Notch another one for the ILECs: Global Alliances.
"...The local loop, the final connection from the exchange to the home or office, which is usually owned by the incumbent operator, continues to prove a barrier to seamless networking..."
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Viewpoint - why global alliances have yet to ring true
by Alan Cane
Published: July 16 2001 10:02GMT | Last Updated: July 23 2001 15:35GMT
Global service alliances were depicted only a few years ago as the battle cruisers of the cyberspace future: giant telecommunications carriers with international reach, fighting among themselves for the lucrative business of large multinational corporations.
Now that vision has all but evaporated, burned off by too much infighting and unsustainable financial losses. With Concert, the alliance between British Telecommunications and AT&T of the US, set to be dismantled and the bits returned to its respective parents, it seems that the day of the supercarrier is over. And over before any of them had time or opportunity to contribute much of significance to the telecoms industry.
Three years ago, a number of groups could have described themselves as global service alliances: AT&T-Unisource, Cable & Wireless, Concert, Global One, Infonet, Unisource and WorldPartners.
Today, and many switches of allegiance later, the picture is radically different. AT&T disengaged itself from both AT&T-Unisource and WorldPartners to link with BT in Concert after the UK company failed to merge with MCI of the US. Cable & Wireless is transforming itself into a business-orientated carrier.
Infonet is up for sale. Unisource has been dismembered. Only Global One, one of the earliest alliances, can still claim a measure of congruence with the old ideals. Once owned jointly by Deutsche Telekom, France Telecom and Sprint of the US, it is now wholly owned by France Telecom, which also holds a majority stake in Equant, the international data network established by the world's airlines. France Telecom intends to merge Global One and Equant to create an international voice and data network. It will be a global service provider with reach and capability, but it will not be an alliance.
The experience of these global ventures has, however, provided an object lesson in the difficulty of persuading companies to work together, especially at a time of violent perturbations in the market. The cost of international calls, for example, has fallen precipitously, confounding many business plans.
The rationale for the creation of alliances has not changed, however. With the relaxation of market regulation after 1998, national operators found themselves increasingly under pressure from new competitors at home and sought new sources of revenue abroad. The cost of providing global services and keeping up with technological developments is high, however, making the opportunity of sharing expenses with a partner welcome.
Moreover, breaking into an overseas market can be costly and time consuming. There are powerful advantages in working with local partners.
Large multinational customers, for their part, also see value in international providers. They want one-stop shopping with seamless service delivery, local access to global resources and a single bill.
The problem, as Concert, Global One and the others found, is that providing such services is - as one operator put it - "bloody difficult".
It can be hard to persuade companies to work together. There may be cultural and personal clashes. While senior executives may be at one on the important issues, it can prove harder to persuade staff further down the pyramid to see eye to eye. Sensitivities are easy to tread upon.
Allocating sales territories can be contentious. One alliance found itself selling its services in competition with the sales force of one of its parents. And the alliances all too frequently found themselves unable to provide what they were promising. Customers were attracted by the idea of seamless services as opposed to the patchwork of deals and agreements with a plethora of authorities which are usually necessary to establish an international network.
In practice, none of the carriers was able to provide end-to-end service everywhere. The local loop, the final connection from the exchange to the home or office, which is usually owned by the incumbent operator, continues to prove a barrier to seamless networking.
It would be wrong to suggest, however, that global alliances cannot succeed; simply that they are unlikely to cut the mustard in the present circumstances. They are deals whose time has not yet come. Regulation and competition rules will have to change. Transmission costs will have to stabilise. And prospective partners will have to understand better the ground rules of profitable co-operation. |
