Executive Summary
Significant Regulatory Developments within 12 months
Impact on Business
Transformation of Telecommunications
Challenge for the Future
Today's communications industry is being shaped by several key factors: a
rapid growth in mobile communications, explosive growth in the Internet,
stagnating revenues from core telephone services, falling prices and spreading
competition, liberalization and privatization.
But there are also big regional differences, mostly a consequence of continuing
economic inequality, and, in some cases, resistance to reforms aimed at increasing
competition. In Africa, most of Asia and parts of Latin America, there are far fewer
than ten phones per hundred people. In the poorest countries, fewer than one in ten
thousand people can access the Internet, compared to almost one in ten in the most
advanced nations. Yet there are many beacons of light in the developing world too,
with China, India, parts of Eastern Europe and much of Latin America seeing strong
growth in all the key markets. As more markets open their doors to competition
following the 1997 World Trade Organization agreement, rapid growth is likely to be
the most notable feature of telecommunications markets around the world.
The first Global Communications Report from BT, published in 1996, summarized the
state of the telecommunications world and its impact on the way organizations do
business. The trends identified in that report have continued and strengthened. Today,
the ability of business to work effectively is even more dependent on information and
communications technologies. The aim of the BT World Communications Report
1998/9 is to provide a useful insight into the changing shape of the communications
industry and to outline how business can use technology to gain competitive edge.
The world that we are entering is neither simple nor predictable. But business must
understand that communications technology is critical to survival – and understanding
technology is the key to success.
Significant Regulatory Developments within 12 Months
Three sets of agreements which came into effect at the beginning of this year have
ensured that, for businesses and customers everywhere, the telecoms marketplace has
changed forever. First, the World Trade Organization's Agreement on Basic
Telecommunications Services came into force on February 5, 1998. As a result 69
countries, accounting for 90 per cent of the world's $650 billion telecoms services
market, agreed to move from the rigid bilateral agreements of the old telecoms
structure to embrace national and international competition. The WTO predicts that
free competition could turn the $650 billion market into a $1 trillion market by the end
of 1998.
Secondly, the European
Union – home to a third of
the world's telephone lines
– decreed an open
telecommunications
market, effective from
January 1, 1998. Europe's
transformation, from one
of the world's most
protected markets to one
of the most open, signals
that governments are
beginning to recognize and
accept the link between
competitive
telecommunications and
economic prosperity. That
increased prosperity is
founded on widely-accepted forecasts of cost reduction, service improvement, and
greater competitiveness. Thirdly, the Japanese telecommunications market – the
world's second biggest and by far the largest in Asia Pacific – fully opened up. The
Japanese Diet passed a raft of legislation during 1997 and was one of the first
governments to ratify the WTO Treaty protocol. This marked the spread of full
competition to the world's three great trading blocs.
Liberalization has been long anticipated and businesses are now waiting to see the
benefits of a competitive marketplace. Potentially, prices could fall dramatically in the
global market, enabling business to increase its use of telecoms. However, the telecoms
industry is booming, not suffering. Despite falling prices, total industry revenue is
growing at twice the rate of the world economy as a whole.
Impact on Business
Business trends worldwide show how information and communications technologies
and management strategies are increasingly becoming locked together. And as
companies are able to develop new business strategies, technology companies are
rising to the challenge to deliver more innovative solutions at lower prices.
This is a virtuous circle for those quick enough and imaginative enough to seize
opportunities. For those who cannot or will not innovate fast enough the future is less
sure.
The trends affecting business across the world include:
Accelerating pace of change: the pressure to find out what the market wants and
bring new products to market fast is becoming more intense.
Globalization: as trade barriers fall and Internet usage grows, geography is
disappearing as a business constraint. This means more opportunities, but also more
competition.
Increasing competition: ‘unexpected competitors' threatening the core business of
traditional organizations. For example, as banks become insurance and financial service
businesses, their core business is being attacked by retailers
Technological awareness: organizations which do not understand what technology
can do for their business are finding that competitors who do are taking over their
markets.
Skills shortage: The
world is facing a massive
skills shortage in
information management
and IT: global skills
shortages and
‘employment insecurity'
are endemic as
organizations are forced to
review strategy and
refocus, creating a flexible,
knowledge-based
workforce, with skills to
respond to change quickly
and effectively.
Information and
knowledge management
are critical issues: the
lean organization has few support staff and uses ‘what it knows' effectively. Businesses
succeeding in this dynamic environment Þnd ways of using that knowledge to gain
competitive edge.
Increasingly sophisticated solutions: to meet the needs of increasingly
sophisticated customers, who demand ease-of-use and global access in the age of
virtual businesses and teams.
For the first time, we are entering a world where our reach is not limited by mechanical
systems, the number of people we have, or our geographical position. Today,
organizations must be creative and connected to succeed.
Transformation of Telecommunications
Once populated by staid, government-owned monopolies, the telecommunications
industry is now moving towards being the largest, most highly competitive and dynamic
market in the world, underpinning almost everything we do.
The industry is changing beyond recognition and is merging with other industries to
create a new sector: a global information and communications industry.
Three forces are fuelling this change:
Technology: Telecoms equipment is digital and is sharing the benefits of computing
technology improvements. Falling satellite channel costs and better cable technologies
help, too. Telecom companies can offer better, more reliable and more intelligent
services at lower cost.
Competition: The commitment to competition shown by virtually all governments
across the world is creating an infrastructure where liberalization and increased
competition are the only options. Telecom providers must respond by innovating,
cutting prices and increasing service quality – or lose customers to new competitors.
Demand for change: Surveys show that telecom business customers want and
expect more supplier competition and lower prices. Political pressure on governments
to deregulate telecom markets is significant.
Challenge for the Future
The transition to an Information Society can be likened to the Industrial Revolution in
Europe and the Americas in the 18th Century. Then, change was accompanied by
massive social and economic dislocation. In the far more complex and interconnected
world of today, failure by politicians, by business leaders, or by the technology itself,
could create havoc and despair. The stakes are high.
This report suggests that the potential wealth and freedom created by the Information
Society will be overwhelming. |
