There has always been a close tie between telecom network operators and their infrastructure providers. After all, the scale of financial investment in networks, their complexity and the length of time over which commercial returns are made means that the lifecycle of the commercial relationship is generally many years -- and that's even without the multi-year managed service deals that operators often sign with their key equipment vendors.

Operators -- even the biggest, more technically well-resourced -- have long looked to network equipment providers (NEPs) for support that goes beyond the type of supply relationship found in most other industries. This support has often included ideas about network and IT architectures, about new services that could be developed on current or future infrastructure or about commercial models and operational structures.

Of course, NEPs have a compelling commercial need to be the source of service and business ideas for operators; without this, operators, particularly the well established former incumbents or market-leading wireless operators, may be tempted to prioritize investment opportunities that aren't based on network infrastructure -- perhaps instead on their property portfolios, developing content ownership, those that favor supply chain disruption, or for which an individual vendor's own equipment is not optimized.

Today, however, service revenues are under threat like never before, and the cleverest ideas about things that can be done using networks aren't all coming from vendors or operators, but from other service providers beyond the traditional telecom ecosystem. Simultaneously, network functionality is becoming more abstracted from underlying physical equipment, opening the door to startup software developers that could destabilize the operator/NEP relationship.

Yet paradoxically, this relationship seems to be tighter than ever. Yes, operators are establishing commercial relationships with content owners and "over-the-top" (OTT) service providers, but there's a suspicion that interests are not aligned. Certainly business models aren't aligned. On the supply side, operators seem to be consolidating the number of vendors they buy from and looking to pre-integrated solutions built for them by key suppliers -- rather than taking a chance on an untried vendor.

Faced with uncertainty, operators and NEPs are holding each other tight and pooling their understanding of what the future might look like. For NEPs, this has meant becoming even more responsive to the needs of their operator customers (responding to the network functions virtualization [NFV] challenge, for instance). For both parties it has meant working out how networks might be built and operated in such a way that revenue can be earned from the new services being created -- wherever the service ideas originate, and whatever business models emerge.

It's what Alcatel-Lucent CTO Marcus Weldon calls a "resonant relationship," which is a neat turn of phrase. I think it's an example of a new and necessary agility on behalf of operators and NEPs -- and it's certainly the future.

This Heavy Reading Insider report, "The Future for Telecom Network Equipment Providers", examines the driving forces behind the global market for telecom network equipment and related services, analyzing them for their scale of impact, and level of uncertainty. It builds three scenarios for the future of NEPs in the global market for telecom equipment, based around those driving forces with the greatest likely impact, but the least certainty about that nature of that impact. It then uses those scenarios to give some perspective on the question "what does the future look like for NEPs?". It also summarizes the strategies of twelve of the leading NEPs.

— Danny Dicks, Analyst, Heavy Reading Insider

The Future for Telecom Network Equipment Providers, a 27-page report, is available as part of an annual subscription (12 monthly issues) to Heavy Reading Insider, priced at $1,595. This report is available for $900. To subscribe, please visit: www.heavyreading.com/insider.