Network equipment provider
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Network equipment providers are companies that sell product and services to communication service providers such as fixed or mobile operators as well as to enterprise customers. If you place a call on your mobile phone, surf the internet, join a conference call or watch a video on demand through IPTV (internet protocol TV) – it is all NEPs technologies that are enabling such kind of services. The history of the NEPs goes back to the mid 19th century when the first telegraphs networks have been set up. Some of these players still exist today.
NEPs can provide:
- Mobile networks like GSM (Global System for Mobile Communication), Enhanced Data Rates for GSM Evolution (EDGE) or GPRS (General Packet Radio Service). Networks of this kind are typically also known as 2G and 2.5G networks. The 3G mobile networks are based on UMTS (Universal Mobile Telecommunication Standard) which allows much higher data rates than 2G or *5G.
- Fixed networks which are typically based on PSTN (Public Switched Telephone Network).
- Enterprise networks, like Unified Communication infrastructure
- Internet infrastructure, like routers and switches
Some providers in each customer segment are:
Majority of revenues from service providers:
- Juniper Networks
- Nokia Networks
- Router Switch Ltd
- Transition Networks
- multi-platform trader of networking solutions
Majority of revenues from enterprise customers:
The NEPs have recently undergone a significant consolidation or M&A activity, for example the joint venture of Nokia and Siemens (Nokia Siemens Networks), the acquisition of Marconi by Ericsson, the merger between Alcatel and Lucent and many numerous acquisitions by Cisco.
A look at the financial performance of these players according to the segment they serve creates a diverse picture:
Power balance in the NEP ecosystem
NEPs face high pressure from old & new rivals and a stronger, more consolidated customer base.
Threat of New entrants:
- Growing importance software applications has led to the entry of new players: IT solution providers like System integrators and other ISVs. (For some NEPs, SIs are being considered as competitors for selected network services i.e. application, services and control layers of the network)
- In the area of managed and hosted services, NEPs are likely to face competition from new players like Google due to lower entry barriers
Bargaining Power of Suppliers:
- Increasing standardization and commoditization of network components leads to more competition among component suppliers, thus lowering their bargaining position.
- Overcapacities have led to lower bargaining power of Semiconductor suppliers
- As more standardized networks components are expected to be used for NGNs, a shift in the current supplier structure may balance the bargaining between suppliers and NEPs
Bargaining Power of Buyers:
- Consolidation among communication service providers due to convergence leads to greater dependence on a few large clients, which means higher bargaining strength of customers
- Due to pressures on their profitability, service providers are increasingly looking at lowering their operating costs and capital expenditures (lowering cost per subscriber), and this is putting pressures on NEPs margins.
- Enterprises increasingly demand end-to-end solutions through a single vendor for their Unified Communication needs
Threat of Substitution:
- Switch from PSTN to Next-Generation Network
- Increasing use of standardized network components (COTS) compared to more proprietary equipment
- Software to increasingly replace traditional network components
- "Compuleasenetworks". compuleasenetworks.com. Retrieved 2019-02-04.