In the telecommunication industry, Customer Premise Equipment (CPE) suppliers have little power. There are many CPE suppliers, but only a few telecommunications service providers. CPE suppliers such as Nortel, Lucent, and Fujitsu face intense competition with each other, which gives telecommunications service providers such as Verizon an upfront advantage when negotiating the initial contract. Verizon also has power on the back end as competition and product substitution forces CPE suppliers to provide high quality service or face being replaced by a competitor when the contract expires. A weak economy has also given Verizon more leverage over CPE suppliers. In many cases, CPE suppliers that lose our business probably won't survive for long in the industry.
Buyer Power
In this economy, buyers have more power than they might ordinarily have. Typically, there are only a handful of telecommunications service companies that can provide the broad range of services that Verizon can. When the economy is strong, businesses put a premium on telecommunications services, which puts the few large telecommunications service providers such as Verizon, SBC, Bell South, and AT&T in the driver's seat. However, in a weak economy, these businesses cut back on telecommunications services, which intensifies competition.
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