From the most recent Economist:
economist.com
SPARE a thought for incumbent telephone companies everywhere. About now, they expected to be coming into their own as standard bearers of the information age. Especially in Europe, with its newly privatised telecoms firms, this should have been a time of great promise. Instead, all over the world, the giants of the industry feel lumbering and endangered. Rather than letting them flex their muscles, their once-supportive national governments have tied them up with pro-competitive rules. And now strange fierce creatures, previously unknown in these parts, are darting about.
Politicians who once controlled or owned telecoms monopolies are stepping back. All are more or less convinced that their citizens will enjoy the benefits of tumbling prices and hitherto undreamt-of new products only if their telecoms markets are opened to competition. In America, legislation passed two years ago was intended to shake up the local monopolies of the Baby Bells and intensify competition in long distance (thanks to legal challenges, it hasn't happened yet, but that's another story). In the European Union, incumbents are feeling the first effects of the liberalisation measures of January 1st. The same is happening elsewhere under the umbrella of the World Trade Organisation.
Feeding time
Governments and incumbents alike in the richer and more technically advanced countries have persuaded themselves that, under the stimulus of competition and private ownership, the old monsters can transform themselves into global titans. But strong though most ex-monopolies still look, just hanging on where they have home advantage will test them. Entering new markets overseas is nice in theory, but against dogged incumbents like themselves on one side and fast-moving, "next generation" network operators from the world of data communications and computing on the other, the difficulties are formidable. Some governments may be tempted to lend a hand by easing the regulatory pressure on putative national champions. British Telecom is a case-history that proves this would be wrong (see article) . . .
economist.com
When British Telecom lost its nerve over MCI, it lost its way. Can it set a new course-and show other incumbent firms that there is life after monopoly?
IN THE world telecoms establishment, British Telecom is, by common consent, a class act. While America's Baby Bells and Europe's former national monopolies are facing up to competition in their traditional markets for the first time, BT, according to one American analyst, "wrote the strategy playbook on how an incumbent should react to competitive threat." But as BT's domestic redoubt comes under intensifying assault from nimble new foes, others are questioning whether BT can play offence as successfully as defence. If even BT is now struggling, what does that mean for other establishment players?
And struggling it is. Four months after the collapse of its marriage with MCI, when the American long-distance carrier was snatched from the altar by WorldCom, BT is still trying to put the pieces of its once-admired global strategy back together. The episode has left psychological scars and damaged both the confidence and the standing of the management-most of all, that of the chief executive and architect of the shattered deal, Sir Peter Bonfield. It was Sir Peter's decision-using the excuse of shareholder pressure-to lop $4 billion off the price BT was prepared to pay for MCI when the American firm uttered a cry of pain over the high cost of entering local markets. And it was this crucial failure to understand strategic asset value that gave WorldCom its opportunity.
Some now even see BT as potential bid prey rather than predator. The British government no longer holds a "golden share" and in the last year a substantial valuation gap has opened between BT and the big American telephone companies (telcos, in the lingo), making the British company a tempting target. Such is the uncertainty over BT's future that rumour of an improbable bid by Microsoft recently sent the firm's shares climbing.
Analysts point to a management that has failed to convince either staff or shareholders that its international strategy makes sense, and which fumbled at a decisive moment. In its domestic market, where it faces competition that has quite suddenly acquired critical mass, the firm must contend with falling prices. Analysts also question whether BT will have the entrepreneurial agility to ride the new wave of Internet-based technologies and digital entertainment. Sir Peter, brought in from ICL, a computer firm, three years ago, is seen as rather stiff and remote despite his blokeish accent-an old-school believer in alliances and lobbying, with little flair for marketing and a poor grasp of the technological forces shaping the industry.
In a recent report, the Yankee Group, a respected international telecoms consultancy, argued:
The real problems for BT, brutally exposed by the failed MCI bid, are cultural and historical. Culturally, BT remains, despite everything, a bureaucracy, stifled by politics, committees and unclear objectives. It is better positioned than its rivals among the ex-national telcos, but that only exposes the problems they will all face as competition and technology march on. Turning oneself from a national telco into a global operator may be a transformation which is simply too difficult to achieve.
A test failed, a strategy lost
BT is a curious amalgam of deep strengths and, for an aspiring global player, possibly fatal weaknesses. As the first of the European state-owned monopolies to experience both privatisation and domestic competition, it is a much leaner, meaner outfit than most of its counterparts in Europe, and at least the equal of America's long-distance carriers and the better Baby Bells.. . . .
economist.com
EMERGING-MARKET INDICATORS
TELEPHONE ACCESS -- The world had about 800m main telephone lines at the end of 1997. The global network has grown nearly tenfold in the past 40 years, according to a new report by the International Telecommunication Union. The world is likely to have almost a billion telephone lines by 2000.
TELEDENSITY<Picture> Telephone density-the number of lines per 100 people-has quadrupled since 1960. It varies greatly. A quarter of countries still have a teledensity below one. But the experience of countries such as Singapore and South Korea shows that teledensity can grow faster than was once thought. China has moved from fewer than one main line per 100 people to more than five since 1990, accounting for one-fifth of the 300m or so lines added in the period. It takes on average 17 years to go from one line per 100 to ten, but about nine years to go from ten to 20. |
