Network Equipment Provider
Encyclopedia
Network Equipment Providers (NEPs) are companies that provide communication solutions to Service Providers
like 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. NEPs are literally influencing lives of billions of people around the world. The history of the NEPs goes even back to the mid of the 19th century when the first telegraphs networks have been set up. Some of these players still exist today.
Some of the most important communication solutions that NEPs provide can include the following:
Majority of revenues from Service Providers:
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:
.
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 expenditure
s (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 equipments
- Software to increasingly replace traditional network components
Service provider
A service provider is an entity that provides services to other entities. Usually, this refers to a business that provides subscription or web service to other businesses or individuals. Examples of these services include Internet access, Mobile phone operators, and web application hosting...
like fixed or mobile operators as well as to Enterprise customers. If you place a call on your mobile phone
Mobile phone
A mobile phone is a device which can make and receive telephone calls over a radio link whilst moving around a wide geographic area. It does so by connecting to a cellular network provided by a mobile network operator...
, surf the internet, join a conference call
Conference call
A conference call is a telephone call in which the calling party wishes to have more than one called party listen in to the audio portion of the call. The conference calls may be designed to allow the called party to participate during the call, or the call may be set up so that the called party...
or watch a video on demand
Video on demand
Video on Demand or Audio and Video On Demand are systems which allow users to select and watch/listen to video or audio content on demand...
through IPTV (internet protocol TV
IPTV
Internet Protocol television is a system through which television services are delivered using the Internet protocol suite over a packet-switched network such as the Internet, instead of being delivered through traditional terrestrial, satellite signal, and cable television formats.IPTV services...
) – it is all NEPs technologies that are enabling such kind of services. NEPs are literally influencing lives of billions of people around the world. The history of the NEPs goes even back to the mid of the 19th century when the first telegraphs networks have been set up. Some of these players still exist today.
Some of the most important communication solutions that NEPs provide can include the following:
- Mobile networks like GSM (Global System for Mobile Communication), EDGE (Enhanced Data Rates for GSM EvolutionEnhanced Data Rates for GSM EvolutionEnhanced Data rates for GSM Evolution is a digital mobile phone technology that allows improved data transmission rates as a backward-compatible extension of GSM...
) or GPRS (General Packet Radio ServiceGeneral Packet Radio ServiceGeneral packet radio service is a packet oriented mobile data service on the 2G and 3G cellular communication system's global system for mobile communications . GPRS was originally standardized by European Telecommunications Standards Institute in response to the earlier CDPD and i-mode...
). These kind of networks 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 ratesData signaling rateIn telecommunication, data signaling rate , also known as gross bit rate, is the aggregate rate at which data pass a point in the transmission path of a data transmission system.Notes:#The DSR is usually expressed in bits per second....
than 2G or *5G. - Fixed networks which are typically based on PSTN (Public Switched Telephone NetworkPublic switched telephone networkThe public switched telephone network is the network of the world's public circuit-switched telephone networks. It consists of telephone lines, fiber optic cables, microwave transmission links, cellular networks, communications satellites, and undersea telephone cables, all inter-connected by...
). - Enterprise networks, like Unified Communication infrastructure
- Internet infrastructure, like routers and switches
Competitive landscape
The key players per type of customer segment are as follows:Majority of revenues from Service Providers:
- Alcatel-Lucent
- Ericsson
- Huawei
- Juniper
- NEC
- Nokia-Siemens
- Nortel
- ZTE
- Emerson Network Power
Majority of revenues from Enterprise customers:
- Avaya
- Cisco
- Motorola
- Siemens Enterprise Communications
The NEPs have recently undergone a significant consolidation or M&A activity, for example the joint venture of Nokia and Siemens (Nokia Siemens Networks
Nokia Siemens Networks
Nokia Siemens Networks is a global data networking and telecommunications equipment company headquartered in Espoo, Finland. It is a joint venture between Nokia of Finland and Siemens of Germany...
), 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 baseCustomer base
The customer base is the group of customers and/or consumers that a business serves. In the most situations, a large part of this group is made up of repeat customers with a high ratio of purchase over time. These customers are the main source of consumer spending...
.
Threat of New entrants:
- Growing importance software applications
Application software
Application software, also known as an application or an "app", is computer software designed to help the user to perform specific tasks. Examples include enterprise software, accounting software, office suites, graphics software and media players. Many application programs deal principally with...
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
Semiconductor
A semiconductor is a material with electrical conductivity due to electron flow intermediate in magnitude between that of a conductor and an insulator. This means a conductivity roughly in the range of 103 to 10−8 siemens per centimeter...
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 expenditure
Capital expenditure
Capital expenditures are expenditures creating future benefits. A capital expenditure is incurred when a business spends money either to buy fixed assets or to add to the value of an existing fixed asset with a useful life extending beyond the taxable year...
s (lowering cost per subscriber), and this is putting pressures on NEPs margins.
- Enterprises increasingly demand end-to-end
End-to-end
End-to-end or End to End may refer to:*Land's End to John o'Groats, the journey from "End to End" across Great Britain*End-to-end auditable voting systems, a voting system*End-to-end principle, a principal design element of the Internet...
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 equipments
- Software to increasingly replace traditional network components