Market Strategies: International outlook vital for carriers
totaltele.com
By David Molony
15 March 1999
Today's telecoms operators should look at the bigger picture - even if they are not planning a global
strategy themselves. That is the message from one U.K. telecoms consultancy.
With companies such as MCI WorldCom Inc., Level 3 Communications Inc. and Global TeleSystems
Group Inc. (GTS) attracting much media coverage and the attention of investors, transatlantic or
pan-European network build might appear to be the telecoms model in vogue in the late 1990s.
But these ambitious, cross-border broadband network owners for the Internet age constitute just one of
many strategic models in the current telecommunications service operator environment.
There are at least 50 distinct and equally valid strategic models for competitive telecoms operators today,
according to a new study from Cambridge, England-based Analysys Ltd. And any of them can be
successfully implemented if the operator has a "unitary" management structure to support its market
strategy.
The report concludes that success in the telecoms market is not just about finding the right market
position, but also about recognizing the global nature of the business and ensuring that your strategic
plan takes account of global market forces as they affect your chosen market position.
According to Analysys, to be "globalized" means to think globally, without necessarily being a global
operator. [Now, that makes sense :-)]
"The market is irrevocably globalized," said Tim Hills, senior writer at Analysys. "Even if you are not
ambitious by nature as a telecoms operator, and [don't] plan to do things globally, you are still in a global
environment and have to think ... strategically in that context ... [or] somebody is going to [move into]
your backyard."
To help carriers understand where they fit into the global telecoms picture, Analysys has proposed a
framework onto which its consultants have mapped the network reach of each carrier against capability,
which encompasses technological facilities and business deals including partnerships. Underlying this
are a half-dozen fundamental technological and economic forces, such as economies of scale, transport,
separate service platform management and unpredictability of demand.
"There are lots of elements in the market and you can play in one or more," said David Cleevely,
managing director at Analysys. "The trick is to know which element you play in and which elements you
need to combine."
Analysys has identified specific approaches that have been adopted by operators around the world in
an effort to position themselves in the globalized environment. This framework also helps get into
perspective the strategic maneuvering of merging companies, such as the recent tie-up between
AirTouch Communications Inc. of San Francisco and Vodafone Group plc of Newbury, England.
"Everybody gets hysterical that this [combination] will wipe everybody else out," said Hills. "But
actually they are just a very big global operator with mobility. Most of the grid is untouched by them. If
they just stay here - although they are obviously part of the future of telecoms - it doesn't follow they are
necessarily the winners."
Hills claims the framework will help operators and market analysts view the telecoms industry with
renewed clarity.
"People talk a lot about globalization, tending to mean there are going to be three or four - maybe even
just two - global telecoms operators, and that's going to be the end of history because of their economies
of scale," continued Hills. "But it won't be the whole story, because capabilities can be broken down.
You can do a lot to get into new bits of the grid.
And you can create new bits of grid by doing new things with tariffs, business quality [and so on]."
So although there will be some major players dominating large swathes of the market, the report shows
there is scope for smaller operators to win market share.
However, there will be instances when it is also important to have control of the network platform,
allowing for local connectivity deals in more restricted markets. "Qwest [Communications Corp.] and
Level 3 are really on a roll," said Hills. "They are single-strategy companies gambling heavily on IP
taking over the world, and having enough money and backing to actually put it into practice."
That does not mean there is not scope for smaller, regionalized companies to do well. Hills picks out
Greece's national operator, Hellenic Telecommunications Organization (OTE), which has taken its
expertise in rural telephony into other Balkan markets.
In addition to the conceptual framework, the consultancy has also looked at how carriers are coming to
terms with the globalized environment, and the major issues commanding the attention of operators.
One company profiled by Analysys is Swisscom, which has followed a home network extension program,
moving out of its national market into the "regional" sector by building networks into the border regions
of neighboring Germany and Italy.
Other notable strategies in the global model include: having metropolitan area network loops in European
cities and stringing fiber between them to build a European network, such as COLT has done; and
offering long distance transport nationally and striking a deal with another carrier to provide local access
- Energis, for example.
"Anybody can get into your patch - anybody," concludes Cleevely. "The only way to protect against
that is to understand exactly what your capabilities are in each of the elements of the market."
Lining up on the grid
The Analysys grid helps locate selected operators according to geographic reach and their technical and
business capability. The grid, which here shows how a small selection of carriers would be represented,
does not show whether one operator has a better position than another.
And you cannot say that an operator is more likely to succeed by being in one section of the grid rather
than another, said Tim Hills at Analysys.
"Some companies may be able to exploit some things in one way [while] others may exploit the same
position in another way." But, according to the consultancy, operators can use the grid to identify where
potential competition may come from and be prepared to "move around the grid" themselves.
And, they say, "unitary" companies, such as Level 3 and Qwest Communications Corp. - those with a
single point of management control (no supervisory board structure), single approach, and single
implementation all the way down through the company - are more likely to be successful.
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