Value Chain in Telecommunications

[value chain diagram]

The diagram above illustrates the basic value chain for residential broadband providers. In terms of the three broad areas of innovations described in the previous section, the most important players are equipment manufacturers and network operators. The figures below show the major actors in each category along with their 2007 revenues and R&D expenditures.

[players and revenue tables]

The interaction between the operators and equipment manufacturers is complicated, dynamic, and situation dependent. Innovation in the sector is neither simply manufacturer-driven nor operator-driven. Rather, operators have a set of market imperatives and competitive pressures that lead them to seek specific capabilities from manufacturers. These needs may be communicated in informal interactions, in formalized requests for proposals, or collectively through various industry associations. At the same time, equipment manufacturers constantly strive to develop new products that anticipate coming needs, or give providers new capabilities. To a certain extent, network operators also do their own R&D, in part through collaborative consortia. The industry advances through the dynamic interaction of this push and pull.

[paragraph about standards processes]

[associations, research consortia, and standards bodies]

As for all highly innovative industries, public sector research -- in this instance including important military work alongside that of universities -- constitutes a major resource that constantly feeds the innovation pipeline.

[chart of sample major university and military innovations in telecommunications]

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