Traditional Telecom and Cellular Industry in Developed World - Essay Example

Industry: Traditional telecom and cellular industry in Developed World. The telecom industry in the developed market such as USA and Europe witnessing hard-core competition with the market attained some kind of saturation level. This has necessitated solid action plan from the individual players to increase both customers and revenue. It is very important for companies to add value added services to sustain in this highly competitive business scenario. Today technology has a major role in the revenue growth of the companies. Technology should be customer friendly and revolutionising. Basic telecom services and cellular service industry have been reporting a decent growth in the developed world in the last century and continues to be major growth area for the future also. While the traditional telecom industry has revolutionised the whole concept of communication and shorten distance between the continents, the invention of cellular services has totally changed the ways of information and communication. Telecommunications rollout boosts economic growth and enhances consumer well-being in the global trade and information scenario. As wireless technologies require much lower cost to roll out over large areas than fixed line systems, mobiles can potentially play a vital role in economic development. Mobile communications have contributed significantly towards enhancing income and improving quality of life in the developed world. Cellular phones have played a vital role in enhancing social capital and thereby significantly improve competitiveness of business and reducing cost in many developed world. Today about 100 percent of American citizens between the age of 20- 50 uses cellular phones. The technology in this sector has witnessed a dramatic change with the introduction of many digital based solutions. Every day cellular companies are incorporating new services to woo more customers. Today cellular phones have attained a new role as a total solution provider at a finger touch. The celluar phones are also work as a personal computer and provide all the services of a personal computer. According to eT Forecasts's report, Cellular Subscriber Forecast By Country, the total number of cellular subscribers world wide was only 11 million in 1990 and among them 49 percent were in USA. From 1990-2005, cellular subscriber number grew by 187 fold to 2,065 million. But in this period share of US in the total number of subscribers fell below 10 percent. It is estimated that the subscriber base in USA would be increased from 202 million in 2005 to 293 million by 2010.The traditional telecom sector in USA has also increased considerably during 1990-2005. It was 132 million traditional telecom lines in 1990 but it has increased to 177 million in 2005. According to eTForecastes, there are a number of reasons for major drive of cellular industry in developed world. It says that network expansion, text messaging, multiple SIM cards, camera phones, family plans and expansion of 3G network where instrumental in strong growth of cellular industry up to the year 2005. But it will be Multi-function handsets, 3G & 3.5G network expansion, un-metered data pricing, multiple SIM cards and machine to machine, MMS and video services and internet access and new content will be the driving force from 2006- 2010. The report also cautions that the subscriber growth in developed countries would be limited as the market has already reached at a saturation level. So machine-to-machine (M2M) communication where embedded wireless modems are used for data transmission is termed as one of the potential area of growth. In the next decade the cellular industry will witness a dramatic change in its look and content. The mobile handsets may get new utilities and will be a communication tool for voice, data, pictures and video content. The handsets will work as a personal computer, which can use for all type of computing and data storage for business and personal contents. It can be also used as a personal identification device for financial transactions. (http://www.etforecasts.com/products/Cellsubs.htm, September, 2005) From this reports it is evident that cellular and traditional telecom players need to look for new ways of growth. In the developed markets like America and Europe, apparent saturation level of subscription level has necessitated for new revenue models to sustain growth. The future of the telecom and cellular industry will be depending on the data services and quality of the service. To win the hearts of customers, companies need to introduce high technology tools, which are customer friendly and able to generate new ways of revenue generation. For a long time convergence has been considered as a happening area of the future business models. Convergence means coming together from different directions so as to eventually meet. Technology convergence in the telecom and the IT sectors has led to service and company convergence. Convergence of technologies has made it technically possible to deliver voice, data, and video services to a subscriber through the same network. Convergence has united the traditionally discrete telecommunications, broadcasting, and networking sectors. The rise of consumerism and the need to anticipate consumer demand were the major catalysts for companies to think of convergence of services. The telecom industry has made use of this concept to a large extent and helped in innovation of large range of services in communication technologies. In the era of convergence traditional telecom operators have introduced audio-visual programming and Internet access through their network. Also cable TV operators have rolled out a variety of telecom services such as voice telephony. Cable operators have now deployed modems to provide high speed Internet access. Customer base has now become the greatest asset for the telecom operators. Wireline and wireless operators are converging their digital based services to maintain and add up more customers. Data service has been becoming the core area for the operators. Today's customers are more intelligent and they are not ready to accept offers as taken for granted. They will evaluate, analise and judge the quality of the services offered. They won't take things on its face value. The era of brand loyalty is now become history. The customers are now willing to switch over to new offers if it digests to his physical and personal needs. So there is more responsibility in the operators' shoulders to give fair treatment to the end customers. The telecom companies have to restructure business support systems and customer relationship management (CRM) architecture to address the growing needs of the customer. The need of a more productive convergence platform is relevant in this highly competitive business scenario. It is now single point contact source for all his business and personal needs on the card. Convergence should be focused to give all services under one roof for the customer. At the same time markets like USA are offering enormous growth potential in niche segments. According to USA Mobile Market Statistics 2006 of Wireless World Forum Data they expect a 44 percent rise in the number of senior (between 50 to 60 years) owners by 2006 to 23.29 million. Also it is expected that the number of teenage mobile users will increase 28.2 percent to 13.36 million by 2007. The report also says that overall growth in cellular industry in USA is showing signs of drop in overall growth by 4.1 percent by 2007 as there is an absolute saturation level among 20-40 age group. Wireless World Forum Data points out that there would be a 68 percent increase in data revenues to 17.5 billion by 2007. These points highlighted the importance of concentrating more on niche customer segment and data services for future growth. These areas offer lot of growth potential. But companies need a concrete and detailed strategy to penetrate into this customer base. It is the knowledge factor, which going to play an effective role in the future growth of the market. Operators have to redefine meaning of the knowledge management to increase their competitive advantage. More focused customer outlook would be an added advantage in this business proposition. Organisational adaptation, survival and competence in a rapidly evolving environment are issues in Knowledge management. It also demands convergence of data and information processing capabilities of information and communication technologies. Knowledge management has the capacity to improve quality management and minimize losses and weaknesses that result from poor performance as well as increase the competitive level of the company and inability to maximize its survival potential in the global marketplace. ( M A Berawi, Quality Revelution, leading the innovation and the competitive advantages, International Journal of Quality and Reliability Management, Volume 21, May 2004). The major challenge before conventional telecom industry and cellular industry is to keep pace with the changing technological and marketing scenario. The industry needs to innovate continuously and understand the market pressure. It is a general principle that a competitive business environment would have lot of pressure for consolidation. While companies trying their best to improve market share and technological strength, it has to be vigilant of take over pressures. The competitors are always looking for ways increase their share. Recently America Online Limited (AOL) has agreed to buy Time Warner, creating the largest company merger in history. Time Warner is the number one media and entertainment company in the world, creating 30 billion dollars of revenue every year. AOL has been making strategic alliances with various content providers for years. This was a move by the Time Warner, which has great strength in data management to acquire more technology. It is believed that internet is the most prospective business in coming years. It should be seen as move to synergise two strengths, content and technology. There are more such high rates mergers on the offer. According to CNN Money, with dominating positions in the music, publishing, news, entertainment, cable and Internet industries, the combined company, called AOL Time Warner, will boast unrivaled assets among other media and online companies. This kind of high profile mergers would be a major challenge for the telecom industry in coming period. The broadcasters are now aggressively entering to communication space by providing information communication technology. The telecom companies have to compete with these technologically strong companies, who have high expertise in content management. In such a scenario the telecom companies should look out for innovative and technically strong platforms to provide better customer support. The best way for developing strength in the market to counter intra and inter- industry competition is introducing convergence as an effective tool. New devices, faster connections, better software and greater choice should be the focus of telecom providers. Most of the internet based companies are considering content as a major source of revenue. Many portals such as Yahoo, AOL and MSN are making revenues with the support of their strong reach, large sales teams, an impressive breadth of content and seemingly endless resources. These three major portals have taken different approaches in developing and distributing content. MSN is not aggressive in producing the content but it focuses on distribution. AOL with the association of Time Warner has now been to content creation. Yahoo! continues to create content.(Avenue A/Razorfiah, 2006 Digital Media Outlook, Seattle Washington). Though the increasing popularity and aggressiveness of internet and broadcasters can be perceived as a major challenge for telecom sector, this can also considered as an opportunity. Competing with a player from a different sector for a common space would automatically increase the competitveness of the telecom industry. Also it will necessitate inducting new technology and services, which ultimately give the telecom player more competitive advantage. With a new array of choices for wireless consumers and converged telephony services the industry is all set to enter into next stage of development. Another area of growth for the telecom companies is mobile virtual network and operators are exploring the changing landscape of a marketplace. Consumer choices about wireless phones and service now have become lifestyle decisions, and certainly the personalization choices, starting with handset form factors and continuing to the activities they support, are vast. However, operators are aiming for something more than being part of a passing trend. Rather, they are building networks and developing applications that will make their services an inseparable part of life. (America Wireless Trends, Research and Markets, Market Reasearch Reports) WiFi is another potential area for the telecom companies to earn more revenue. WiFi and wireless Local Area Networks are said to be a low-cost, relatively simple way to gain high-speed access to the Internet. It is said that both these technologies are opening lot of potential and prospects for the telecommunication sector in Europe and USA. As the popularity of wireless access to the Internet grows, expert groups are speeding up efforts to create standards that allow WiFi network users to have access to multiple networks just as voice wireless customers can have their phone calls go through over multiple networks. A research report by Insights says that the introduction of WiFi would open new regulatory, security and technology challenges, and it will change the prospects for both the corporate enterprise and home networking markets. (Insight Research - WiFi in North America & Europe Telecommunications Future 2003-2008.htm) Though Mobile operators took advantage of some of the new Wi-Fi capabilities, using the technology to support delivery of mobile data bundles, but they now face a new challenge: "Mobilizing" WLAN (Wireless Local Area Network) and enabling Voice over Internet Protocol (VoIP) on WLAN networks seems to be giving fixed carriers and mobile virtual network operators (MVNOs) a chance to get some of their voice business back from mobile carriers. (Svetlana Issaeva, WLAN-Cellular Convergence, Carrier Business Case for WLAN, UMA and VoWLAN, Pyramid Stores) The telecom sector need to device strategy to counter these challenges also. Today technology is enabling sectors to adapt services meant for other sector to initiate cross sector competition. Regulation will be a major challenge for the telecom companies in this new market scenario, where concept of convergenece and new technologies catching ground. However new information and communication technologies do present profound challenges and opportunities for telecom sector. It is time to make use these opportunities and face the challenges with more focused strategy. The ground is now more open with there are intra and inter industry competitors are in the field. The time is warranting introduction of new customized services and concentrating more own technology. Content is going to be the major deciding factor. However the globalization has opened lot of potential to find out new areas of growth also. Despite challenges ahead, convergence has opened lot of potential for telecom companies to reach out at new markets and maintain the existing customer base. Another area of importance is niche markets such as senior citizens and teenagers. There should be some focused products aiming at these categories. Understanding their specific needs and customise products to their choice would help in increasing market share among these categories. But company needs more technological strength and expertise in that direction. At the same time company can join hands with some content providers on a profit sharing basis. Reference America Wireless Trends, Research and Markets, Market Reasearch Reports, 2006 Avenue A/Razorfiah, 2006 Digital Media Outlook, Seattle Washington Damien Geradin, David Luff, The WTO and Global Convergence in Telecommunications and Audio-Visual Services, Cambridge University Press, 2004 M A Berawi, Quality Revelution, leading the innovation and the competitive advantages, International Journal of Quality and Reliability Management, Volume 21, May 2004 http://www.money.cnn.com/ http://www.etforecasts.com/products/Cellsubs.htm http://www.pyr.com/index.htm http://www.researchandmarkets.com/index.asp http://www.wallstreetreporter.com/ Read More