Survey Explores Micro MSPP Market
The reason for the survey is simple: Dozens of vendors have launched products in this market, but the jury's still out on how big the market will be and what carriers really want in terms of product characteristics, supplier credentials, and price point. To contribute your views on these topics, please complete the Light Reading Micro MSPP Survey.
And industry observers say that large service providers in the U.S., Asia, and Europe are demonstrating a growing appetite for micro MSPPs. In the U.S. Sprint Wireless (NYSE: PCS) and Verizon Communications Inc. (NYSE: VZ) are looking seriously at major deployments in the 2006 timeframe, but no RFPs have surfaced as yet, says William Quigley of Clearstone Venture Partners. In Asia, Korea Telecom has already issued an RFP for the devices.
But can smaller players like Overture Networks Inc., Luminous Networks Inc., Turin Networks Inc., and White Rock Networks Inc. survive in a market characterized by increased competition, consolidation, and falling profit margins?
The idea is that the micro MSPPs are much smaller and there must be more of them distributed across the edge of the network. So they must be relatively inexpensive. The U.S. and European markets dictate a price point of $10,000 or less, while in the Asian market it’s between $5,000 and $7,500, says Quigley.
Add downward pressure to those numbers caused by a marketplace already crowded with dozens of vendors large and small, and you have a situation where deals must be of some volume -- or paired with a larger network solution -- to yield acceptable returns.
Turin's director of product marketing, Kevin Wade, explains that because they carry less strategic risk to the carrier, devices at the access edge of the network are somewhat commoditized and the prices and margins are typically low.
So smaller suppliers like Turin use their micro MSPP product as more of an entrée into the more profitable business of selling larger devices closer to the core of the network. “It’s a pull-through effect,” Wade says. “The more of these micro MSPPs you sell, and as they [the carrier] get more comfortable with you as a vendor, the better you can market and bid your equipment further into the network.”
Not surprisingly, as the supplier sells gear closer and closer to the network core, the prices and the margins increase, Wade says. The more the carrier has to rely on the supplier, the more it is willing to pay.
But there's another problem in this market: Big deals come from big operators -- RBOCs, primarily -- and small suppliers have a lot of trouble getting in the front door. One observer points out that large service providers, if they will even talk to a small supplier, usually aren’t willing tell the vendor what they want in the product.
“A small supplier has to have something the carrier needs, and that it can’t get anywhere else,” Clearstone’s Quigley says. “If they do, the carrier will hold its nose and say ‘OK, we’ll buy from you and hope you don’t go out of business.’ ”
While Turin’s Wade agrees in principle, he says the size of the vendor is less of an issue when selling access products. “It’s more about port counts and port types in the device,” Wade says, “Carriers use a host of smaller vendors’ products in the access network.”
That's all well and good, but what do you think? Please take a few minutes to fill out the survey. After the results are collected and analyzed, we'll post the results right here.
— Mark Sullivan, Reporter, Light Reading