Frost & Sullivan: RBOCs Preparing to Battle the Wholesale Market, What Strategy Should They Follow?
November 17, 1998
MOUNTAIN VIEW, Calif., Nov. 16 /PRNewswire/The U.S. telecommunications services industry is in the midst of a revolution. Driven by deregulation which began with the divestiture of AT&T and continued with the Telecommunications Act of 1996, and by the rapid pace of technological innovation, the competition for increased end-user spending is escalating. The wholesale segment is among the least developed of the U.S. telecommunications service markets. Recently, market participants have emerged with their sole focus on wholesale accounts.
According to new strategic research from Frost & Sullivan (www.frost.com), U.S. RBOC Wholesale Strategies, many incumbents, especially the regional Bell operating companies (RBOCs), are pursuing the wholesale market in full force. The revenues for the wholesale RBOCs telecommunications services were $14.4 billion in 1997.
"Prospective entrants into the telecommunications markets must choose between high capital investment in network infrastructure or resale of an incumbent's services," say the telecommunications consultants at Frost & Sullivan. "Some of the companies may choose the option with the lower initial cost, purchasing and reselling RBOC lines and services. This strategy enables competitors to quickly gain access to consumer and business markets while avoiding the high costs of establishing their own networks."
For the purposes of this study, the market has been segmented into six sections: Voice telephone service, wireless service, Internet service, enhanced voice service, operator and card service, and data service. Voice telephone services include local/local toll voice service, and long distance. Wireless services include cellular, paging and personal communications service (PCS). Internet service covers Internet access. Enhanced voice services add value to plain old telephone service (POTS) with call waiting, caller identification, and three-way calling. Operator and card service covers operator services and calling and prepaid card services. The data service section covers private line service and public data service.
Multiple issues and concerns currently pose serious challenges to the RBOCs and other competitors pursuing the provisioning of the telecommunications services in the wholesale sector. Challenges presently faced by market participants include the continued mergers and acquisitions which breed uncertainty and reseller indecision. Regulatory obstacles and delays are slowing the market growth while major interexchange carriers (IXCs) find local market penetration difficult, resulting in reduced market potential.
Competitors unable to account for and overcome these challenges will face difficulties in an environment filled with resourceful companies and dynamic profit margins.
Growing demand for all types of telecommunications services is attracting new entrants to the wholesale market. Service providers unable to proactivley retain customers in an increasingly competitive environment will face swift, negative consequences.
The technologies reviewed include asymmetric digital subscriber line (ADSL),asynchronous transfer mode (ATM), centrex, code division multiple access (CDMA),digital data system (DDS), frame relay, frequency division multiple access (FDMA), fiber-to-the-curb (FTTC), hybrid-fiber coax (HFC), global system for mobile communications (GSM), integrated services digital network (ISDN), local multipoint distribution service (LMDS), multichannel multipoint distribution service (MMDS), near video-on-demand (NVOD), open video system (OVS),private branch exchange (PBX), personal communications service (PCS), switched digital video (SDV), T1, time division multiple access (TDMA), video on demand (VOD), and generic digital subscriber line (xDSL).
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