Network equipment providers (NEPs) – sometimes called telecommunications equipment manufacturers (TEMs) – sell products and services to communication service providers such as fixed or mobile operators as well as to enterprise customers. NEP technology allows for calls on mobile phones, Internet surfing, joining a conference calls, or watching video on demand through IPTV (internet protocol TV). The history of the NEPs goes back to the mid-19th century when the first telegraph networks were set up.[1] Some of these players still exist today.
The terminology of the traditional telecommunications industry has rapidly evolved during the Information Age. The terms "Network" and "Telecoms" are often used interchangeably. The same is true for "provider" and "manufacturer".[2] Historically, NEPs sell integrated hardware/software systems to carriers such as NTT-DoCoMo, ATT, Sprint, and so on. They purchase hardware from TEMs (telecom equipment manufacturers),[2] such as Vertiv, Kontron, and NEC, to name a few.[3] TEMs are responsible for manufacturing the hardware, devices, and equipment the telecommunications industry requires.[4] The distinction between NEP and TEM is sometimes blurred, because all the following phrases may imply NEP:
This is a highly competitive industry that includes telephone, cable, and data services segments.[3] Products and services include:
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.
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:
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 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
The SCOPE Alliance was a non-profit and influential Network Equipment provider (NEP) industry group aimed at standardizing "carrier-grade" systems for telecom in the Information Age, successfully in accelerating the NEP transformation towards Carrier-grade Open Source Hardware, OS, Middleware, Virtualization, and Cloud see table:
SCOPE drives NEP Supply Chain transformation to open carrier-grade standards
