Creative destruction in Canada

Creative destruction in Canada

Summary: Canada is much better off nurturing entrepreneurs than trying to bail out the past.


The creative destruction fostered by the Internet and open source struck Canada hard over the weekend.

Nortel, once one of the Big Three in telecom equipment (Lucent, now part of Alcatel and Siemens were the others) is being broken up for pennies on the dollar. Its stock is now officially worthless.

The end became obvious this weekend in the $650 million sale of its CDMA wireless unit, ironically to a joint venture of Siemens and Nokia. (Their new parent is trying to reassure Nortel LTE employees with an open letter today.)

To anyone whom, like me, went to a Supercomm in the mid-1990s the fall is humbling. But it was both inevitable and necessary.

Inevitable because Nortel, like Siemens and Lucent (the Bell equipment arm before being renamed and spun-out), made most of its money on huge switches for analog phone service, mostly to a small group of carriers.

The Internet killed that business. Voice is a low-bandwidth application.

Even had Nortel seen the handwriting on the wall and moved into the data networking area dominated now by Cisco, it would have quickly faced both the Chinese giant Huawei and open source outfits like Vyatta, killing its margins.

The necessity still has fall-out in Canada's loss of international business prestige. It reminds me a bit of what happened to Texas banking in the 1980s, when the state's biggest banks were all sold to competitors in New York, California and North Carolina.

Back then there was a great feeling of loss, a fear the state was losing its autonomy and its economic center. Canadians may feel that way today.

But Texas came back. That's the point. Canada is much better off nurturing entrepreneurs than trying to bail out the past.

Topics: Browser, Networking, Telcos

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.


Log in or register to join the discussion
  • Royal Bank of Canada (RBC Bank) : Corporate Bully

    RBC Bank President Gordon Nixon - Salary $11.73 Million


    I'm a commercial fisherman fighting the Royal Bank of Canada (RBC Bank) over a $100,000 loan mistake. I lost my home, fishing vessel and equipment. Help me fight this corporate bully by closing your RBC Bank account.

    There was no monthly interest payment date or amount of interest payable per month on my loan agreement. Date of first installment payment (Principal + interest) is approximately 1 year from the signing of my contract.
    Demand loan agreements signed by other fishermen around the same time disclosed monthly interest payment dates and interest amounts payable per month.The lending policy for fishermen did change at RBC from one payment (principal + interest) per year for fishing loans to principal paid yearly with interest paid monthly. This lending practice was in place when I approached RBC.
    Only problem is the loans officer was a replacement who wasn't familiar with these type of loans. She never informed me verbally or in writing about this new criteria.

    Phone or e-mail:
    RBC President, Gordon Nixon, Toronto (416)974-6415
    RBC Vice President, Sales, Anne Lockie, Toronto (416)974-6821
    RBC President, Atlantic Provinces, Greg Grice (902)421-8112 mail
    RBC Manager, Cape Breton/Eastern Nova Scotia, Jerry Rankin (902)567-8600
    RBC Vice President, Atlantic Provinces, Brian Conway (902)491-4302 mail
    RBC Vice President, Halifax Region, Tammy Holland (902)421-8112 mail
    RBC Senior Manager, Media & Public Relations, Beja Rodeck (416)974-5506 mail
    RBC Ombudsman, Wendy Knight, Toronto, Ontario 1-800-769-2542 mail
    Ombudsman for Banking Services & Investments, JoAnne Olafson, Toronto, 1-888-451-4519 mail

    "Fighting the Royal Bank of Canada (RBC Bank) one customer at a time"
  • Re. Did you think Nortel was Canada's only high-tech enterprise

    Dana, please. First off, we've all know Nortel was on its
    way out for a number of years. I've worked with numerous
    people who lost their jobs at Nortel. Oh well. Poorly run
    company fails. What's new? They missed the data boat and
    no they wouldn't have been pressured by open source
    firms any more than Cisco is.

    Any one heard of RIM? How about Bombardier (corporate
    jets, trains, buses)? It is true that Canada once led in
    telecommunications technologies - but that was pre-
    Nortel in the Bell Northern Research days, before Bell
    Canada was privatized. Bell's, and hence Nortel's being a
    spin-off of Bell, downfall began the day it became a
    private company. We've all seen the then-mighty telecom
    companies fall post-private due to the cuts to their
    margins and resulting lowering of R&D spend. It's
    unfortunate but in a market economy - where value is king
    - it's what happens.

    I agree with your conclusion however - that what we are
    seeing in these instances is creative destruction. I'd like to
    believe that something new and better will rise from the
  • Accounting scandal? Not mentioned even once?

    Of course, that Nortel had been caught (more than once) committing securities and accounting fraud in the past decade doesn't help either..Oh yeah - and Nortel's been bleeding cash as early as the late 90's, long before any of the technoligies you cite as reasons for its demise could have had this kind of effect on the company.

    Honestly, I'm sure Open Source and the internet and telephony and all the free stuff in the world probably helped bring Nortel down.. And we all like to see big dinosaurs get owned by little disruptive communities, but you're being completely disingenuous here - not even one mention of one of the largest accounting frauds in Canadian history.. not even one?
  • RE: Creative destruction in Canada

    It reminds me a bit of what happened to Texas banking in the 1980s, when the states biggest banks were all sold to competitors in New York, California and North Carolina.<a href=""><font color="white"> k</font></a>