Other market trends may be stacked against the largest vendors as well. One of the healthiest markets these days — the optical equipment segment — lends itself to best-of-breed purchasing, which diminishes at least part of the advantage of megavendors. Thus, a one-product optical start-up such as Infinera is able to sail past larger vendors with broader portfolios.

“In most buying segments in optical networking, it's a best-in-class solution,” Kline said. “There's enough interoperability between equipment at certain levels that they can do that. You can have a standards-based handoff at the [optical-electrical] interface.”

But the optical market is notoriously lumpy, which makes life volatile for optical vendors. So although equipment may be purchased in “piece parts” today, having a broad portfolio can be a hedge against that unpredictable market.

“The full-line vendors — those guys are at a little bit of a disadvantage because infrastructure investments are coming in a piece-part sort of way,” Nolle said. “I don't think that's likely to continue. I think next year, particularly in the second half, you'll start to see broader-based advances in network technology. Future deals will require more integration rather than less. When that happens, you may see the tables turn a little.”

Historically, smaller telcos have been considered the best candidates for turnkey approaches or end-to-end platforms because they lack the resources to do much of their own integration and interoperability testing — and because simplicity is a feature for which they're willing to pay a premium. But big carriers such as AT&T, which have deep wells of brainpower for best-of-breed selection and integration, are increasingly turning to vendors to take leading roles in their network buildout plans. For example, AT&T named Alcatel-Lucent the chief systems integrator of its massive fiber-to-the-node initiative.

Part of that is due to the cost of operations as opposed to infrastructure; as operational complexity becomes more expensive, the math suggests letting vendors ease some of that complexity. Carriers big and small are now venturing into all sorts of uncharted territory, from carrier Ethernet and IP to video. Though major carriers have the money to amass their own expertise on any of these subjects, a great deal of uncertainty remains, and that leads them to a time-tested tactic, Nolle said: “If you can't guarantee the outcome, make sure you've got someone to sue if something goes wrong.”

That mind-set could become more popular as network transformation trends progress, said Glen Hunt, principal analyst for Current Analysis. “Everyone's looking at 2008 to 2010 as being sort of positioning for the all-IP network. That will include everything from DSLAMs and mobile base stations to content providers going all-IP. We might be at the beginning of that transition, which might reflect some of the reasons for the softening of wireless and wireline operators. They may be entering into that transition phase.”

With the consolidation of major incumbent carriers, vendor strategies — and network technologies — are increasingly split into two segments: the duo of AT&T and Verizon, which collectively represent about half the North American market, and everyone else. Though Bell contracts can bring in big revenue, they require vendors to put a lot of eggs in one basket.

“Verizon and AT&T are half the market, but that's a declining market,” Kline said, anticipating a spending slowdown to follow current fiber access buildouts. “They've said, ‘After 2007, 2008, we'll be ramping down.’ On the other hand, we'll see nontraditional buying segments jumping in the game: enterprises, [cable multiple systems operators], wireless companies.”

Vendors are already working hard to be less dependent on the two largest telcos. After having its fiber access equipment margins squeezed by Verizon the past four years, Tellabs — facing a potentially worse scenario now that it is one of three suppliers of FiOS infrastructure — is targeting Independent telcos, a group the company didn't have time for while trying to keep up with Verizon's needs. Meanwhile, Adtran and Zhone are working hard to penetrate markets overseas.