Transcript management principles & the business environment

Key Determinants of Environmental
Change in UK Telecommunications:
Empirical Evidence
David Lal and Peter Strachan
THE
ROBERT GORDON
UNIVERSITY
ABERDEEN
ABERDEEN BUSINESS
SCHOOL
Main Aims of Article
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ROBERT GORDON
UNIVERSITY
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1. Present empirical evidence on key
determinants of environmental change from
the perspective of the UK telecoms incumbent
since deregulation that drove strategic change
at the firm;
2. To consider the evolving and dynamic nature
of the global telecoms market.
Methodology
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Research Content - Qualitative Data
A series of face-to face interviews
Senior Executives at BT (Purposive Sample)
Semi-Structured Questionnaire Checklist
Content Analysis applied to Data-Set
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UNIVERSITY
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Pre – Privatisation
• The introduction of the telecommunications
act of 1981, separating telecommunications
from postal services;
• The breaking up of the network operator's
monopoly of the supply of customer
premises with equipment, which was one of
the earliest measures in UK telecoms market
liberalisation by the government;
Pre – Privatisation
• The companies of Cellnet and Vodaphone
were licensed to compete in the provision of
mobile communications services, opening up
the UK mobile communications market;
• Liberalisation of "packaged solutions"
thereby increasing the use of outside
suppliers to provide these to the business
market;
Pre – Privatisation
• Limited competition was introduced into the
UK fixed network services market, with
Mercury Communications being elevated to
the status of the 2nd national UK operator
and the duopoly was created (duopoly
guaranteed for seven years)
Pre - Privatisation
• UK government creates a telecoms
regulatory body - OFTEL - with the Office of
Telecommunications;
• British Telecommunications plc was created
with privatisation of the incumbent - 51% of
the firm's shares being sold in the first of
three tranches of the sell-off.
Periods One and Two
• Competition was launched by mobile network
operators Vodaphone and Cellnet via their
respective cellular radio networks;
• Market liberalisation allowed cable television
operators to offer fixed link telephony services
but only agents for the duopoly players
(British Telecommunications and Mercury
Communications). Thus, “resale of capacity”
i.e. the leasing of lines from BT continued to
be the “modus operandi”;
Periods One and Two
• Technological advancements - both internally
(within British Telecommunications) and
externally (industry - wide) were evolving,
with new digital technology overtaking
existing analogue technology products;
• More demanding customers, requirements for
an increasing range of products and services –
plus falling prices/costs;
• Hence – Limited impact on incumbent!
Period Three
• Phase 1: There was a boom in 2nd lines and
an increase in the requirement for bandwidth.
Period Three
• Phase 2:
There would be a substitution of
new Internet services for traditional services.
Here, Internet Protocol Wide Area Network
Services (IP WANS) would replace private
circuits; Internet fax would replace phone;
Web transactions would replace toll free
services; and email would substitute for voice
and fax;
Period Three
• Phase 3:
The pre-emption of Internet
technologies over telecommunications
technologies was being seen as the primary
platform for service innovation. This was
evolving in the areas of E-Commerce,
Multimedia, and Networking.
Period Four and Beyond
• Wireless technology, where it is increasingly
becoming the primary access technology for
voice;
• Telecommunications becoming increasingly
about carrying data, although voice will be
the major money spinner for many years to
come;
• Newcomers displacing the traditional
telecommunications operators;
Period Four and Beyond
• Strategic alliancing and acquisitions playing a
major role in the evolving structure of the
UK, European and Global telecoms markets.
• Demand led by customised solutions;
packaged solutions; wholesale bit transport
and retail products/services (including
through mobile products/services).
Period Four and Beyond
• Nine hundred firms were registered to
compete within the UK telecoms market primarily in the areas of: – Provision of public access mobile radio services;
– international simple voice resale services;
– international facilities based services;
– fixed link public telecom operator services;
Period Four and Beyond
– value added services;
– regional/national radio paging services;
– mobile public telecoms operator services
(cellular);
– radio data services (including baggage
tracking and reconciliation services); and
– Broadband cable public telecommunications
operator.
Conclusions
• From governmental perspectives, the main
objectives in telecommunications
liberalisation and deregulation were the
offerings of greater competition, choice, and
value for money services.
• What we can learn from the BT perspective
of key determinants driving change in the
evolving UK, European and indeed global
telecommunications industries, is that there
appears to have been a distinct failure in
introducing real competition in fixed link
voice telephony.
Conclusions (Continued)
Accordingly, failure can be attributed to several
factors: -
1. The inherent contradictions in BT’s role: it is
both the owner and maintainer of the
infrastructure - as well as - a competitor in
the delivery of services.
2. Continuing reliance on BT as the “owner” of
the infrastructure, and the difficulty of
making BT competitive when its licence
conditions include service “obligations”.
Conclusions (Continued)
3. The large capital investment and disruption
to the environment required to lay new
cables, and new technology in
communications through computers is “bypassing” the regulatory problems of
traditional telecommunications and proving
to be cheaper.
4. The pursuit of the cable route and partial
neglect of the potential of wireless
technology, which would resolve the issue
and by-pass, the infrastructure problems.
Conclusions (Continued)
5. The reliance which OFCOM is forced to make
on the incumbent for its “information,” and
therefore the regulatory difficulties placed in
the path of potential entrants to the market,
based on the fact that they are placed in direct
competition to the huge clout of BT.
6. Tendency of new entrants to the market to
concentrate on the provision of value-added
services due to the difficulty and risk involved
in entering the fixed link voice telephony
market – setup costs being small and therefore
attractive to potential market entrants.
Impact of deregulation on Global
Market Structure.
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• Deregulation / Privatisation /
Liberalisation
• Integration of :
–Information
–Communication and
–Entertainment
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• Shareholder Value
• Globalisation
• Technology
• Consumer Demand
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• Strategic Partners
• Strategic Acquisitions
• Internationalisation
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• Providing a Basket of Services;
• Globalising;
• Restructuring;
• Development of a Customer Focus.
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Finally …..
Key Determinants impact on :The Evolving Nature of the Market
Structure
AND
Affect the Bases of Competition
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UNIVERSITY
ABERDEEN