Booming Internet to jolt telephone companies
Reuters Story - March 25, 1998 21:40
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By Neil Winton, Science and Technology Correspondent
LONDON, March 26 (Reuters) - The explosive growth of the
Internet poses a life-or-death challenge to telephone companies,
according to a report published on Thursday.
The report, from Cambridge, England-based consultancy
Analysys, said the Internet, the worldwide network of personal
computers connected by telephone lines, threatens a cull of
phone companies which fail to meet the demands of the new
technology.
Telephone companies which embrace the Internet challenge
will thrive.
According to Margaret Hopkins, principal consultant at
Analysys and one of the report's authors, companies like Telecom
Finland [TCFN.CN], and WorldCom Inc are front-runners
in this race.
Telephone companies only recently freed from state-ownership
shackles are likely to be the hindmost.
The Internet is set to shake-up the business world because
the electronic commerce it generates melts traditional
boundaries.
Supermarkets can offer banking services, banks sell life
insurance, and companies like software giant Microsoft Corp
find themselves involved with companies offering
products as disparate as news, entertainment and shopping.
Analysys said that by the end of 1997, more than 60 million
people around the world and nearly 20 million computers were
linked over the Internet. This is growing at about 50 percent a
year.
"The Internet creates chaos because it opens the door to new
ways of doing things. When the dust settles, lasting competitive
advantage will lie with the companies that have managed to find
a new way of doing business," the report said.
"Telecommunications companies must fundamentally re-invent
themselves if they are to exploit the huge commercial potential
of the Internet," Analysys said.
"Operators need to abandon old prejudices as well as learn
new skills, and drag themselves out of the dark ages of the
public switched telephone network and into the Internet age,"
Hopkins told Reuters in a telephone interview.
Internet use threatens to transform traditional telephony as
voice traffic is overwhelmed by data transmission.
Imaginative new companies are already using the Internet to
sell long-distance calls for the price of a local call,
undermining traditional fat profit margins.
"By 2003, over 25 percent of international call minutes are
forecast to be carried over the Internet, by which time the IP
(Internet provider) telephony market will be worth at least $7
billion. No doubt this explains why we are starting to see AT&T
(Corp ), Deutsche Telekom (AG ), GTE (Corp )
and MCI (Communications Corp ) entering the IP telephony
market," Hopkins said.
High-capacity cable networks are bringing increased voice,
data and video competition. Technical developments threaten
competition from electric utilities which reckon they can
transmit data over power lines and deliver services via the home
electric power plug.
Teledesic, the $9 billion "Internet-in-the-Sky" project of
Microsoft and telecommunication pioneer Craig McCaw, plans to
launch a network of 288 low-earth-orbit satellites in 2002.
Other groups like Motorola Inc's led Iridium have
similar plans.
Which companies will best handle intensifying competition?
"Telecom Finland has already coped with this. There's real
competition there. Worldcom and (recently acquired) MCI are in a
very advantageous position, basing their whole ?????into next week.
Private export registrations totaled some 586,000 bags in
March, he said. Federation registrations were not immediately
available.
Another private exporter voiced doubt over whether the
latest strike would help shore up the international price of
Colombian coffee, explaining that transport problems were
becoming so frequent that buyers no longer took much notice.
In comments to reporters Tuesday, Jorge Cardenas, head of
the National Coffee Growers' Federation voiced frustration at
repeated truck drivers' strikes but did not specify what
quantity of exports may have been affected.
"The federation has been quite affected by these permanent
strikes," Cardenas said. "From the first moment we agreed a
(transport) pricing policy according to what the truckers had
asked for and we have fulfilled our end of the bargain."
The federation exports most of its coffee through the
Caribbean coast port of Cartagena -- which handles an overall 40
percent of all the country's coffee shipments.
Carlos Flechas, head of port security at Cartagena, told
Reuters Wednesday that truck traffic was normal but conceded
that operations may be affected later in the week as the strike
began to bite deeper.
While the immediate impact of the transport strike remained
uncertain, Cardenas signaled longer term supply shortfalls.
"Colombia is revising (its export target) to 10.2 million
bags...because of quality problems," he told reporters in an
impromptu press conference late Tuesday in a rural area of
central Caldas province.
The previous forecast was for exports to total some 11.2
million 60-kg bags this year, which would have forced Colombia
to draw at least 2 million bags from inventories given the
1997/98 harvest forecast of about 10.5 million bags.
Cardenas did not spell out the reasons for the downward
revision but industry sources have blamed the unusually hot, dry
weather caused by the El Nino phenomenon for diminishing crop
estimates and for a rise in the berry borer plague.
Bullish news from Colombia, however, failed to have any
significant impact on CSCE coffee futurnes, whic( ended broadly
lower Wednesday. Traders said prospects of a large 1998/99
Brazil crop kept the market's downward bias intact.
"Any way you cut it, there's just going to be more coffee
down the road," said Smith Barney analyst Walter Spilka.
"Conditions in Brazil point to a crop 60 to 80 percent
largerthan a year ago. If you're a roaster, there's no reason to
chase this market."
LastThursday, the Brazilian Association of Coffee Exporters
(Abecafe) pegged the Crox at 35.2 million bags, up from 22.05
million bags in 1997/98.
Brazil, the world's largest coffee producer, is expected to
produce betweun 30 million and 40 million 60-kg bags of coffee
in the 1998/99 season.
((--Karl Penhaul, Bogota newsroom (571) 523 7877,
bogota.newsroomreuters.com)) |
