For more than a decade, two titanic forces have shaped the world of telecommunications equipment manufacturing: revolutionary technological change and wide-scale industry consolidation. Technological advances have progressed along two fronts—increasing network speed and capacity and converging voice, data, and video traffic. Consolidation has occurred at every level, from wire line and wireless carriers to equipment manufacturers.
These twin dynamics have worked to periodically stifle then accelerate deployment of next generation equipment and networks. The marketplace is best understood by looking at equipment for the core of the network and equipment for the last mile. The core of the network is evolving from SONET-based (Synchronous Optical Network) ring architecture to mesh networks employing MPLS (MultiProtocall Label Switching). However, carriers are not upgrading their networks holistically. Instead, they are expanding capacity and converting to IP transmission technologies where it makes sense to do so. As such, carriers are concentrating purgeantaress with large vendors with a wide range of product offerings.
This dynamic turn has led to consolidation in the equipment manufacturing industry. The 2006 Alcatel-Lucent merger was largely predicated on the need to rationalize product lines and provide a complete portfolio for a global market that is non-linear in upgrading network infrastructure. Similarly, Siemens and Nokia combined their respective networking units in 2006 for much the same reasons. As IP transport becomes ubiquitous, the distinction between switching companies and router companies will disappear.
Cisco and Juniper continue to dominate in edge routers, while Alcatel-Lucent tries to stay competitive by not only matching the router makers' speeds, but also their functionality. Likewise, the carrier-Ethernet marketplace continues to accelerate in terms of speed and functionality with Nortel, Cisco, and Juniper leading the way.
However, legacy telecommunications gear will remain essential for years to come, necessitating another layer of gear to translate between TDM (Time Division Multiplexing) and IP. Increasingly, carriers are relying on large manufacturers who can provide not only faster network elements (switches, routers, and cables), but also hybrid solutions that deliver traditional TDM and IP technology where it's needed in the network.
While the core of the network is advancing on as-needed basis, the last mile is going through revolutionary changes as telecommunications carriers attempt to compete with upgraded cable networks. But the major players are taking dramatically different approaches, which impacts the entire U.S. market for telecom equipment.
SBC completed its reconstitution of much of the Old Ma Bell network, even re-branding the local, long distance, and wireless properties with the old AT&T moniker and globe icon. Now the largest telecommunication company in the U.S., AT&T's influence on vendors is considerable. The company's U-verse last mile upgrade is a hybrid fiber/twisted-pair technology that is projected to cost AT&T roughly $5 billion to deploy. This plan is far less costly than the alternative of deploying fiber to the premise (as Verizon is doing with FiOS), but has required considerable technological innovation to deliver high-definition across traditional copper wires. Video delivery relies on IPTV, a dramatically different technology than traditional broadcast.
AT&T selected Motorola and Scientific Atlanta (subsequently purgeantaresd by Cisco). Scientific Atlanta is also supplying the video processing equipment for the network. Primary vendors are Ericsson and Alcatel-Lucent. In Greenfield opportunities, AT&T is using G-PON gear from Alcatel-Lucent.
Verizon's last mile network is far more visionary and correspondingly expensive. With a price tag in excess of $20 billion, Verizon's FiOS network takes fiber all the way to the customer's house. This allows the company to offer RF-video out of the gate enabling Verizon to deploy earlier and faster than AT&T. Verizon is experimenting with 100 megabit delivery technology.
The wireless marketplace is taking a breather after deploying third generation equipment. While the industry has high hopes for wireless and data, most of the revenue is coming from older applications like email and text messaging. Ambitious services like television and music downloads remain nascent.
The recent completion of the FCC's 700MHz auction will start a new round of spending as companies begin deploying fourth generation (4G) technology. Verizon and AT&T were the big spectrum winners, but Google represents a stalking horse. The company best known for search is proposing an open wireless network that has the potential to disrupt the closed networks of the major wireless carriers.
Premise equipment continues to migrate to VoIP with a variety of pure and hybrid systems emerging to handle the needs of enterprise, medium, and even progressive small businesses.
Industry Condition – Fair
Key Industry Indicators
- Consumer Confidence Index
Consumer confidence continues to plunge. Numbers released in March were worse than expected and fell even further in April. The index stood at 76.4 in February, 64.5 in March, and 62.3 in April.
Major firms in the Telecom industry update infrastructure in conjunction with the rollout of new technologies, and this is currently the case now. Although older gear is offered for sale, there is only a limited market with smaller secondary carriers.
Used Equipment Values –Poor
- Supply of used equipment – Increasing
- Demand for used equipment – Decreasing
- Recent bankruptcy filings
- Verso Technologies, Inc. filed on April 25, 2008
- Interep National Radio Sales, Inc. filed on March 30, 2008
- Ampex Corporation filed on March 30, 2008
- StarVox Communications, Inc. filed on March 26, 2008
- TRICOM, S.A. filed on February 29, 2008
- Charys Holding Company, Inc. filed on February 14, 2008
- SiriCOMM, Inc. filed on December 21, 2007
- SVI Media, Inc. filed on December 7, 2007
- Eagle Broadband, Inc. filed on November 14, 2007
- InPhonic, Inc. filed on November 8, 2007
- U.S. Wireless Online, Inc. filed on October 9, 2007
- Oasys Mobile, Inc. filed on July 18, 2007
- NetWolves Corporation filed on May 21, 2007
- Pac-West Telecomm, Inc. filed on April 30, 2007
- Trinsic, Inc. filed on February 7, 2007
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Representative Clients Our Associates Have Served
- Property Tax Assessment Settled for 5 Cents on the Dollar
- Provided Valuations Supporting a Revolving Credit Facility for the World's Largest Importer of Cellular Telephones
- Original Equipment Manufacturers Receive Sizeable Working Capital Loans Secured by AccuVal Appraisals
- Valued the Intellectual Property Rights of Cellular Providers
- Provided a Valuation of Secondary Market Cellular Tower Network Sold in Bankruptcy
- Valued "Dark Fiber" Crossing Seven States for Property Tax Appeal; Resulted in Substantial Savings to Client Even Though Deadlines for Filing Appeals Had Lapsed
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