliability is a must

th

e b

usi

ne

ss b

oo

k STRATEgiC iNDuSTRiES

from autobahns and railways to emergency services and power grids, we rely on complex systems to keep us safe, secure and productive. and those systems rely on alcatel-lucent.

CuSTOMER STORiES

markEt trENdsThere’s no such thing as “good enough.” not when it comes to the systems societies depend on for essential services, safety and defense. that’s why customers around the world trust our networking experience and expertise—for reliable results, every time. alcatel-lucent strategic industries provides solu-tions for:

Transportation authorities—enabling smart systems that streamline operations and reduce environmental impacts.

Energy providers—allowing power utilities to manage ener-gy use in real time, conserving resources and providing for a cleaner environment.

Public-safety organizations—enabling police forces, fire departments and emergency medical services to ensure mis-sion-critical operations while reining in costs.

chattanooGa’s epbcommunities at the speed of ‘smart’a municipal utility and technology trailblazer, chattanooga’s epb is working with alcatel-lucent to build north america’s first smart grid on a fiber-optic network. the system, which can collect and process information about electricity use in real time, gives customers more control over their consumption by providing up-to-the-minute information about how much energy they’re using and what it costs.

eurotunneltrains for speed, network for safetyfor trains racing through the tunnel under the english channel between france and the u.k., reliable ground-to-train communications are essential. alcatel-lucent is taking the existing communications system to today’s highest technical standard, allowing authorities to manage cross-channel traffic more safely and efficiently while preparing for future signaling requirements.

TOM BuRNSpresident enterprise and strateGic industries

we’re in business

ENTERPRiSE

from education and healthcare to financial services and hospitality, enterprises understand exactly the benefits innovative communications can bring—and want them now.

markEt trENdsThere would be no business without communications. cus-tomer engagement, employee collaboration and productivity all depend on instant access to people and information. so does being present and competitive in a global market that never sleeps.

Enterprises are innovators. like the people who work in them, enterprises are embracing innovation in communication: social media, video, and mobility. they want real-time applications to be delivered over networks that know what users need and what device they need it on.

Everyone’s included. by bringing together their employees, partners and customers, alcatel-lucent is not only helping enterprises be more productive and collaborative but also allowing them to engage their business in a whole new kind of conversation.

CuSTOMER STORiES

our guests are extremely happy with the entire service value chain, including the communication systems. ADARSH JATiA, eXecutive director, four seasons hotel, mumbai

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482010 AnnuAl report

ViVEk MOHANpresident services

to meet the demand for new high-speed services, communications companies aren’t just changing their technology—they’re also reinventing the ways they do business. and they’re not doing it alone.

492010 AnnuAl report

alcatel-lucent was the perfect fit, the perfect price, with the experience we needed: a company vodafone trusted and valued. BASSAM AL-iBRAHiM, technoloGY vendor manaGer, vodafone Qatar

taking green to the desertDiesel generators are usually the fallback for powering communications equipment in areas not served by reliable electrical grids. To avoid the costs and environmental harm that come from burning fuel, the Alcatel-Lucent Alternative Energy Program is helping companies set up wireless networks that run on solar, wind and other alternative energy sources. By the end of 2010, Alcatel-Lucent had installed more than 500 alternative energy-powered base stations suited to all weather conditions and physical environments—including deployments in Africa, the Middle East and india.

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operational transformation

It takEs a PartNErnew opportunities are springing up almost daily for network companies to increase the value they deliver their customers—through high-quality video services, innovative applications and the freedom to connect anywhere, anytime, using any device. seizing those opportunities demands rapid action. alcatel-lucent is helping customers the world over gain the flexibil-ity and responsiveness they need by transforming their operations, strip-ping the complexity out of the network so it can run in the most efficient and streamlined way—and guiding them through the transformation process based on the experience of a large number of ip (internet protocol) and mobile network migrations.

markEt trENdsEvery network has a price tag. capeX and opeX—what it costs to build a network and what it costs to run one—have shot up with the demand for more speed, more video, more applications. the old ways of growing net-works and making money from them have reached their limits.

iP is the answer. communications companies can make their networks smart-er, leaner and more adaptable by basing them on ip technology. ip acceler-ates the development and delivery of new kinds of services and applications, meaning telcos can offer more of what people want, where and when they want it.

There’s no need to go it alone. it’s a tall order for any organization to take on the task of transformation and still carry out the daily business of serv-ing its customers. from managing network operations to providing whole-network design, build and migration services, alcatel-lucent is a trusted partner that relieves the transformation burden so companies can compete and thrive as they evolve.

CuSTOMER STORiES

vivacom change is good—with the right partner“our decision to enter a strategic partnership with alcatel-lucent is designed to guarantee our fixed and mobile subscribers a network of constantly increasing quality over the long term,” said bernard moscheni, ceo of vivacom. “alcatel-lucent is the most appropriately equipped to meet our network operations requirements with greater speed, flexibility and cost synergies than we could alone. and with this step, we’re once again playing a pioneering role in the bulgarian market.”

vodafone Qatar a faster path to marketvodafone Qatar is part of the world's leading international mobile communications group, the vodafone Group. to realize its forward-looking vision “to be the most admired brand in Qatar,” the company turned to alcatel-lucent for a fully outsourced, end-to-end managed services solution for a brand new 2G/3G mobile network. this turnkey solution enables vodafone to quickly and efficiently take advantage of an important opportunity to enter the mobile market with competitive next-generation services.

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482010 AnnuAl report

ViVEk MOHANpresident services

to meet the demand for new high-speed services, communications companies aren’t just changing their technology—they’re also reinventing the ways they do business. and they’re not doing it alone.

492010 AnnuAl report

alcatel-lucent was the perfect fit, the perfect price, with the experience we needed: a company vodafone trusted and valued. BASSAM AL-iBRAHiM, technoloGY vendor manaGer, vodafone Qatar

taking green to the desertDiesel generators are usually the fallback for powering communications equipment in areas not served by reliable electrical grids. To avoid the costs and environmental harm that come from burning fuel, the Alcatel-Lucent Alternative Energy Program is helping companies set up wireless networks that run on solar, wind and other alternative energy sources. By the end of 2010, Alcatel-Lucent had installed more than 500 alternative energy-powered base stations suited to all weather conditions and physical environments—including deployments in Africa, the Middle East and india.

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operational transformation

It takEs a PartNErnew opportunities are springing up almost daily for network companies to increase the value they deliver their customers—through high-quality video services, innovative applications and the freedom to connect anywhere, anytime, using any device. seizing those opportunities demands rapid action. alcatel-lucent is helping customers the world over gain the flexibil-ity and responsiveness they need by transforming their operations, strip-ping the complexity out of the network so it can run in the most efficient and streamlined way—and guiding them through the transformation process based on the experience of a large number of ip (internet protocol) and mobile network migrations.

markEt trENdsEvery network has a price tag. capeX and opeX—what it costs to build a network and what it costs to run one—have shot up with the demand for more speed, more video, more applications. the old ways of growing net-works and making money from them have reached their limits.

iP is the answer. communications companies can make their networks smart-er, leaner and more adaptable by basing them on ip technology. ip acceler-ates the development and delivery of new kinds of services and applications, meaning telcos can offer more of what people want, where and when they want it.

There’s no need to go it alone. it’s a tall order for any organization to take on the task of transformation and still carry out the daily business of serv-ing its customers. from managing network operations to providing whole-network design, build and migration services, alcatel-lucent is a trusted partner that relieves the transformation burden so companies can compete and thrive as they evolve.

CuSTOMER STORiES

vivacom change is good—with the right partner“our decision to enter a strategic partnership with alcatel-lucent is designed to guarantee our fixed and mobile subscribers a network of constantly increasing quality over the long term,” said bernard moscheni, ceo of vivacom. “alcatel-lucent is the most appropriately equipped to meet our network operations requirements with greater speed, flexibility and cost synergies than we could alone. and with this step, we’re once again playing a pioneering role in the bulgarian market.”

vodafone Qatar a faster path to marketvodafone Qatar is part of the world's leading international mobile communications group, the vodafone Group. to realize its forward-looking vision “to be the most admired brand in Qatar,” the company turned to alcatel-lucent for a fully outsourced, end-to-end managed services solution for a brand new 2G/3G mobile network. this turnkey solution enables vodafone to quickly and efficiently take advantage of an important opportunity to enter the mobile market with competitive next-generation services.

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502010 AnnuAl report

512010 AnnuAl report

Flatter, tighter operationsalcatel-lucent’s new principal operating model—the foundations of which were built in 2010—will improve the company’s operational efficiency by simplifying and harmonizing the interactions between its various legal units. the number of legal entities responsible for sourcing products will drop from eight to three, with alcatel-lucent interna-tional (established in 2010) serving emea, latin america and asia-pacific, alcatel-lucent usa serv-ing north america, and asb serving china. What used to require 25 separate cost accounting sys-tems will now involve just one. not only does this make the company’s operations more streamlined and economical; it also stands to improve customer satisfaction by making alcatel-lucent easier to do business with.

Real estate modernizationalcatel-lucent’s transformation continues to include a focus on real estate—specifically, improv-ing occupancy conditions at facilities around the world, reducing operating expenses and shrinking the organization’s carbon footprint. in 2010, these efforts led to a reduction in the number of proper-ties, the disposal of a large area of space and the generation of significant operational savings. in the process, alcatel-lucent beat its own carbon foot-print targets, cutting 10 percent of its greenhouse gas emissions a full year ahead of schedule.

Next stepsGoing forward, the company will continue to build strong relationships with suppliers, taking advan-tage of the intellectual and technological benefits they have the potential to bring. the operations group specifically will contribute to the company’s profit and loss and balance sheets by simplifying the delivery of products to customers and reducing inventory in ways that allow improvements to flow more quickly to the bottom line.

Walking the talkAlcatel-Lucent isn’t just helping communications companies reduce their environmental impact— it’s taking a cut at its own as well. The target: to reduce its own carbon footprint by 50 percent from its 2008 level by 2020. Addressing everything from facility operations and logistics to iT and business travel—and involving its entire workforce—Alcatel-Lucent trimmed its total emissions by nearly 12.6 percent last year, a calculation that included a greater range of indirect emissions than ever before for a more accurate measure of impact. in the end, more than 176,000 tons of carbon dioxide emissions were eliminated—the equivalent of taking nearly 32,000 cars off the road.

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response and responsibilityacting quickly to address supply chain pressures in 2010, alcatel-lucent established systems to ensure its ongoing ability to meet customer requirements.

After a year of challengeWe make significant purchases of electronic components and other materials from many sources. in 2010, we experienced shortages of components and commodities commonly used across the industry that led to increases in our production lead times and a deterioration of our delivery capability.

as early as the beginning of 2010, we undertook measures to mitigate the impact of these shortages, which allowed us to gradually improve our production capa-bilities throughout the year. in addition, an easing of supply conditions occurred during the last quarter of 2010, but supply conditions were not yet at normal levels by the end of 2010.

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0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.60

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1200

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2008 2012 2016 2020

50%

42%

24%

alcatel-lucent's three-phase plan to reduce its carbon footprint by 50% by 2020 (in millions of tons of co2)

get our house in order

improve onsite energy efficiencyreduce the use of air shipmentsconsolidate facilitiesconsolidate it serversreduce business travel

ask more from suppliers

improve onsite energy efficiencyreduce the use of air shipmentsconsolidate facilitiesencourage partner involvement

use renewables for the rest

use renewable energyuse renewable energy credits

1 2 3

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502010 AnnuAl report

512010 AnnuAl report

Flatter, tighter operationsalcatel-lucent’s new principal operating model—the foundations of which were built in 2010—will improve the company’s operational efficiency by simplifying and harmonizing the interactions between its various legal units. the number of legal entities responsible for sourcing products will drop from eight to three, with alcatel-lucent interna-tional (established in 2010) serving emea, latin america and asia-pacific, alcatel-lucent usa serv-ing north america, and asb serving china. What used to require 25 separate cost accounting sys-tems will now involve just one. not only does this make the company’s operations more streamlined and economical; it also stands to improve customer satisfaction by making alcatel-lucent easier to do business with.

Real estate modernizationalcatel-lucent’s transformation continues to include a focus on real estate—specifically, improv-ing occupancy conditions at facilities around the world, reducing operating expenses and shrinking the organization’s carbon footprint. in 2010, these efforts led to a reduction in the number of proper-ties, the disposal of a large area of space and the generation of significant operational savings. in the process, alcatel-lucent beat its own carbon foot-print targets, cutting 10 percent of its greenhouse gas emissions a full year ahead of schedule.

Next stepsGoing forward, the company will continue to build strong relationships with suppliers, taking advan-tage of the intellectual and technological benefits they have the potential to bring. the operations group specifically will contribute to the company’s profit and loss and balance sheets by simplifying the delivery of products to customers and reducing inventory in ways that allow improvements to flow more quickly to the bottom line.

Walking the talkAlcatel-Lucent isn’t just helping communications companies reduce their environmental impact— it’s taking a cut at its own as well. The target: to reduce its own carbon footprint by 50 percent from its 2008 level by 2020. Addressing everything from facility operations and logistics to iT and business travel—and involving its entire workforce—Alcatel-Lucent trimmed its total emissions by nearly 12.6 percent last year, a calculation that included a greater range of indirect emissions than ever before for a more accurate measure of impact. in the end, more than 176,000 tons of carbon dioxide emissions were eliminated—the equivalent of taking nearly 32,000 cars off the road.

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response and responsibilityacting quickly to address supply chain pressures in 2010, alcatel-lucent established systems to ensure its ongoing ability to meet customer requirements.

After a year of challengeWe make significant purchases of electronic components and other materials from many sources. in 2010, we experienced shortages of components and commodities commonly used across the industry that led to increases in our production lead times and a deterioration of our delivery capability.

as early as the beginning of 2010, we undertook measures to mitigate the impact of these shortages, which allowed us to gradually improve our production capa-bilities throughout the year. in addition, an easing of supply conditions occurred during the last quarter of 2010, but supply conditions were not yet at normal levels by the end of 2010.

0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.60

200

400

600

800

1000

1200

1400

1600

2008 2012 2016 2020

50%

42%

24%

alcatel-lucent's three-phase plan to reduce its carbon footprint by 50% by 2020 (in millions of tons of co2)

get our house in order

improve onsite energy efficiencyreduce the use of air shipmentsconsolidate facilitiesconsolidate it serversreduce business travel

ask more from suppliers

improve onsite energy efficiencyreduce the use of air shipmentsconsolidate facilitiesencourage partner involvement

use renewables for the rest

use renewable energyuse renewable energy credits

1 2 3

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ideas in the making

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ideas in the making

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542010 AnnuAl report

552010 AnnuAl report

Where ‘keePing UP’ gets LeFt behinDThe one predictable thing about technology is that it never stops evolving. New devices catch people’s imaginations, new applications take root at the center of their lives. It’s not enough for communications companies to keep up: they have to anticipate and adapt—faster than ever before. The Alcatel-Lucent High Leverage Network™ helps them do so by evolving their networks and transforming their operations, enabling new applications and delivering universal access to the content and connectivity people demand.

What was the big story in Networks last year?For us without a doubt it was HLN, the High Leverage Network™. This is our answer to the challenges our cus-tomers are facing right now—in wireline, wireless, IP and optics—due to the ongoing explosion of data from mobile Internet, video and social networking. HLN offers a path-way for network evolution toward an integrated, all-IP network that expands easily, runs cost effectively and is intelligent. Everything we do is aligned with this HLN vision and, in 2010, 60 percent of our R&D investment was devoted to it.

What are your key priority areas?We’re investing in the evolution of mobile networks—a move that paid off when we delivered Verizon’s 4G net-work. At the same time, we’re doing everything we can to help our customers deliver the next wave of high-speed broadband, whether it’s using ‘Phantom Mode’ to boost the capacity of traditional copper networks or new fiber installations. We’re investing in transport—the long-distance transmission of voice, video and data—and are combining our capabilities in IP and optics to achieve transport speeds of 100 Gigabits per second. And light-Radio™ is making mobile networks more flexible and efficient, with more capacity to meet demand.

How are these strategies paying off?HLN contributed to Alcatel-Lucent’s growth in 2010. It’s resonating strongly with our customers and the broader market, across multiple technologies and geographies. We’re gaining traction among customers in key technol-ogy areas, and are displacing competitors in others. Mov-ing forward, we are going to see even greater need for network capacity due to the data explosion, and our strategy for 2011 is to accelerate our ability to deliver practical, innovative solutions to our customers.

hLn is resonating strongly with our customers and the broader market, across multiple technologies and geographies. PHILIPPE KERYER, PRESIDENT NETWORKS

Watch the video interview at: www.alcatel-lucent.com/keryer

Enabling a low-carbon economyThe information and communications technology (ICT) sector is in a unique position when it comes to the environment. Beyond reducing its own impact, the solutions it provides can help other industries cut theirs as well—by minimizing travel and commuting, enabling virtual meetings, improving the quality of electric power services and more. In all, ICT has the potential to reduce global greenhouse gas emissions by 15 percent by 2020. As governments and industry strive for sustainable growth, innovative ICT solutions will contribute to energy-efficient ways of living and working—laying the foundation for what’s being called ‘the low-carbon economy.’

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a netWork that DeLivers: the high Leverage netWork™

INTERvIEW WITH…

542010 AnnuAl report

552010 AnnuAl report

Where ‘keePing UP’ gets LeFt behinDThe one predictable thing about technology is that it never stops evolving. New devices catch people’s imaginations, new applications take root at the center of their lives. It’s not enough for communications companies to keep up: they have to anticipate and adapt—faster than ever before. The Alcatel-Lucent High Leverage Network™ helps them do so by evolving their networks and transforming their operations, enabling new applications and delivering universal access to the content and connectivity people demand.

What was the big story in Networks last year?For us without a doubt it was HLN, the High Leverage Network™. This is our answer to the challenges our cus-tomers are facing right now—in wireline, wireless, IP and optics—due to the ongoing explosion of data from mobile Internet, video and social networking. HLN offers a path-way for network evolution toward an integrated, all-IP network that expands easily, runs cost effectively and is intelligent. Everything we do is aligned with this HLN vision and, in 2010, 60 percent of our R&D investment was devoted to it.

What are your key priority areas?We’re investing in the evolution of mobile networks—a move that paid off when we delivered Verizon’s 4G net-work. At the same time, we’re doing everything we can to help our customers deliver the next wave of high-speed broadband, whether it’s using ‘Phantom Mode’ to boost the capacity of traditional copper networks or new fiber installations. We’re investing in transport—the long-distance transmission of voice, video and data—and are combining our capabilities in IP and optics to achieve transport speeds of 100 Gigabits per second. And light-Radio™ is making mobile networks more flexible and efficient, with more capacity to meet demand.

How are these strategies paying off?HLN contributed to Alcatel-Lucent’s growth in 2010. It’s resonating strongly with our customers and the broader market, across multiple technologies and geographies. We’re gaining traction among customers in key technol-ogy areas, and are displacing competitors in others. Mov-ing forward, we are going to see even greater need for network capacity due to the data explosion, and our strategy for 2011 is to accelerate our ability to deliver practical, innovative solutions to our customers.

hLn is resonating strongly with our customers and the broader market, across multiple technologies and geographies. PHILIPPE KERYER, PRESIDENT NETWORKS

Watch the video interview at: www.alcatel-lucent.com/keryer

Enabling a low-carbon economyThe information and communications technology (ICT) sector is in a unique position when it comes to the environment. Beyond reducing its own impact, the solutions it provides can help other industries cut theirs as well—by minimizing travel and commuting, enabling virtual meetings, improving the quality of electric power services and more. In all, ICT has the potential to reduce global greenhouse gas emissions by 15 percent by 2020. As governments and industry strive for sustainable growth, innovative ICT solutions will contribute to energy-efficient ways of living and working—laying the foundation for what’s being called ‘the low-carbon economy.’

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a netWork that DeLivers: the high Leverage netWork™

INTERvIEW WITH…

562010 AnnuAl report

572010 AnnuAl report

It’s not just a ‘nice to have.’ Anywhere, anytime, network access is a social necessity and an economic imperative. With the World Bank showing that a 10 percent increase in high-speed (broadband) availability raises a country’s gross domestic product by 1.2 percent, governments worldwide now consider high-speed (broadband) connectivity part of their critical national infrastructure.

TDC: reaching high sPeeD in recorD time Alcatel-Lucent’s Intelligent services Access Manager (IsAM) allows telcos like Denmark’s TDC to deliver a whole variety of faster, more reliable services through one sophisticated system, cutting operating costs while guaranteeing the highest quality of service. More importantly, the IsAM technology will allow Denmark to meet the targets of the European Commission’s Digital Agenda—which aims to provide every European with high-speed service—years ahead of schedule.

VERIzON WIRELESS: bUiLDing the netWork oF ‘beyonD’A major network infrastructure partner to verizon Wireless, Alcatel-Lucent is helping the company grow and improve the performance of its current mobile network while at the same time building the foundation for its next-generation (4G LTE) network. In a four-year contract expected to be worth Us$4 billion to make sure verizon will continue to satisfy its customers with advanced, high-quality wireless services, Alcatel-Lucent is providing a wide range of technologies— IP, fiber optics and microwave—along with best-in-the-business professional integration services.

CUsToMER

WIN

CUsToMER

WIN

NEW TECHNoLoGIEs LTEthe long term starts now Mobile customers will soon be able to access the Internet four times faster than they can today thanks to fourth-generation wireless technology (LTE, or long-term evolu-tion). Alcatel-Lucent’s early leadership in the LTE/4G market comes from the power of its High Leverage Net-work™ approach and the fact that it’s the only vendor with deep experience and strong offerings in both mobile radio and IP routing, two LTE-essential technologies. In addition to major LTE wins in the U.S. in 2010, the com-pany also demonstrated record LTE speeds with China Mobile Communications at Shanghai World Expo in 2010 and won the 4G deployment in Shanghai for China Mobile. And Alcatel-Lucent is building the Middle East’s first LTE network for Etisalat in the United Arab Emirates.

WireLess

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UniversaL access

NEW TECHNoLoGIEs 10GPONsatisfying the need for speedWhile wireless communication has taken off, most resi-dential and business customers still get their high-speed services and applications (super-fast Internet, video on demand, high-definition TV (HDTV) and web-based cloud computing, to name a few) through fixed-line connectiv-ity, even when they have WiFi on their premises. Alcatel-Lucent is helping communications companies deliver through innovations such as vectoring—a way of more than doubling the capacity of existing copper lines—and 10GPON (Gigabit passive optical networking), which ups the capacity of fiber optic networks by as much as 10 times.

WireLine

562010 AnnuAl report

572010 AnnuAl report

It’s not just a ‘nice to have.’ Anywhere, anytime, network access is a social necessity and an economic imperative. With the World Bank showing that a 10 percent increase in high-speed (broadband) availability raises a country’s gross domestic product by 1.2 percent, governments worldwide now consider high-speed (broadband) connectivity part of their critical national infrastructure.

TDC: reaching high sPeeD in recorD time Alcatel-Lucent’s Intelligent services Access Manager (IsAM) allows telcos like Denmark’s TDC to deliver a whole variety of faster, more reliable services through one sophisticated system, cutting operating costs while guaranteeing the highest quality of service. More importantly, the IsAM technology will allow Denmark to meet the targets of the European Commission’s Digital Agenda—which aims to provide every European with high-speed service—years ahead of schedule.

VERIzON WIRELESS: bUiLDing the netWork oF ‘beyonD’A major network infrastructure partner to verizon Wireless, Alcatel-Lucent is helping the company grow and improve the performance of its current mobile network while at the same time building the foundation for its next-generation (4G LTE) network. In a four-year contract expected to be worth Us$4 billion to make sure verizon will continue to satisfy its customers with advanced, high-quality wireless services, Alcatel-Lucent is providing a wide range of technologies— IP, fiber optics and microwave—along with best-in-the-business professional integration services.

CUsToMER

WIN

CUsToMER

WIN

NEW TECHNoLoGIEs LTEthe long term starts now Mobile customers will soon be able to access the Internet four times faster than they can today thanks to fourth-generation wireless technology (LTE, or long-term evolu-tion). Alcatel-Lucent’s early leadership in the LTE/4G market comes from the power of its High Leverage Net-work™ approach and the fact that it’s the only vendor with deep experience and strong offerings in both mobile radio and IP routing, two LTE-essential technologies. In addition to major LTE wins in the U.S. in 2010, the com-pany also demonstrated record LTE speeds with China Mobile Communications at Shanghai World Expo in 2010 and won the 4G deployment in Shanghai for China Mobile. And Alcatel-Lucent is building the Middle East’s first LTE network for Etisalat in the United Arab Emirates.

WireLess

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UniversaL access

NEW TECHNoLoGIEs 10GPONsatisfying the need for speedWhile wireless communication has taken off, most resi-dential and business customers still get their high-speed services and applications (super-fast Internet, video on demand, high-definition TV (HDTV) and web-based cloud computing, to name a few) through fixed-line connectiv-ity, even when they have WiFi on their premises. Alcatel-Lucent is helping communications companies deliver through innovations such as vectoring—a way of more than doubling the capacity of existing copper lines—and 10GPON (Gigabit passive optical networking), which ups the capacity of fiber optic networks by as much as 10 times.

WireLine

582010 AnnuAl report

592010 AnnuAl report

CDN: PUTTING THE RIGHT CONTENT CLOSE TO THE CONSUMERone of the most demanding challenges for networks is—and will continue to be—the profitable delivery of video and multimedia content. CDn (Content Delivery network) solutions help by putting popular, video-rich content in the right place for the right subscriber at the right time. Devices such as high-definition televisions and tablets pull down this video from sources close by instead of having to reach all the way across the network, a faster and more stable option that helps conserve overall network resources. this is precisely what Alcatel-lucent’s Velocix CDn solution does, improving the delivery of popular media services and meeting demand for multi-screen video entertainment in a profitable way.

By combining IP (Internet Protocol) and optics, the Alcatel-Lucent High Leverage Network™ keeps down the cost of delivering video and multimedia services while providing the intelligence to create and deliver new high-quality offerings—whether video-on-the-move or high-definition movie watching at home.

how does 100g work? It creates what are called coherent optical links—basi-cally, efficient ways of transporting large volumes of information at high speeds across the network. With 100G in both IP and optics, the two can intersect when-ever needed to flow voice, data and media as efficiently and rapidly as possible. It’s like creating expressways for information.

100G is an important step in the evolution of the net-work. With it, communications companies can profitably meet the demands of exponential growth of all kinds of content. Many have already performed live trials of Alcatel-Lucent’s 100G technology and are well on their way toward making it part of their networks.

T-SySTEMS:research at the sPeeD oF LightWorking with Deutsche Telekom’s corporate customer arm, T-systems, Alcatel-Lucent has achieved another industry first: the deployment of ultra-fast commercially available 100 Gigabit-per-second (100G) connectivity that combines IP and optical technologies on a single wavelength of light. Linking high-performance data centers at Germany’s Dresden and Bergakademie Freiberg technical universities, Alcatel-Lucent and T-systems showcased the solution’s performance and high capacity for growth. 100G technology will greatly strengthen cooperation between the research facilities and enable network and data center operators to offer more advanced cloud services and collaborative multimedia applications— and in this way work to improve the lives of people everywhere.

CUsToMER

WIN

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netWork evoLUtion

NEW TECHNoLoGIEs 100GAlcatel-Lucent stood out in 2010 as the only company in the world to deliver 100 Gigabit Ethernet (100G) tech-nologies, extending highest-speed capabilities to both the IP and optical parts of the network. It was a break-through built on more than a decade’s worth of research and development—and included the creation of custom silicon, the substance at the heart of today’s powerful computer circuits. Having its own self-made components for key technology purposes continues to give Alcatel-Lucent a distinct competitive advantage.

breaking the sPeeD barrier: iP anD oPtics For 100g

582010 AnnuAl report

592010 AnnuAl report

CDN: PUTTING THE RIGHT CONTENT CLOSE TO THE CONSUMERone of the most demanding challenges for networks is—and will continue to be—the profitable delivery of video and multimedia content. CDn (Content Delivery network) solutions help by putting popular, video-rich content in the right place for the right subscriber at the right time. Devices such as high-definition televisions and tablets pull down this video from sources close by instead of having to reach all the way across the network, a faster and more stable option that helps conserve overall network resources. this is precisely what Alcatel-lucent’s Velocix CDn solution does, improving the delivery of popular media services and meeting demand for multi-screen video entertainment in a profitable way.

By combining IP (Internet Protocol) and optics, the Alcatel-Lucent High Leverage Network™ keeps down the cost of delivering video and multimedia services while providing the intelligence to create and deliver new high-quality offerings—whether video-on-the-move or high-definition movie watching at home.

how does 100g work? It creates what are called coherent optical links—basi-cally, efficient ways of transporting large volumes of information at high speeds across the network. With 100G in both IP and optics, the two can intersect when-ever needed to flow voice, data and media as efficiently and rapidly as possible. It’s like creating expressways for information.

100G is an important step in the evolution of the net-work. With it, communications companies can profitably meet the demands of exponential growth of all kinds of content. Many have already performed live trials of Alcatel-Lucent’s 100G technology and are well on their way toward making it part of their networks.

T-SySTEMS:research at the sPeeD oF LightWorking with Deutsche Telekom’s corporate customer arm, T-systems, Alcatel-Lucent has achieved another industry first: the deployment of ultra-fast commercially available 100 Gigabit-per-second (100G) connectivity that combines IP and optical technologies on a single wavelength of light. Linking high-performance data centers at Germany’s Dresden and Bergakademie Freiberg technical universities, Alcatel-Lucent and T-systems showcased the solution’s performance and high capacity for growth. 100G technology will greatly strengthen cooperation between the research facilities and enable network and data center operators to offer more advanced cloud services and collaborative multimedia applications— and in this way work to improve the lives of people everywhere.

CUsToMER

WIN

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netWork evoLUtion

NEW TECHNoLoGIEs 100GAlcatel-Lucent stood out in 2010 as the only company in the world to deliver 100 Gigabit Ethernet (100G) tech-nologies, extending highest-speed capabilities to both the IP and optical parts of the network. It was a break-through built on more than a decade’s worth of research and development—and included the creation of custom silicon, the substance at the heart of today’s powerful computer circuits. Having its own self-made components for key technology purposes continues to give Alcatel-Lucent a distinct competitive advantage.

breaking the sPeeD barrier: iP anD oPtics For 100g

602010 AnnuAl report

612010 AnnuAl report

Application Enablement turns yesterday’s sealed-up network into a hotbed of creativity where telcos and their partners churn out new applications, generate new revenue and keep consumers coming back for more.

TELEFóNICA DE ARGENTINA: haPPier cUstomers, FeWer caLLsoffering technical support services that respond to customer needs while staying cost effective is a challenge faced by all telcos. Looking to make its installation and set-up easier for customers, Telefónica de Argentina selected Alcatel-Lucent’s Motive suite of self-help tools to assist with the activation of new high-speed services. The result? A simplified customer experience that has reduced incoming technical support calls by 60 percent and field maintenance by 18 percent.

TELUS: get yoUr DigitaL entertainment hereWhen Canadian operator TELUs sought the best entertainment services solution for its network, it chose Alcatel-Lucent’s Digital Media store (DMs). By integrating TELUs’ mobile applications, gaming, and ringtones within a single media ‘store’, DMs enables the rapid, timely launch of entertainment services with a consistently better experience—whether consumers connect through the mobile network or over the Internet.

CUsToMER

WINs

NEW TECHNoLoGIEs MOTIVEa more motivating experienceWhat do people do when an app doesn’t load properly on their smartphone or tablet? Many call the mobile company that sold them their device. But it isn’t always easy to identify the problem. Is it user error, a faulty device, or a buggy app? Alcatel-Lucent is helping bring clarity to these kinds of situations thanks to its 2008 acquisition of Motive, an industry leader in diagnostic and remote-management software for devices of all kinds, from smartphones to TV set-top boxes. With Motive installed, the service provider is able to trouble-shoot the problem and get customers up and running faster.

NEW TECHNoLoGIEs OPTISM™the direct connection to consumersLaunched in 2010, Optism is an award-winning market-ing solution that allows network companies to bridge the gap between mobile consumers and advertisers. It deliv-ers highly targeted ads based on people’s specific prefer-ences and permissions. Alcatel-Lucent is working with operators like Etisalat in the United Arab Emirates and Mobinil in Egypt to launch Optism services. As people only receive ads relevant to their interests, advertisers are expected to be able to see significant increase in response rates.

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aPPLication enabLement

content is kingToday’s networks support specialized applications that con-nect people to all kinds of content: movies and videos, music and podcasts, newspapers, magazines, online gaming, social networks and information of every variety—from travel schedules to bœuf bourguignon recipes. And this is just the beginning.

everyone’s a developerWith Application Enablement, developers are using the fea-tures and capabilities of the network to create compelling new applications that make consumers’ lives simpler, more productive and more fun. For telcos, this translates into higher revenues and a revamped role—one that goes beyond simply delivering content to being an essential part of peo-ple’s connected experience, with quality and convenience people are willing to pay for.

open for businessIn 2010, Alcate l -Lucent acquired the company ProgrammableWeb—one of the most important libraries of application programming interfaces (APIs) for creating applications—along with OpenPlug™, a company offering tools to simplify the development of apps for mobile phones, tablets and other devices. Combined with Alcatel-Lucent Open API Platform™, these give network companies access to endless innovation through a large and growing pool of developers.

KENNETH FRANKPRESIDENT SOLUTIONS

PAUL sEGREPRESIDENT APPLICATIONS

602010 AnnuAl report

612010 AnnuAl report

Application Enablement turns yesterday’s sealed-up network into a hotbed of creativity where telcos and their partners churn out new applications, generate new revenue and keep consumers coming back for more.

TELEFóNICA DE ARGENTINA: haPPier cUstomers, FeWer caLLsoffering technical support services that respond to customer needs while staying cost effective is a challenge faced by all telcos. Looking to make its installation and set-up easier for customers, Telefónica de Argentina selected Alcatel-Lucent’s Motive suite of self-help tools to assist with the activation of new high-speed services. The result? A simplified customer experience that has reduced incoming technical support calls by 60 percent and field maintenance by 18 percent.

TELUS: get yoUr DigitaL entertainment hereWhen Canadian operator TELUs sought the best entertainment services solution for its network, it chose Alcatel-Lucent’s Digital Media store (DMs). By integrating TELUs’ mobile applications, gaming, and ringtones within a single media ‘store’, DMs enables the rapid, timely launch of entertainment services with a consistently better experience—whether consumers connect through the mobile network or over the Internet.

CUsToMER

WINs

NEW TECHNoLoGIEs MOTIVEa more motivating experienceWhat do people do when an app doesn’t load properly on their smartphone or tablet? Many call the mobile company that sold them their device. But it isn’t always easy to identify the problem. Is it user error, a faulty device, or a buggy app? Alcatel-Lucent is helping bring clarity to these kinds of situations thanks to its 2008 acquisition of Motive, an industry leader in diagnostic and remote-management software for devices of all kinds, from smartphones to TV set-top boxes. With Motive installed, the service provider is able to trouble-shoot the problem and get customers up and running faster.

NEW TECHNoLoGIEs OPTISM™the direct connection to consumersLaunched in 2010, Optism is an award-winning market-ing solution that allows network companies to bridge the gap between mobile consumers and advertisers. It deliv-ers highly targeted ads based on people’s specific prefer-ences and permissions. Alcatel-Lucent is working with operators like Etisalat in the United Arab Emirates and Mobinil in Egypt to launch Optism services. As people only receive ads relevant to their interests, advertisers are expected to be able to see significant increase in response rates.

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aPPLication enabLement

content is kingToday’s networks support specialized applications that con-nect people to all kinds of content: movies and videos, music and podcasts, newspapers, magazines, online gaming, social networks and information of every variety—from travel schedules to bœuf bourguignon recipes. And this is just the beginning.

everyone’s a developerWith Application Enablement, developers are using the fea-tures and capabilities of the network to create compelling new applications that make consumers’ lives simpler, more productive and more fun. For telcos, this translates into higher revenues and a revamped role—one that goes beyond simply delivering content to being an essential part of peo-ple’s connected experience, with quality and convenience people are willing to pay for.

open for businessIn 2010, Alcate l -Lucent acquired the company ProgrammableWeb—one of the most important libraries of application programming interfaces (APIs) for creating applications—along with OpenPlug™, a company offering tools to simplify the development of apps for mobile phones, tablets and other devices. Combined with Alcatel-Lucent Open API Platform™, these give network companies access to endless innovation through a large and growing pool of developers.

KENNETH FRANKPRESIDENT SOLUTIONS

PAUL sEGREPRESIDENT APPLICATIONS

622010 AnnuAl report

632010 AnnuAl report

managinginFormation

connecting the WorLD

Telstar was able to receive a signal, amplify it, and then transmit it

back to another location on Earth. This technology allowed telephone calls to be transmitted from coast to coast and around the world.

Soft Router provides a means of separating control processing from

packet-forwarding functions, which results in increased

reliability, scalability and security, reduces costs and makes adding

new functionality easier.

= nobel prize

2010 Immersive Communication

2011 lightRadio™

2006 Soft router

1994 TrueWave® Optical Fiber

1983 C++ Language

1988 Undersea fiber-optic cable

1973 C Language

1962 Telstar – first interactive communication satellite

1969 Unix

1958 Laser

1924 Fax machine

Unix is a multi-user computer operating system that

enabled large-scale networking of diverse computing systems and has played a decisive role in the evolution of the Internet.

1937 Electrical digital computer

1947 Cellular concept

1876 First telephone

Other Nobel Prize-winning inventions: Fractional Quantum Hall Effect,

Wave Nature of Matter, Theory of Imperfect Crystals.

UnDerstanDing the Universe

aDvancing sUstainabiLity

The real measure of innovation is its impact on people’s lives. Bell Labs invents technologies and revolutionizes solutions that change the ways people live and work and play.

Developed as a replacement for vacuum tubes and mechanical relays, the Transistor is the fundamental

building block of modern electronic devices (computers, radios, calculators) and is arguably one of the greatest inventions of the 20th century.

Radar is a detection system

capable of determining the range, altitude, direction or

speed of both moving and fixed objects.

CCD technology transforms patterns of light into

useful digital information and serves as the basis for modern imaging. It is widely used in digital cameras,

video recorders, bar code readers, and image scanners,

to name just a few. 2010 GreenTouch™

2005 High-speed electronics

1997 Nano transistors

1985 Atom trapping

1969 Charge-coupled device (CCD)

1964 Radio support for the Big Bang

1954 Solar cell

1947 Transistor

1939 Radar

1933 Radio astronomy

1923 Hearing aid

1914 Vacuum tube

research at sPeeD

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622010 AnnuAl report

632010 AnnuAl report

managinginFormation

connecting the WorLD

Telstar was able to receive a signal, amplify it, and then transmit it

back to another location on Earth. This technology allowed telephone calls to be transmitted from coast to coast and around the world.

Soft Router provides a means of separating control processing from

packet-forwarding functions, which results in increased

reliability, scalability and security, reduces costs and makes adding

new functionality easier.

= nobel prize

2010 Immersive Communication

2011 lightRadio™

2006 Soft router

1994 TrueWave® Optical Fiber

1983 C++ Language

1988 Undersea fiber-optic cable

1973 C Language

1962 Telstar – first interactive communication satellite

1969 Unix

1958 Laser

1924 Fax machine

Unix is a multi-user computer operating system that

enabled large-scale networking of diverse computing systems and has played a decisive role in the evolution of the Internet.

1937 Electrical digital computer

1947 Cellular concept

1876 First telephone

Other Nobel Prize-winning inventions: Fractional Quantum Hall Effect,

Wave Nature of Matter, Theory of Imperfect Crystals.

UnDerstanDing the Universe

aDvancing sUstainabiLity

The real measure of innovation is its impact on people’s lives. Bell Labs invents technologies and revolutionizes solutions that change the ways people live and work and play.

Developed as a replacement for vacuum tubes and mechanical relays, the Transistor is the fundamental

building block of modern electronic devices (computers, radios, calculators) and is arguably one of the greatest inventions of the 20th century.

Radar is a detection system

capable of determining the range, altitude, direction or

speed of both moving and fixed objects.

CCD technology transforms patterns of light into

useful digital information and serves as the basis for modern imaging. It is widely used in digital cameras,

video recorders, bar code readers, and image scanners,

to name just a few. 2010 GreenTouch™

2005 High-speed electronics

1997 Nano transistors

1985 Atom trapping

1969 Charge-coupled device (CCD)

1964 Radio support for the Big Bang

1954 Solar cell

1947 Transistor

1939 Radar

1933 Radio astronomy

1923 Hearing aid

1914 Vacuum tube

research at sPeeD

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e s

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at

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y b

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from

with

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642010 AnnuAl report

652010 AnnuAl report

breakthroUghINNOVATIONS

Ever since the introduction of the first videoconferencing system, the promise of remote medical diagnostics or

“as good as being there” video meetings has seemed within reach. But this promise has not yet been fully realized.

A Bell Labs research initiative called Immersive Communication promises to change that by generating innovations that will allow people to work together in real time no matter where they are. Employing sensors, video processing, novel user interfaces, high-speed networking technology—and accessible from almost any device—it creates virtual environments in which people separated by distance can almost literally gather for discussions, information sharing and collaborative work.

immersive COMMUNICATION

information at blistering speeds: optics at 100gThe rapid increase in video communications and the addition of millions of new subscribers are driving demand for higher-speed networks. Working together in anticipation of these trends, Bell Labs scientists and technical experts throughout Alcatel-Lucent developed novel optical technologies that made the company first to market with a single carrier 100 Gigabit-per-second optical transmission system. This solution will provide customers with the high-speed capacity they need well into the future.

turning copper into gold: Phantom modeThe capacity and performance requirements of new video and data services are pushing existing copper access networks to their limits. In some cases, it’s not an affordable option to replace that copper with faster fiber. For network companies in that boat, Bell Labs has developed a unique solution called Phantom Mode that ups copper-wire capacity by as much as 50 percent, enabling speeds of 300 Megabits per second.

imagine: a critical undersea communications cable lies damaged beneath the surface of the english channel. to fix it, the repair crew must pinpoint the exact location of the problem. even though the monitored signal is extremely faint, the crew can guide their vessel straight to the right spot, thanks to bell Labs’ optical time Domain reflector technology. it’s just one example of how bell Labs is solving global communications chal-lenges.

at bell Labs, ‘revolutionary’ is everyday. Continuously innovating technologies that allow people to connect, share and do, bell labs is at the frontier of advances that re-imagine the way we communicate. thirteen of its scientists have been awarded nobel priz-es. Customers rely on bell labs for insight into the ever-changing world of communications and guidance on the best way forward. And the entire Alcatel-lucent team looks to bell labs for leadership in defining energy-efficient communications networks with revolutionary capabilities.

this is where breakthroughs are born: At eight bell labs research centers around the world—in the u.S., France, belgium, Germany, ireland, india, China and South Korea; as a result of partnerships and collabo-ration with more than 200 other leading laboratories, academic institutions and customer organizations. All focused on bringing the best possible thinking to the problems of the day, and fresh perspectives on the pos-sibilities for tomorrow.

With a relentless commitment to innovation, scientists and researchers at Bell Labs take on the most complex technology challenges—and aim to reset the boundaries of the possible.

Participation in

100standards bodies

27,900 Active patents (2,400 obtained in 2010)

r&D at aLcateL-LUcent

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the innovation acceLerator

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642010 AnnuAl report

652010 AnnuAl report

breakthroUghINNOVATIONS

Ever since the introduction of the first videoconferencing system, the promise of remote medical diagnostics or

“as good as being there” video meetings has seemed within reach. But this promise has not yet been fully realized.

A Bell Labs research initiative called Immersive Communication promises to change that by generating innovations that will allow people to work together in real time no matter where they are. Employing sensors, video processing, novel user interfaces, high-speed networking technology—and accessible from almost any device—it creates virtual environments in which people separated by distance can almost literally gather for discussions, information sharing and collaborative work.

immersive COMMUNICATION

information at blistering speeds: optics at 100gThe rapid increase in video communications and the addition of millions of new subscribers are driving demand for higher-speed networks. Working together in anticipation of these trends, Bell Labs scientists and technical experts throughout Alcatel-Lucent developed novel optical technologies that made the company first to market with a single carrier 100 Gigabit-per-second optical transmission system. This solution will provide customers with the high-speed capacity they need well into the future.

turning copper into gold: Phantom modeThe capacity and performance requirements of new video and data services are pushing existing copper access networks to their limits. In some cases, it’s not an affordable option to replace that copper with faster fiber. For network companies in that boat, Bell Labs has developed a unique solution called Phantom Mode that ups copper-wire capacity by as much as 50 percent, enabling speeds of 300 Megabits per second.

imagine: a critical undersea communications cable lies damaged beneath the surface of the english channel. to fix it, the repair crew must pinpoint the exact location of the problem. even though the monitored signal is extremely faint, the crew can guide their vessel straight to the right spot, thanks to bell Labs’ optical time Domain reflector technology. it’s just one example of how bell Labs is solving global communications chal-lenges.

at bell Labs, ‘revolutionary’ is everyday. Continuously innovating technologies that allow people to connect, share and do, bell labs is at the frontier of advances that re-imagine the way we communicate. thirteen of its scientists have been awarded nobel priz-es. Customers rely on bell labs for insight into the ever-changing world of communications and guidance on the best way forward. And the entire Alcatel-lucent team looks to bell labs for leadership in defining energy-efficient communications networks with revolutionary capabilities.

this is where breakthroughs are born: At eight bell labs research centers around the world—in the u.S., France, belgium, Germany, ireland, india, China and South Korea; as a result of partnerships and collabo-ration with more than 200 other leading laboratories, academic institutions and customer organizations. All focused on bringing the best possible thinking to the problems of the day, and fresh perspectives on the pos-sibilities for tomorrow.

With a relentless commitment to innovation, scientists and researchers at Bell Labs take on the most complex technology challenges—and aim to reset the boundaries of the possible.

Participation in

100standards bodies

27,900 Active patents (2,400 obtained in 2010)

r&D at aLcateL-LUcent

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662010 AnnuAl report

672010 AnnuAl report

Communication networks could be 10,000 times more energy efficient than they are today. that’s what bell labs found when it analyzed every aspect of the way today’s networks consume power. Clearly, the industry has a massive opportunity to reduce its environmental impact. the ques-tion is how?

Going green is a collective concern. everyone involved in communica-tions has a role to play in making the sector more sustainable: network companies, equipment makers and the communications service provid-ers who deliver connectivity to con-sumers. Change will require new thinking, new technologies and fresh

a chaLLenge WithoUt borDers, a soLUtion WithoUt PreceDent

perspectives on how to make net-works leaner, cleaner and more effi-cient. that’s why, in January 2010, bell labs facilitated the creation of the Greentouch™ consortium—a group of the top international think-ers from industry labs, telcos, aca-demia, and government and non-profit research institutions.

The goal: improve network energy efficiency by a factor of 1,000. Greentouch is laying the groundwork for tomorrow’s sustainable networks by researching and developing ambi-tious, visionary solutions to address the increasing energy demands of the communications industry as it continues to experience enormous, rapid growth. over the next five years, the Greentouch consortium aims to demonstrate what’s needed to produce innovative new technolo-gies that will dramatically increase

energy efficiency and finally elimi-nate the need for telcos to sacrifice efficiency in the name of perfor-mance.

Momentum is building. As 2010 came to a close, 15 Greentouch research projects were already underway. Consortium members from europe, Asia, Australia and north America are collaborating on a whole range of solutions that can be applied throughout the industry and even beyond, extending the benefits of their unprecedented col-laboration to other sectors. the result will be not only a greener future for telecoms but also a more sustainable future for all.

by making communications networks dramatically more energy efficient, we will help any industry that uses them to become greener as well. JEoNG KIM, PRESIDENT BELL LABS

By 2015, there will be 18 times as many smartphones using 30 times more data as there are today. net-works will need more capacity to keep pace, but the traditional ways of adding that capacity won’t serve. they’re too clumsy, requiring too much hands-on intervention by technicians to set up and maintain. they clutter the urban skyline with antennas. And they’re too power-hungry— the mobile industry already produces as many carbon emissions on a daily basis as 15 million cars.

It’s time for a game-changer. recog-nizing all of these challenges, bell labs set out to come up with a new approach to wireless networks, and the result was lightradio™. lightra-dio distributes the elements of con-ventional wireless base stations (the equipment that controls wireless antennas and transmitters) across the network, doubling wireless net-work capacity while cutting costs in half.

The heart of this innovation is the lightRadio cube. A tiny piece of equipment weighing less than 400 grams, the cube makes it sim-pler for mobile companies to set up new sites, minimizes maintenance time and costs by requiring crews to visit just one site instead of several, and makes it easier to add capacity to the network as demand grows. it

allows any wireless tower to handle any type of signal—including the next wave of wireless technology created to handle complex transmis-sions like video.

lightRadio helps bridge the digital divide. by 2015, five billion people will still be without high-speed inter-net access. lightweight and easy to deploy, lightradio can be mounted in practically any location and can be used with alternative energy sourc-es to deliver energy-efficient mobile service to nearly anyone, anywhere in the world.

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from

with

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662010 AnnuAl report

672010 AnnuAl report

Communication networks could be 10,000 times more energy efficient than they are today. that’s what bell labs found when it analyzed every aspect of the way today’s networks consume power. Clearly, the industry has a massive opportunity to reduce its environmental impact. the ques-tion is how?

Going green is a collective concern. everyone involved in communica-tions has a role to play in making the sector more sustainable: network companies, equipment makers and the communications service provid-ers who deliver connectivity to con-sumers. Change will require new thinking, new technologies and fresh

a chaLLenge WithoUt borDers, a soLUtion WithoUt PreceDent

perspectives on how to make net-works leaner, cleaner and more effi-cient. that’s why, in January 2010, bell labs facilitated the creation of the Greentouch™ consortium—a group of the top international think-ers from industry labs, telcos, aca-demia, and government and non-profit research institutions.

The goal: improve network energy efficiency by a factor of 1,000. Greentouch is laying the groundwork for tomorrow’s sustainable networks by researching and developing ambi-tious, visionary solutions to address the increasing energy demands of the communications industry as it continues to experience enormous, rapid growth. over the next five years, the Greentouch consortium aims to demonstrate what’s needed to produce innovative new technolo-gies that will dramatically increase

energy efficiency and finally elimi-nate the need for telcos to sacrifice efficiency in the name of perfor-mance.

Momentum is building. As 2010 came to a close, 15 Greentouch research projects were already underway. Consortium members from europe, Asia, Australia and north America are collaborating on a whole range of solutions that can be applied throughout the industry and even beyond, extending the benefits of their unprecedented col-laboration to other sectors. the result will be not only a greener future for telecoms but also a more sustainable future for all.

by making communications networks dramatically more energy efficient, we will help any industry that uses them to become greener as well. JEoNG KIM, PRESIDENT BELL LABS

By 2015, there will be 18 times as many smartphones using 30 times more data as there are today. net-works will need more capacity to keep pace, but the traditional ways of adding that capacity won’t serve. they’re too clumsy, requiring too much hands-on intervention by technicians to set up and maintain. they clutter the urban skyline with antennas. And they’re too power-hungry— the mobile industry already produces as many carbon emissions on a daily basis as 15 million cars.

It’s time for a game-changer. recog-nizing all of these challenges, bell labs set out to come up with a new approach to wireless networks, and the result was lightradio™. lightra-dio distributes the elements of con-ventional wireless base stations (the equipment that controls wireless antennas and transmitters) across the network, doubling wireless net-work capacity while cutting costs in half.

The heart of this innovation is the lightRadio cube. A tiny piece of equipment weighing less than 400 grams, the cube makes it sim-pler for mobile companies to set up new sites, minimizes maintenance time and costs by requiring crews to visit just one site instead of several, and makes it easier to add capacity to the network as demand grows. it

allows any wireless tower to handle any type of signal—including the next wave of wireless technology created to handle complex transmis-sions like video.

lightRadio helps bridge the digital divide. by 2015, five billion people will still be without high-speed inter-net access. lightweight and easy to deploy, lightradio can be mounted in practically any location and can be used with alternative energy sourc-es to deliver energy-efficient mobile service to nearly anyone, anywhere in the world.

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682010 AnnuAl report

the power of partnershipTwo heads—or two hundred—are better than one. Alcatel-lucent is investing in partnerships with innovators, thought leaders and academics around the globe to create a true ‘knowledge society’—one that will spawn revolutionary ideas and generate previously undreamed-of technologies. Whether it’s designing eco-friendly networks, dreaming up ways of cutting energy consumption or developing the internet of the future, open innovation transforms novel insights into real products, services and businesses through collaboration and cooperation.

The walls are coming down. Communication technologies have shrunk the world, bringing people closer together and shining a bright light on the fact that we all have a stake in the same future. Mobilizing resources in single labs, through national projects and global initiatives, Alcatel-lucent is building partnerships to ensure that future is a good one—for the telecommunications industry and for our world as a whole.

THE EARTH CONSORTIUM

Bell Labs serves as project coordinator in this ambitious venture

that has leading European communications companies and research organizations working together to halve the energy consumption of next-generation wireless networks by 2012. one of 15 partners, Alcatel-Lucent is helping develop a new generation of energy-efficient equipment and components, as well as energy-saving strategies for building networks. The EARTH consortium (whose name stands for Energy Aware Radio and neTwork tecHnologies) is also looking to produce solutions that make energy consumption a factor in the way tomorrow’s networks are managed.

UNIVERSITy OF MELBOURNE Bell Labs and the University of Melbourne launched the Centre for Energy Efficient Telecommunications (CEET) envisioning that it will soon be an international hotspot for developing energy-saving communication technologies. Given that our worldwide use of communication networks will continue to grow exponentially in the coming years—and our power demands along with it—CEET’s opening couldn’t be timelier. And because the University of Melbourne and Bell Labs are both members of the GreenTouch™ consortium, the Centre’s research will also be coupled to the industry’s most ambitious research program for improving energy efficiency.

Alcatel-Lucent is bringing the world’s brightest minds together to exchange expertise and tackle some of the toughest challenges facing our planet.

692010 AnnuAl report

a ForUm For THE WORLD a unique organization, the World economic Forum (WeF) unites business, government, academic and civil society leaders in responding to the world’s challenges.

Alcatel-Lucent has been a strategic Partner in the Forum since 2009: it is a key pillar of the company’s corporate responsibility activities. CEo Ben verwaayen is a member of the WEF Foundation Board; Rajeev singh-Molares, President Asia-Pacific Region, is vice Chairman of WEF’s Telecom Industry Global Agenda Council (GAC); Jeong Kim, President of Bell Labs, is a member of the WEF Tech Pioneers selection Committee and science Advisory Council; stephen Carter, Chief Marketing, strategy and Communications officer, supports the Young Global Leaders Community; and Adolfo Hernandez, President Europe, Middle East and Africa Region supports global growth companies in Europe through mentoring.

Focused on digital economies, rural inclusion and climate change, Alcatel-Lucent has taken a thought leadership role in a number of WEF projects. In 2010, Bell Labs, through the Telecoms Industry GAC, undertook a study (to which Bright simons, interviewed below, contributed) on the impact of ubiquitous network access. That study provides a basis on which governments and investment agencies can examine the feasibility and benefits of various business models for technology adoption and deployment.

Alcatel-Lucent and its stakeholders are committed to the WEF’s goal of improving the state of the world. With the right leadership, the right thinking and—most importantly—the right stakeholders around us, we can make a difference.

What role can social networks play in developing countries?they can be revolutionary. Social networks allow people to go beyond geographical constraints and con-nect with people who share the same concerns, issues or politics wherever they may live. Mobile sys-tems can catalyze human action, changing the politics of a country—as we’ve seen in recent months.

What about connectivity in general?Mobile phones vastly enhance com-munity, improving the communica-tions infrastructure. i’ve seen it in hospitals in Ghana, for example, where the absence or presence of adequate connectivity across differ-ent departments can often mean life or death for patients.

What were some of the key themes that emerged from the 2010 WEF’s Global Agenda Council?We know that everywhere, all-the-time connectivity is inevitable. but how can we use it to improve the quality of life for people all over the world? How can universal access improve health, living standards, education? We need to apply mobile technology to these sectors and evolve our systems to take advan-tage of new ways of communicating.

What’s the project you’re currently working on?We’re working with pharmaceutical companies to assign unique iD codes to medicines, thus keeping counter-feit versions off the market in Africa and Southeast Asia. these codes can be scanned using any number of mobile messaging technologies. it’s just one example of how information and communications technologies can directly impact global health.

the PoWer oF change— IN THE PALM OF THE HAND

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Where better iDeas begin

from

with

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INTERvIEW WITH…

BRIGHT sIMoNs, ENTREPRENEURtechnology innovator, development activist and social entrepreneur, bright b. Simons is an executive at the Accra-based think tank, iMAni; president of the mpedigree network; and a member of the World economic Forum’s telecoms industry Global Agenda Council and technology pioneers Community.

682010 AnnuAl report

the power of partnershipTwo heads—or two hundred—are better than one. Alcatel-lucent is investing in partnerships with innovators, thought leaders and academics around the globe to create a true ‘knowledge society’—one that will spawn revolutionary ideas and generate previously undreamed-of technologies. Whether it’s designing eco-friendly networks, dreaming up ways of cutting energy consumption or developing the internet of the future, open innovation transforms novel insights into real products, services and businesses through collaboration and cooperation.

The walls are coming down. Communication technologies have shrunk the world, bringing people closer together and shining a bright light on the fact that we all have a stake in the same future. Mobilizing resources in single labs, through national projects and global initiatives, Alcatel-lucent is building partnerships to ensure that future is a good one—for the telecommunications industry and for our world as a whole.

THE EARTH CONSORTIUM

Bell Labs serves as project coordinator in this ambitious venture

that has leading European communications companies and research organizations working together to halve the energy consumption of next-generation wireless networks by 2012. one of 15 partners, Alcatel-Lucent is helping develop a new generation of energy-efficient equipment and components, as well as energy-saving strategies for building networks. The EARTH consortium (whose name stands for Energy Aware Radio and neTwork tecHnologies) is also looking to produce solutions that make energy consumption a factor in the way tomorrow’s networks are managed.

UNIVERSITy OF MELBOURNE Bell Labs and the University of Melbourne launched the Centre for Energy Efficient Telecommunications (CEET) envisioning that it will soon be an international hotspot for developing energy-saving communication technologies. Given that our worldwide use of communication networks will continue to grow exponentially in the coming years—and our power demands along with it—CEET’s opening couldn’t be timelier. And because the University of Melbourne and Bell Labs are both members of the GreenTouch™ consortium, the Centre’s research will also be coupled to the industry’s most ambitious research program for improving energy efficiency.

Alcatel-Lucent is bringing the world’s brightest minds together to exchange expertise and tackle some of the toughest challenges facing our planet.

692010 AnnuAl report

a ForUm For THE WORLD a unique organization, the World economic Forum (WeF) unites business, government, academic and civil society leaders in responding to the world’s challenges.

Alcatel-Lucent has been a strategic Partner in the Forum since 2009: it is a key pillar of the company’s corporate responsibility activities. CEo Ben verwaayen is a member of the WEF Foundation Board; Rajeev singh-Molares, President Asia-Pacific Region, is vice Chairman of WEF’s Telecom Industry Global Agenda Council (GAC); Jeong Kim, President of Bell Labs, is a member of the WEF Tech Pioneers selection Committee and science Advisory Council; stephen Carter, Chief Marketing, strategy and Communications officer, supports the Young Global Leaders Community; and Adolfo Hernandez, President Europe, Middle East and Africa Region supports global growth companies in Europe through mentoring.

Focused on digital economies, rural inclusion and climate change, Alcatel-Lucent has taken a thought leadership role in a number of WEF projects. In 2010, Bell Labs, through the Telecoms Industry GAC, undertook a study (to which Bright simons, interviewed below, contributed) on the impact of ubiquitous network access. That study provides a basis on which governments and investment agencies can examine the feasibility and benefits of various business models for technology adoption and deployment.

Alcatel-Lucent and its stakeholders are committed to the WEF’s goal of improving the state of the world. With the right leadership, the right thinking and—most importantly—the right stakeholders around us, we can make a difference.

What role can social networks play in developing countries?they can be revolutionary. Social networks allow people to go beyond geographical constraints and con-nect with people who share the same concerns, issues or politics wherever they may live. Mobile sys-tems can catalyze human action, changing the politics of a country—as we’ve seen in recent months.

What about connectivity in general?Mobile phones vastly enhance com-munity, improving the communica-tions infrastructure. i’ve seen it in hospitals in Ghana, for example, where the absence or presence of adequate connectivity across differ-ent departments can often mean life or death for patients.

What were some of the key themes that emerged from the 2010 WEF’s Global Agenda Council?We know that everywhere, all-the-time connectivity is inevitable. but how can we use it to improve the quality of life for people all over the world? How can universal access improve health, living standards, education? We need to apply mobile technology to these sectors and evolve our systems to take advan-tage of new ways of communicating.

What’s the project you’re currently working on?We’re working with pharmaceutical companies to assign unique iD codes to medicines, thus keeping counter-feit versions off the market in Africa and Southeast Asia. these codes can be scanned using any number of mobile messaging technologies. it’s just one example of how information and communications technologies can directly impact global health.

the PoWer oF change— IN THE PALM OF THE HAND

th

e s

tr

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eg

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oo

k INNovATIoN

Where better iDeas begin

from

with

in

at

INTERvIEW WITH…

BRIGHT sIMoNs, ENTREPRENEURtechnology innovator, development activist and social entrepreneur, bright b. Simons is an executive at the Accra-based think tank, iMAni; president of the mpedigree network; and a member of the World economic Forum’s telecoms industry Global Agenda Council and technology pioneers Community.

702010 AnnuAl report

712010 AnnuAl report

INTERvIEW WITH…

INTERvIEW WITH… What does it mean to you

that you’ve been named to MIT Tech Review’s TR35?it’s an honor, of course. When you think the judges were looking at more than 300 candidates—that’s a very big field of very bright people—it seems quite amazing. i think it’s very good for Alcatel-lucent and bell labs because it highlights the really exceptional work we’re doing here.

What is that work, specifically?We’re trying to get more speed and capacity out of today’s optical net-works. My work focuses on Wave-length Division Multiplexing (WDM), which enables high-speed data trans-mission and is at the core of the inter-net. What i’ve been looking at are ‘coherent detection’ and ‘advanced modulation formats.’ Without getting into the technical details, these are ways of increasing bit rate and mini-

You’re head of Bell Labs in India. What’s it like working in one of the biggest potential communications markets in the world?it’s very exciting. When our team looks out at the country, we see liter-ally millions of people whose lives could be changed by technology, and we of course want to deliver that change. in india, and around the world.

You’ve had some experience delivering that kind of change.Yes, developing solutions that use location-specific information to tar-get messages and content to mobile phone users. those kinds of loca-tion-based solutions are going to underlie all kinds of applications in the future. Advertisers will push

mizing the imperfections that can start to weaken an optical signal over a long distance.

You’ve broken some records.Yes, we have. First, we were able to transport data at a rate of 7.2 terabits per second, then at 15.5 terabits per second—over a fiber more than 7,000 kilometers long. i think the comparison one commentator made was that’s like transmitting more than 6,000 feature-length DVD movies in a minute. the previous threshold was about 1.2 terabits for commercial systems, so that’s a significant gain.

Where has this discovery led?our techniques are being used in the 40-Gigabit-per-second solution, and in the 100G solution Alcatel-lucent launched in 2010. it’s exciting to know that they’re going to be put in action.

messages to people who are near a particular store. parents will get alerts if their child wanders beyond the edge of the yard. there are busi-ness applications, personal applica-tions and safety applications to loca-tion technology.

You were recently recognized with an Excellence in Innovation Award at the International India Innovation summit.that was a proud moment. the Sum-mit has been held for several years now—it’s a sign of india’s commit-ment to innovation. Seeing that engagement is inspiring for our bell labs team; it’s very clear we’re part of a movement that’s going to be very big and drive all kinds of dis-coveries.

Limits are maDe TO BE PUSHED

IT’S ALL ABOUT Location

GABRIEL CHARLET With 26 patents and the Fabry-de-Gramont prize to his name by age 30, Charlet was inducted last year into the Mit tech review’s prestigious tr35, an elite group of young innovators.

vIsHY PoosALA A respected researcher in location-based applications, software architecture and venturing, poosala holds 32 patents and has received the bell labs president’s Gold Award three times.

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Emerging from the French Entrepreneurial Boot Camp, dekaps’ is an approach to

‘augmented reality’ that promises to revolutionize mobile phone use. What is ‘augmented reality’? Imagine you see a building with unique architecture and want to know more about it. Film it with your phone and get back a whole range of information. or, to give another example, you might scan a barcode or an image on a poster and receive video or music clips related to the advertised event. At Mobile World Congress in Barcelona, dekaps’ unveiled an iPhone1 app that let participants take a 3D tour of the city.

aUgment yOUR REALITy

INNovATIoN

inventing oPPortUnitiesAt the heart of an innovation culture is the free flow of ideas—fostered at Alcatel-Lucent through programs that tap into employees’ knowledge, experience and imagination.

the idea is just the beginning: boot campsHow do you turn a good idea into a bona fide innovation? by giving the person who had the idea the chance to develop it—whether she works in a research role, on the front line in a managed service center, or at a desk writing marketing material.

Alcatel-lucent’s entrepreneurial boot Camps give all employees the opportunity not only to make suggestions for new products or solu-tions but also to be part of the cross-organiza-tional team that builds the business case to take the idea forward. First held in belgium in 2006, the now-global boot Camp program functions like a ‘mini-MbA’ (Master of business Administration): employees are trained in how

to develop a proper business case, receiving guidance from experts over the course of a structured three-month process.

A panel of corporate senior leaders and external investors evaluates each proposal and recommends next steps—whether moving the idea to an Alcatel-lucent business group, Alcatel-lucent Ventures or even to an external venture capitalist.

the entrepreneurial boot Camps are about finding the best ideas—wherever they are—and delivering them to market. they’re about build-ing the innovation capacity of the company as a whole. And they’re about giving employees the opportunity to feel a sense of ownership over what could be the next big thing.

at

1 iPhone is a trademark of Apple Inc., registered in the U.S. and other countries.

702010 AnnuAl report

712010 AnnuAl report

INTERvIEW WITH…

INTERvIEW WITH… What does it mean to you

that you’ve been named to MIT Tech Review’s TR35?it’s an honor, of course. When you think the judges were looking at more than 300 candidates—that’s a very big field of very bright people—it seems quite amazing. i think it’s very good for Alcatel-lucent and bell labs because it highlights the really exceptional work we’re doing here.

What is that work, specifically?We’re trying to get more speed and capacity out of today’s optical net-works. My work focuses on Wave-length Division Multiplexing (WDM), which enables high-speed data trans-mission and is at the core of the inter-net. What i’ve been looking at are ‘coherent detection’ and ‘advanced modulation formats.’ Without getting into the technical details, these are ways of increasing bit rate and mini-

You’re head of Bell Labs in India. What’s it like working in one of the biggest potential communications markets in the world?it’s very exciting. When our team looks out at the country, we see liter-ally millions of people whose lives could be changed by technology, and we of course want to deliver that change. in india, and around the world.

You’ve had some experience delivering that kind of change.Yes, developing solutions that use location-specific information to tar-get messages and content to mobile phone users. those kinds of loca-tion-based solutions are going to underlie all kinds of applications in the future. Advertisers will push

mizing the imperfections that can start to weaken an optical signal over a long distance.

You’ve broken some records.Yes, we have. First, we were able to transport data at a rate of 7.2 terabits per second, then at 15.5 terabits per second—over a fiber more than 7,000 kilometers long. i think the comparison one commentator made was that’s like transmitting more than 6,000 feature-length DVD movies in a minute. the previous threshold was about 1.2 terabits for commercial systems, so that’s a significant gain.

Where has this discovery led?our techniques are being used in the 40-Gigabit-per-second solution, and in the 100G solution Alcatel-lucent launched in 2010. it’s exciting to know that they’re going to be put in action.

messages to people who are near a particular store. parents will get alerts if their child wanders beyond the edge of the yard. there are busi-ness applications, personal applica-tions and safety applications to loca-tion technology.

You were recently recognized with an Excellence in Innovation Award at the International India Innovation summit.that was a proud moment. the Sum-mit has been held for several years now—it’s a sign of india’s commit-ment to innovation. Seeing that engagement is inspiring for our bell labs team; it’s very clear we’re part of a movement that’s going to be very big and drive all kinds of dis-coveries.

Limits are maDe TO BE PUSHED

IT’S ALL ABOUT Location

GABRIEL CHARLET With 26 patents and the Fabry-de-Gramont prize to his name by age 30, Charlet was inducted last year into the Mit tech review’s prestigious tr35, an elite group of young innovators.

vIsHY PoosALA A respected researcher in location-based applications, software architecture and venturing, poosala holds 32 patents and has received the bell labs president’s Gold Award three times.

th

e s

tr

at

eg

y b

oo

k

Emerging from the French Entrepreneurial Boot Camp, dekaps’ is an approach to

‘augmented reality’ that promises to revolutionize mobile phone use. What is ‘augmented reality’? Imagine you see a building with unique architecture and want to know more about it. Film it with your phone and get back a whole range of information. or, to give another example, you might scan a barcode or an image on a poster and receive video or music clips related to the advertised event. At Mobile World Congress in Barcelona, dekaps’ unveiled an iPhone1 app that let participants take a 3D tour of the city.

aUgment yOUR REALITy

INNovATIoN

inventing oPPortUnitiesAt the heart of an innovation culture is the free flow of ideas—fostered at Alcatel-Lucent through programs that tap into employees’ knowledge, experience and imagination.

the idea is just the beginning: boot campsHow do you turn a good idea into a bona fide innovation? by giving the person who had the idea the chance to develop it—whether she works in a research role, on the front line in a managed service center, or at a desk writing marketing material.

Alcatel-lucent’s entrepreneurial boot Camps give all employees the opportunity not only to make suggestions for new products or solu-tions but also to be part of the cross-organiza-tional team that builds the business case to take the idea forward. First held in belgium in 2006, the now-global boot Camp program functions like a ‘mini-MbA’ (Master of business Administration): employees are trained in how

to develop a proper business case, receiving guidance from experts over the course of a structured three-month process.

A panel of corporate senior leaders and external investors evaluates each proposal and recommends next steps—whether moving the idea to an Alcatel-lucent business group, Alcatel-lucent Ventures or even to an external venture capitalist.

the entrepreneurial boot Camps are about finding the best ideas—wherever they are—and delivering them to market. they’re about build-ing the innovation capacity of the company as a whole. And they’re about giving employees the opportunity to feel a sense of ownership over what could be the next big thing.

at

1 iPhone is a trademark of Apple Inc., registered in the U.S. and other countries.

722010 AnnuAl report

732010 AnnuAl report

“Just as the winds disperse seeds to grow, technology gives us the ability to spread and sow great ideas over thousands of kilometers in seconds.”8 emmanUeLLe, GERMANy

“C-3PO, the friendly droid in Star Wars, was fluent in six million forms of communication. Thanks to the Internet, we can know just one language and still appreciate as many people as C-3PO.”7 sevket, TURKEy

“I like to imagine what the famous Chinese scientist, zu Chongzhi (429-500) would make of cloud computing and the Internet. I think he’d use those tools to discover another beautiful planet in the universe where we could live and work.”10 JULia, CHINA

“If there’s one thing I’d like future technology to do, it would be to share feelings. Not just video, text and voice, but actual emotions—so that people who call me on my mobile will already know beforehand how I feel.”3 markUs, AUSTRALIA

“If Alexander Graham Bell were alive today, I think he’d be working on a whole new kind of communications technology— one that would allow us to communicate with our minds only, without the use of voice or text.”4 sUniL, INDIA

“Communications technology is becoming_and will continue to be_the tool of revolutions.”

5 seLma, FRANCE

“The world’s youth see it clearly. Social connectivity

isn’t a trend. It’s a tool for making history.”

6 WaeL, EGyPT

9

8

7

6

5

4

3

“I watch my kids and see they’re the teachers, I’m the student. Technology is so intuitive for them. If they’re the prototype, future generations are going to have the wonders of time and space literally at their fingertips.” 9 osvaLDo, USA

“It’s July 2014. We’re in Maracana Rio watching another thrilling Brazil game. Photos, texts and videos from people everywhere appear instantly as 3D holographic projections on screens and websites. I see myself up there, shouting: ‘Champions!’”12 cassia, BRASIL

“History has shown that the more we’re able to share with people, the happier we are. With our communications technology, the world is destined to become a happier place.”2 Javier, MExICO

Flash thoughts on the future from some of Alcatel-Lucent’s young leaders.

“Geographic boundaries are meaningless: our future is one of shared values.”

11 ravi, CANADA

“Today my parents can see and talk to their grandson even though they are half

the globe away. In another decade, who knows-maybe they’ll be able

to reach out and touch.”1 thanh-Dinh, VIETNAM

12

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722010 AnnuAl report

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“Just as the winds disperse seeds to grow, technology gives us the ability to spread and sow great ideas over thousands of kilometers in seconds.”8 emmanUeLLe, GERMANy

“C-3PO, the friendly droid in Star Wars, was fluent in six million forms of communication. Thanks to the Internet, we can know just one language and still appreciate as many people as C-3PO.”7 sevket, TURKEy

“I like to imagine what the famous Chinese scientist, zu Chongzhi (429-500) would make of cloud computing and the Internet. I think he’d use those tools to discover another beautiful planet in the universe where we could live and work.”10 JULia, CHINA

“If there’s one thing I’d like future technology to do, it would be to share feelings. Not just video, text and voice, but actual emotions—so that people who call me on my mobile will already know beforehand how I feel.”3 markUs, AUSTRALIA

“If Alexander Graham Bell were alive today, I think he’d be working on a whole new kind of communications technology— one that would allow us to communicate with our minds only, without the use of voice or text.”4 sUniL, INDIA

“Communications technology is becoming_and will continue to be_the tool of revolutions.”

5 seLma, FRANCE

“The world’s youth see it clearly. Social connectivity

isn’t a trend. It’s a tool for making history.”

6 WaeL, EGyPT

9

8

7

6

5

4

3

“I watch my kids and see they’re the teachers, I’m the student. Technology is so intuitive for them. If they’re the prototype, future generations are going to have the wonders of time and space literally at their fingertips.” 9 osvaLDo, USA

“It’s July 2014. We’re in Maracana Rio watching another thrilling Brazil game. Photos, texts and videos from people everywhere appear instantly as 3D holographic projections on screens and websites. I see myself up there, shouting: ‘Champions!’”12 cassia, BRASIL

“History has shown that the more we’re able to share with people, the happier we are. With our communications technology, the world is destined to become a happier place.”2 Javier, MExICO

Flash thoughts on the future from some of Alcatel-Lucent’s young leaders.

“Geographic boundaries are meaningless: our future is one of shared values.”

11 ravi, CANADA

“Today my parents can see and talk to their grandson even though they are half

the globe away. In another decade, who knows-maybe they’ll be able

to reach out and touch.”1 thanh-Dinh, VIETNAM

12

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742010 AnnuAl report

752010 AnnuAl report

oUr PeoPLe PLeDge

Let talent shineHow do you bring out the best in people? By managing them effectively. By giving future experts and leaders the opportunities to grow and letting people make their own plans for professional development.

Develop diversityvariety isn’t just the spice of life— it’s the source of creativity. Diversity brings strength; difference reveals new perspectives. Alcatel-Lucent works

actively to develop the talents of the next generation of local leaders, people from diverse backgrounds and nationalities. And it’s committed to increasing the role of women in management, particularly at the executive level.

Line up leaders for the futureAlcatel-Lucent knows exactly the innovative, entrepreneurial profiles tomorrow’s leaders will need to fit, and is identifying the talent today to fill those roles tomorrow.

Why is gender equality so important in today’s global reality? At the global level, there’s still a 40 percent gap between women and men in terms of economic participa-tion and opportunity. it’s time for a more inclusive culture that empha-sizes diverse approaches to decision making and enables companies to benefit from the deepest possible talent pool.

What is the Gender Equality Project doing to address that gap?We’ve developed an assessment methodology to provide companies

with a structured and systematic approach to gender equality. We measure gender composition at dif-ferent organizational levels as well as pay gaps and employee satisfac-tion with equality of opportunity.

How will the Project’s certification process make a difference in ensuring equal opportunity in the workplace?in the corporate world, whatever gets measured gets done. Applying for a certification in gender equality is not just a purpose but also a pro-cess that generates awareness, rais-es questions, provides answers and catalyzes sustainable change.

genDer Diversity—pilot in inDiA

The Gender Equality Project is a swiss non-profit organization committed to closing the gender gap in workplace opportunities through a global certification system. In 2010, Alcatel-Lucent worked with the Project to test and streamline the assessment methodology as part of a pilot program in India.

In a technology company, what is HR’s top priority?It’s all about engagement. Our business is transforma-tion—and you can’t transform anything without people. We’ve created an online hub called ‘Engage,’ which is a kind of social media and collaboration site internal to the company that lets colleagues connect in real time, share insights, links and documents. It’s a tool for our people to contribute to our culture of innovation.

What makes someone an ‘Alcatel-Lucent person’?Entrepreneurial spirit. The desire to be a responsible world citizen. And of course, a passion for technology. We also love our people to be disruptive—to move from one field to another and mix things up. To that end, we’ve opened up a global job market where any of our people can apply for any type of job and bring new ideas to new careers.

Does innovation have a secret ingredient?I see it as being strongly linked with diversity, with new ways of thinking. It’s about breaking boundaries, foster-ing connectivity between people wherever they are. The more diverse our teams become—the more they’re linked with and shaped by different cultures—the more we develop our innovation. In R&D, our teams in the U.S., Europe, Africa and Asia-Pacific are all connected, all working together to innovate. At the same time, they give us a local presence. We’re in 130 countries. We speak the language, provide the right services for each market, and develop innovation by linking with local universities, partners and subcontractors. It comes down to having the right people in the right places.

Alcatel-Lucent is a technology company, and its people are technology people— expert, international and driven to innovate.

our business is transformation— and you can’t transform anything without people. PIERRE BARNABÉ EVP HUMAN RESOURCES AND TRANSFORMATION

Watch the video interview at: www.alcatel-lucent.com/barnabe

NICoLE sCHWAB Co-founder of the Gender equality project and a past Director of the Forum of Young Global leaders at the World economic Forum. She has also worked on health sector reform projects in latin America for the World bank and the Ministry of Health of bolivia.

INTERvIEW WITH…

INTERvIEW WITH…

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breaking boUnDaries

742010 AnnuAl report

752010 AnnuAl report

oUr PeoPLe PLeDge

Let talent shineHow do you bring out the best in people? By managing them effectively. By giving future experts and leaders the opportunities to grow and letting people make their own plans for professional development.

Develop diversityvariety isn’t just the spice of life— it’s the source of creativity. Diversity brings strength; difference reveals new perspectives. Alcatel-Lucent works

actively to develop the talents of the next generation of local leaders, people from diverse backgrounds and nationalities. And it’s committed to increasing the role of women in management, particularly at the executive level.

Line up leaders for the futureAlcatel-Lucent knows exactly the innovative, entrepreneurial profiles tomorrow’s leaders will need to fit, and is identifying the talent today to fill those roles tomorrow.

Why is gender equality so important in today’s global reality? At the global level, there’s still a 40 percent gap between women and men in terms of economic participa-tion and opportunity. it’s time for a more inclusive culture that empha-sizes diverse approaches to decision making and enables companies to benefit from the deepest possible talent pool.

What is the Gender Equality Project doing to address that gap?We’ve developed an assessment methodology to provide companies

with a structured and systematic approach to gender equality. We measure gender composition at dif-ferent organizational levels as well as pay gaps and employee satisfac-tion with equality of opportunity.

How will the Project’s certification process make a difference in ensuring equal opportunity in the workplace?in the corporate world, whatever gets measured gets done. Applying for a certification in gender equality is not just a purpose but also a pro-cess that generates awareness, rais-es questions, provides answers and catalyzes sustainable change.

genDer Diversity—pilot in inDiA

The Gender Equality Project is a swiss non-profit organization committed to closing the gender gap in workplace opportunities through a global certification system. In 2010, Alcatel-Lucent worked with the Project to test and streamline the assessment methodology as part of a pilot program in India.

In a technology company, what is HR’s top priority?It’s all about engagement. Our business is transforma-tion—and you can’t transform anything without people. We’ve created an online hub called ‘Engage,’ which is a kind of social media and collaboration site internal to the company that lets colleagues connect in real time, share insights, links and documents. It’s a tool for our people to contribute to our culture of innovation.

What makes someone an ‘Alcatel-Lucent person’?Entrepreneurial spirit. The desire to be a responsible world citizen. And of course, a passion for technology. We also love our people to be disruptive—to move from one field to another and mix things up. To that end, we’ve opened up a global job market where any of our people can apply for any type of job and bring new ideas to new careers.

Does innovation have a secret ingredient?I see it as being strongly linked with diversity, with new ways of thinking. It’s about breaking boundaries, foster-ing connectivity between people wherever they are. The more diverse our teams become—the more they’re linked with and shaped by different cultures—the more we develop our innovation. In R&D, our teams in the U.S., Europe, Africa and Asia-Pacific are all connected, all working together to innovate. At the same time, they give us a local presence. We’re in 130 countries. We speak the language, provide the right services for each market, and develop innovation by linking with local universities, partners and subcontractors. It comes down to having the right people in the right places.

Alcatel-Lucent is a technology company, and its people are technology people— expert, international and driven to innovate.

our business is transformation— and you can’t transform anything without people. PIERRE BARNABÉ EVP HUMAN RESOURCES AND TRANSFORMATION

Watch the video interview at: www.alcatel-lucent.com/barnabe

NICoLE sCHWAB Co-founder of the Gender equality project and a past Director of the Forum of Young Global leaders at the World economic Forum. She has also worked on health sector reform projects in latin America for the World bank and the Ministry of Health of bolivia.

INTERvIEW WITH…

INTERvIEW WITH…

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breaking boUnDaries

762010 AnnuAl report

772010 AnnuAl report

strategy is knowing what you’re willing to give up in order to get what you want. sTEPHEN A. CARTER CHIEF MARKETING, STRATEGy AND COMMUNICATIONS OFFICER

Watch the video interview at: www.alcatel-lucent.com/carter

Much like in Asia, European customers are seeking to get full value out of multiple generations of networks and capitalize on web-based applications. Given the rich diversity of their markets, they also want specificity and an appreciation of context: people on the ground who speak the language, know the culture and understand how technology fits into the bigger social and economic picture of their societies. In the Middle East, the mobile phone is becoming the communication tool of choice; the same is true in Africa, a continent that has also doubled its connectivity with the addition of major new subma-rine cables.

No matter where they are, and regardless of whether they are in the telecoms business or in industries espe-cially dependent on communications technology, our customers demand innovation relevant and responsive to their needs, with the right economics for their busi-nesses.

IP InsideThe common thread running through all the markets we serve is people’s desire to connect. It is clear in the rapid uptake of new devices and solutions—smartphones, smart cars, smart grids. As consumers, we are all excited by the emerging opportunities to manage and enjoy our lives through technologies personalized to our interests and preferences.

Enabling these kinds of liberating innovations is IP tech-nology, the ‘intelligence’ of the digital network. It cuts across wireless and wireline, optics, applications and enterprise communications. It is driving our customers’ growth by allowing them to offer new kinds of services and achieve unprecedented efficiencies and simplifica-tion within their networks. Recognizing this enormous potential, Alcatel-Lucent today is a wholeheartedly IP-focused company in a fully IP world.

Relentless InnovationFrom the world’s first transistor to the reinvention of wireless with lightRadio™; from the launch of digital sub-scriber line (DSL) technology to speed-boosting Phantom Mode; from the science of the laser to boundary-pushing 100 Gigabit-per-second optical transmission technology, we have always been—and remain—driven to innovate.

With Bell Labs as our innovation engine, we not only generate new knowledge and technologies, but more importantly apply them to the real-world needs of our customers. The High Leverage Network™ is a prime example of this: the solution for a future in which people will demand flexible, immediate access to all manner of applications—with uncompromising expectations of secu-rity and high-quality service.

We aim to meet our customers where these demands converge, giving them the tools to move confidently into the coming world of cloud services and virtualization.

Deliver. Execute. Advance.It is seldom a simple thing when two powerful companies with long histories come together to form a new enter-prise. yet that is exactly what we have done—for the benefit of our customers and our people. Now some two years through the process of transformation, we under-stand that 2011 must be a year of visible delivery.

Around the world in emerging and emerged markets—and markets where you cannot tell the difference— Alcatel-Lucent is realizing its strategy. We are applying our “three ‘I’s” to meet customers where they are, helping them achieve their goals for right now, and for the future they envision.

the three ‘i’s of our business: internationalism, innovation and iP. these are at the heart of everything we do.

th

e s

tr

at

eg

y b

oo

k sTRATEGIC ovERvIEW

a high-Leverage strategy

eople have written whole books about strategy, but I think the most useful definition is a practi-

cal one. Strategy is knowing what you’re willing to give up in order to get what you want.

At Alcatel-Lucent our strategy is centered on the High Leverage Network™, which allows our customers to deliver universal access and profitable applications through a process of network evolution and operational transformation. That strategy has guided our choices of where to focus our efforts, how to package our offerings and rationalize our portfolio.

Behind strategy is culture, a company’s unique strengths and orientation. At Alcatel-Lucent, these might be called the “three ‘I’s”: we are an inherently international orga-nization, both in terms of our presence and our people; we are obsessed with innovation; and we are convinced that IP, the Internet Protocol, is not just the enabler of a powerful product set but more crucially a leap forward in capability and efficiency for every type of network. From our perspective, the move to IP technology may be as significant as the shift from transistors to semiconduc-tors in computing.

Mirroring our Markets Our Chief Executive Officer, Ben Verwaayen, is fond of saying that talent has no passport and is not constrained by one. This is also true of technology. Our customers’ operational reality is a global one in which worldwide access to talent and technology solutions is a prerequisite.

Being international is in our DNA. We are headquartered in Paris, France, with 20 strategic hubs of expertise from Trieste to Guadalajara, Toronto to Shanghai, and an active presence in 130 countries. We don’t just sell to global markets: we are at home in them, are citizens of them. We understand their distinct needs.

In the Americas, and particularly in North America, our customers are concentrated on the shift to 4G—the next generation of wireless—and on developing smart, web-based applications. In Asia-Pacific, they are looking to take advantage of deep fiber-optic capabilities, engaging in some of the world’s largest-scale fixed network proj-ects while at the same time welcoming literally millions of people onto their wireless networks.

P

762010 AnnuAl report

772010 AnnuAl report

strategy is knowing what you’re willing to give up in order to get what you want. sTEPHEN A. CARTER CHIEF MARKETING, STRATEGy AND COMMUNICATIONS OFFICER

Watch the video interview at: www.alcatel-lucent.com/carter

Much like in Asia, European customers are seeking to get full value out of multiple generations of networks and capitalize on web-based applications. Given the rich diversity of their markets, they also want specificity and an appreciation of context: people on the ground who speak the language, know the culture and understand how technology fits into the bigger social and economic picture of their societies. In the Middle East, the mobile phone is becoming the communication tool of choice; the same is true in Africa, a continent that has also doubled its connectivity with the addition of major new subma-rine cables.

No matter where they are, and regardless of whether they are in the telecoms business or in industries espe-cially dependent on communications technology, our customers demand innovation relevant and responsive to their needs, with the right economics for their busi-nesses.

IP InsideThe common thread running through all the markets we serve is people’s desire to connect. It is clear in the rapid uptake of new devices and solutions—smartphones, smart cars, smart grids. As consumers, we are all excited by the emerging opportunities to manage and enjoy our lives through technologies personalized to our interests and preferences.

Enabling these kinds of liberating innovations is IP tech-nology, the ‘intelligence’ of the digital network. It cuts across wireless and wireline, optics, applications and enterprise communications. It is driving our customers’ growth by allowing them to offer new kinds of services and achieve unprecedented efficiencies and simplifica-tion within their networks. Recognizing this enormous potential, Alcatel-Lucent today is a wholeheartedly IP-focused company in a fully IP world.

Relentless InnovationFrom the world’s first transistor to the reinvention of wireless with lightRadio™; from the launch of digital sub-scriber line (DSL) technology to speed-boosting Phantom Mode; from the science of the laser to boundary-pushing 100 Gigabit-per-second optical transmission technology, we have always been—and remain—driven to innovate.

With Bell Labs as our innovation engine, we not only generate new knowledge and technologies, but more importantly apply them to the real-world needs of our customers. The High Leverage Network™ is a prime example of this: the solution for a future in which people will demand flexible, immediate access to all manner of applications—with uncompromising expectations of secu-rity and high-quality service.

We aim to meet our customers where these demands converge, giving them the tools to move confidently into the coming world of cloud services and virtualization.

Deliver. Execute. Advance.It is seldom a simple thing when two powerful companies with long histories come together to form a new enter-prise. yet that is exactly what we have done—for the benefit of our customers and our people. Now some two years through the process of transformation, we under-stand that 2011 must be a year of visible delivery.

Around the world in emerging and emerged markets—and markets where you cannot tell the difference— Alcatel-Lucent is realizing its strategy. We are applying our “three ‘I’s” to meet customers where they are, helping them achieve their goals for right now, and for the future they envision.

the three ‘i’s of our business: internationalism, innovation and iP. these are at the heart of everything we do.

th

e s

tr

at

eg

y b

oo

k sTRATEGIC ovERvIEW

a high-Leverage strategy

eople have written whole books about strategy, but I think the most useful definition is a practi-

cal one. Strategy is knowing what you’re willing to give up in order to get what you want.

At Alcatel-Lucent our strategy is centered on the High Leverage Network™, which allows our customers to deliver universal access and profitable applications through a process of network evolution and operational transformation. That strategy has guided our choices of where to focus our efforts, how to package our offerings and rationalize our portfolio.

Behind strategy is culture, a company’s unique strengths and orientation. At Alcatel-Lucent, these might be called the “three ‘I’s”: we are an inherently international orga-nization, both in terms of our presence and our people; we are obsessed with innovation; and we are convinced that IP, the Internet Protocol, is not just the enabler of a powerful product set but more crucially a leap forward in capability and efficiency for every type of network. From our perspective, the move to IP technology may be as significant as the shift from transistors to semiconduc-tors in computing.

Mirroring our Markets Our Chief Executive Officer, Ben Verwaayen, is fond of saying that talent has no passport and is not constrained by one. This is also true of technology. Our customers’ operational reality is a global one in which worldwide access to talent and technology solutions is a prerequisite.

Being international is in our DNA. We are headquartered in Paris, France, with 20 strategic hubs of expertise from Trieste to Guadalajara, Toronto to Shanghai, and an active presence in 130 countries. We don’t just sell to global markets: we are at home in them, are citizens of them. We understand their distinct needs.

In the Americas, and particularly in North America, our customers are concentrated on the shift to 4G—the next generation of wireless—and on developing smart, web-based applications. In Asia-Pacific, they are looking to take advantage of deep fiber-optic capabilities, engaging in some of the world’s largest-scale fixed network proj-ects while at the same time welcoming literally millions of people onto their wireless networks.

P

782010 AnnuAl report

792010 AnnuAl report

We’re moving at a new speed— what we call ‘the speed of ideas’.

We are building the organization we need. We have a clear roadmap, and have the best team in the business.

Watch the video interview at: www.alcatel-lucent.com/verwaayen

We have said we will grow faster than the market in 2011.

intervieW With ben verWaayen, CHIEF ExECUTIVE OFFICER

tim burt is the former Media editor of the Financial times. He is now Managing partner of StockWell Group, an international strategic communications firm.

Tim Burt Interviewer

so how do you deal with that?Our customers are under pressure from their customers…we have to respond by thinking like them. To deliver the kind of experience they’ll remember and keep coming back for. We have a clear roadmap, and we have the best team in the business: we’ve brought together a unique set of people from the out-side, from the inside, young talents, people from very different industries. With their ener-gy, we’re moving at a new speed—what we call ‘the speed of ideas.’ We want to have great ideas and then execute them flawlessly, with speed and a desire to make a difference. I think lightRadio™ is an excellent example of this, a rethinking of wireless networks and how a 30-year-old infrastructure has to change to keep growing.

What are some of the big priorities on the horizon?We have to ‘green’ our portfolio. We started the GreenTouch™ consortium as a way to achieve a breakthrough in network energy consump-tion. We’re working with our competitors, with customers and universities. We need to create self-sustained systems. When you go to remote areas of the world, the question is what will be first: energy or communications? My answer is it has to be communications, because that’s what provides the earning capacity to build grids and other capabilities. Energy efficiency is critical for the established market, too. A smartphone consumes 20 times the bandwidth

of a normal phone, a tablet 40 times. And there are potentially two billion people out there not yet connected. So we have to do something. I feel this company has a great opportunity to make a contribution.

What’s important to you personally going forward from here?I want to make sure our people are inspired and feel supported. We’ve asked them under sometimes very difficult circumstances to carry out a massive transformation of the com-pany. I want them to see and feel the progress. I’m confident that in 2011 we will deliver what we said we would deliver.

th

e s

tr

at

eg

y b

oo

k

innovating at the eDge oF the market

make a difference and cut costs where it makes sense—getting rid of duplication, complexity. 2010 was a year of going from restoring order to growing again. For 2011, we have said we will grow faster than the market, with an adjusted operating margin above 5 percent of sales.

Is the hard work done?you’re never done. But we are building the organization we need. We have started to exe-cute on operational excellence. The reality is that even a company running perfectly in every market would still struggle today to keep up—things are changing so quickly. Demand keeps climbing. Deployments need to happen faster. People are taking up new technologies at a pace we’ve never seen before.

Tim Burt: Alcatel-Lucent finished 2010 on a high note. How do you see the coming year for Alcatel-Lucent?Ben verwaayen: We are putting in place what we need to go and deliver. We are transforming the value we bring our customers. We continue to shape an organization that is linked to them, understands them and works with them shoul-der to shoulder. We’ve revitalized our innova-tion capability. Bell Labs is at the heart of this, a unique benefit to our organization. Is this a competitive market? you bet. And we’re able to compete—on our own values, our own strengths.

How far is the company along its transformation journey?We’ve made great progress. We’ve been trans-lating the changes of the first few years—new board, new management team, new strategy, new corporate governance structure, new focus—into passion in the organization. you have to do that to win the hearts and the minds of customers, to bring about financial discipline, to renew your product portfolio. you have to put yourself at the edge of where the market is and where your technology can help it develop further.

Is that where you are now?We certainly have a clear picture of what’s happening and what’s coming next. The market is transforming very rapidly, with an explosion of video. In the old world, you had three sizes

of screens and they all did different things: your TV, your computer, your cellphone. Now consumers are saying, “I want what’s on the big screen on the small screen and vice versa.” We are delivering that multi-screen experience, building on innovations we had in the pipeline.

How heavily is Alcatel-Lucent able to engage in that kind of R&D?In 2008, we spent approximately 2.5 billion euros on research and development. 75 per-cent of that was to customize existing tech-nologies. In 2010, we spent the same and 75 percent was on new technologies. That’s a massive redirection of where we spend and why. We will keep investing where we can

782010 AnnuAl report

792010 AnnuAl report

We’re moving at a new speed— what we call ‘the speed of ideas’.

We are building the organization we need. We have a clear roadmap, and have the best team in the business.

Watch the video interview at: www.alcatel-lucent.com/verwaayen

We have said we will grow faster than the market in 2011.

intervieW With ben verWaayen, CHIEF ExECUTIVE OFFICER

tim burt is the former Media editor of the Financial times. He is now Managing partner of StockWell Group, an international strategic communications firm.

Tim Burt Interviewer

so how do you deal with that?Our customers are under pressure from their customers…we have to respond by thinking like them. To deliver the kind of experience they’ll remember and keep coming back for. We have a clear roadmap, and we have the best team in the business: we’ve brought together a unique set of people from the out-side, from the inside, young talents, people from very different industries. With their ener-gy, we’re moving at a new speed—what we call ‘the speed of ideas.’ We want to have great ideas and then execute them flawlessly, with speed and a desire to make a difference. I think lightRadio™ is an excellent example of this, a rethinking of wireless networks and how a 30-year-old infrastructure has to change to keep growing.

What are some of the big priorities on the horizon?We have to ‘green’ our portfolio. We started the GreenTouch™ consortium as a way to achieve a breakthrough in network energy consump-tion. We’re working with our competitors, with customers and universities. We need to create self-sustained systems. When you go to remote areas of the world, the question is what will be first: energy or communications? My answer is it has to be communications, because that’s what provides the earning capacity to build grids and other capabilities. Energy efficiency is critical for the established market, too. A smartphone consumes 20 times the bandwidth

of a normal phone, a tablet 40 times. And there are potentially two billion people out there not yet connected. So we have to do something. I feel this company has a great opportunity to make a contribution.

What’s important to you personally going forward from here?I want to make sure our people are inspired and feel supported. We’ve asked them under sometimes very difficult circumstances to carry out a massive transformation of the com-pany. I want them to see and feel the progress. I’m confident that in 2011 we will deliver what we said we would deliver.

th

e s

tr

at

eg

y b

oo

k

innovating at the eDge oF the market

make a difference and cut costs where it makes sense—getting rid of duplication, complexity. 2010 was a year of going from restoring order to growing again. For 2011, we have said we will grow faster than the market, with an adjusted operating margin above 5 percent of sales.

Is the hard work done?you’re never done. But we are building the organization we need. We have started to exe-cute on operational excellence. The reality is that even a company running perfectly in every market would still struggle today to keep up—things are changing so quickly. Demand keeps climbing. Deployments need to happen faster. People are taking up new technologies at a pace we’ve never seen before.

Tim Burt: Alcatel-Lucent finished 2010 on a high note. How do you see the coming year for Alcatel-Lucent?Ben verwaayen: We are putting in place what we need to go and deliver. We are transforming the value we bring our customers. We continue to shape an organization that is linked to them, understands them and works with them shoul-der to shoulder. We’ve revitalized our innova-tion capability. Bell Labs is at the heart of this, a unique benefit to our organization. Is this a competitive market? you bet. And we’re able to compete—on our own values, our own strengths.

How far is the company along its transformation journey?We’ve made great progress. We’ve been trans-lating the changes of the first few years—new board, new management team, new strategy, new corporate governance structure, new focus—into passion in the organization. you have to do that to win the hearts and the minds of customers, to bring about financial discipline, to renew your product portfolio. you have to put yourself at the edge of where the market is and where your technology can help it develop further.

Is that where you are now?We certainly have a clear picture of what’s happening and what’s coming next. The market is transforming very rapidly, with an explosion of video. In the old world, you had three sizes

of screens and they all did different things: your TV, your computer, your cellphone. Now consumers are saying, “I want what’s on the big screen on the small screen and vice versa.” We are delivering that multi-screen experience, building on innovations we had in the pipeline.

How heavily is Alcatel-Lucent able to engage in that kind of R&D?In 2008, we spent approximately 2.5 billion euros on research and development. 75 per-cent of that was to customize existing tech-nologies. In 2010, we spent the same and 75 percent was on new technologies. That’s a massive redirection of where we spend and why. We will keep investing where we can

802010 AnnuAl report

Internet sitewww.alcatel-lucent.com

ContactsBy mail: Alcatel-Lucent Investor Relations 3, avenue Octave Gréard 75007 Paris, France

By email: finance@alcatel-lucent.com

By phone: +33 (0)800 354 354 (from Europe) or +1 (908) 582-6173 (from USA) Company fact sheetProfile: Supplier of Telecommunications equipment and related servicesIndex: CAC 40Stock Symbol: ALUISIN Code: FR0000130007 ListingOur shares are traded on Eurolist by Euronext, on SEAQ International in London, and on the New york Stock Exchange in the form of American Depository Shares (ADS).

Additional documentation (available on website)Annual Report on Form 20-F

INVESTOR RELATIONS

ALCATEL-LUCENT 2010 ANNUAL REPORT

Corporate Communications3, avenue Octave Gréard75007 Paris, FranceTel. +33 1 40 76 10 10www.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.

Copyright © 2011 Alcatel-Lucent. All Rights Reserved.

Creation and layout: Publicis Consultants I Verbe

Content:Alcatel-LucentEditechAscribe Marketing Communications

Illustrations:Stéphane ManelFranck Teillard

802010 AnnuAl report

Internet sitewww.alcatel-lucent.com

ContactsBy mail: Alcatel-Lucent Investor Relations 3, avenue Octave Gréard 75007 Paris, France

By email: finance@alcatel-lucent.com

By phone: +33 (0)800 354 354 (from Europe) or +1 (908) 582-6173 (from USA) Company fact sheetProfile: Supplier of Telecommunications equipment and related servicesIndex: CAC 40Stock Symbol: ALUISIN Code: FR0000130007 ListingOur shares are traded on Eurolist by Euronext, on SEAQ International in London, and on the New york Stock Exchange in the form of American Depository Shares (ADS).

Additional documentation (available on website)Annual Report on Form 20-F

INVESTOR RELATIONS

ALCATEL-LUCENT 2010 ANNUAL REPORT

Corporate Communications3, avenue Octave Gréard75007 Paris, FranceTel. +33 1 40 76 10 10www.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.

Copyright © 2011 Alcatel-Lucent. All Rights Reserved.

Creation and layout: Publicis Consultants I Verbe

Content:Alcatel-LucentEditechAscribe Marketing Communications

Illustrations:Stéphane ManelFranck Teillard

AT THE SPEED OF IDEAS TM

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