A Whole Pack of Leaders

It's logical to assume that the market for next-generation wireless infrastructure is tightly contested, given the big incumbent names in the market. It's also a valid assumption, according to Heavy Reading's latest report, 2004 Next-Generation Wireless Infrastructure Market Perception Study. In fact, it's hard to identify a clear winner in a market sector that's dominated by an oligarchy of incumbent suppliers.

The report is based on a survey of nearly 400 service provider employees responsible for buying CDMA2000 and GPRS/EDGE/UMTS infrastructure. Respondents were asked to rank 34 vendors in terms of their leadership in ten product classes – such as base stations and packet data serving nodes (PDSNs) – according to five evaluation categories: brand recognition, price, product performance, product quality and reliability, and service and support.

Not surprisingly, large, established vendors have the greatest mindshare across multiple product types. The "majors" rank relatively close to one another in terms of overall market perception, so the takeaway here is that although they're all getting credit for leadership, none stands head and shoulders above the pack.

For example, LM Ericsson (Nasdaq: ERICY) scored the highest in terms of overall leadership in three out of five categories across all product sectors: service and support, product quality and reliability, and product performance. But rivals such as Nokia Corp. (NYSE: NOK) don't lag far behind in the eyes of wireless infrastructure buyers. In service and support, for instance, Ericsson's and Nokia's leadership scores are separated by just 0.3 percent. That's just one example of how tight the competition is.

The exception is price: Huawei Technologies Co. Ltd. is widely perceived as the price leader, with an average of 25.9 percent of respondents naming it as such. Its closest rival trailed by 12.5 percent. Huawei has clearly carved out a niche as the economical choice for next-gen wireless infrastructure – just as in other telecom equipment market sectors, as reported in previous Heavy Reading surveys. What remains to be seen, however, is whether Huawei can use this foot in the door to woo customers with the quality and reliability of its products.

Another key finding is that despite a crowded, competitive market, some smaller players are doing a good job of building mindshare. The catch is that besides having a recognized brand, they're not known for much else. For example, IPWireless Inc. ranked sixth overall in product performance in the sectors for which it sells equipment, with an average score of 10.8 percent – outstanding for a company that's not even four years old. But IPWireless ranked near the bottom in terms of perceived leadership in the remaining categories, and the survey found other small vendors in a similar boat. The takeaway is that although smaller vendors such as IPWireless have their foot in the door, they need to get in the room and educate potential customers about how their products stack up against rivals.

Looking at the market in terms of perceived leadership isn't about ranking vendors just for the sport of it. A prime example is the base station category, where pricing pressure is enormous, with no signs of respite. In that light, it helps to know which vendor is considered the most aggressive in terms of price, but it's also important to have a sense of which vendors produce base stations that are considered superior in terms of quality and performance. That's because when a product category is crowded and facing commoditization, vendors with a reputation for first-rate gear are in the best position both to differentiate themselves and to justify a price premium.

Thus it's surprising to find that in the CDMA2000 and GMS/GPRS/EDGE base station sector, no vendor has yet established a dominant position in terms of product performance, product quality and reliability, and service and support. That brings us back to the price issue: Unless a vendor has a reputation for quality, it's difficult to justify a premium in a cutthroat market.

Put simply, mindshare begets market share. There's an old adage that says if you don't stand for something, you'll fall for anything. In the competitive wireless infrastructure market, if you don't stand for something, you'll fall, period.

— Tim Kridel, Analyst, Heavy Reading

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