The Past

  Telecommunications Pre-Privatisation/ Globalisation/ Liberalisation

  The Network as We Used to Know Them

The Present

  The Breakthrough of Internet

  The New Technology of Fixed Lines

  Mobile Communications, a Finger in the Airwaves

  The Liberalisation of the Telecommunication Industry

  The Global Telecommunications Map

The Future

  Internet

  The Future in Mobile Communications

  The Network of the Next Millennium

 

  References

Introduction

    The world of telecommunications market is undergoing enormous change, while at the same time experiencing major growth. One of the hallmarks of the industrial revolution was the introduction of new Communications technologies as mechanism of control that played an important role in almost every area of production and distribution of manufactured goods. These communications technologies have evolved throughout the past two centuries at an increasingly rapid rate.

    The every explosive growth of the internet and the multimedia services in general, the penetration of mobile network that is one day deemed to overtake its fixed network counterpart, the laying of fibre optic networks around the world to cope with the ever expanding traffic, the use of video conferencing in the health sector and many more new developments are just the beginning of this revolution. The revolution shows no sign of slowing, so an understanding of this evolution is vital for any individual wishing to attain or retain a position in business, government or education.

Back to top

Telecommunications Pre-Privatisation/ Globalisation/ Liberalisation
 
    In the early years, domestic and international telecommunications in each country were controlled by a national post and telecommunications organisations (PTO). International telecommunications were traded under a system of bilateral agreements between nations. These Pots had no competition, and so had little incentive to improve efficiency, introduce new services, or reduce their charges. There was very little opportunity to expand overseas, as their foreign counterparts also enjoy the monopoly status in their own respective countries. These monopoly operators collaborated in the joint provision of international services. An international example would be, BT would pay American Telephone and Telegraph (AT&T) for delivery of UK calls to the US and vice versa. This cartel type arrangement ensured that international traffic was highly profitable. The industry only began to restructure in the mid 1980s, when telecommunications business had been sold to the private sector to improve efficiency, foster competition and invade the global telecommunications market.
 
Back to top

The Network as We Used to Know Them

    During the last twenty years, potent economies around the world have undergone fundamental changes. Today, most of them are progressing well in their transition from an industrial to an information society (i.e. a society whose primary economic and social activity is the production, storage and dissemination of information). A prerequisite for this rapid transformation process has been semiconductor electronics. The microprocessor, which was invented in the early 1970s, became the driving force behind the creation  of a wide array of new products, as well as the miniaturisation and improvement of already existing goods.

    Initially, technological developments focused on individual stand-alone equipment such as personal computers, industrial robots and numerically controlled machine tools. With the copper based network infra-structure as the backbone to the telecommunication network around the world, and the limitation that this network has in terms of transporting large traffic bandwidth availability, the telecommunication, computing and entertainment industries was never thought to one day be emerging as one new sector. It was always thought that the copper line network would only be the transporting voice information for telephone conversations while satellite system was only for forecasting the weather and for international television broadcast. Recent advances however, highlight a trend toward integrating and interconnecting information technology by means of sophisticated private and public communication networks. In the office, telephones, facsimile machines, personal computers along with text and data processing equipment, are being integrated into network systems. In the factory, the interconnection of robots, machine tools and computer-aided design (CAD) will gradually allow the smooth interlocking of what are now discrete production phases. Even the health sector are using the latest technology in Information Technology in using video conferencing, enabling specialist around the world to share their expertise with each other, especially during surgery without actually having to be in the operating theatre.
 
Back to top

The Breakthrough of Internet

    Since the mid 1980s, many things have changed in the computing world. The move to the client-server architecture coupled with the growth in power and population of PCs has put more intelligence at the periphery of the network. As a result, on-line services such as both on the corporate network and the public Internet have grown to encompass a far richer data set than ever before. This includes not only traditional text and figures, but also graphical, audio and even video data. Following these developments was the stunning growth of the size of the Internet ever since, an outstanding doubling in size every year. The Internet as an industry is huge, generating revenue of around US$1.43 trillion during 1994. The following figure exhibits this growth between the year 1984 to 1994.

    Nevertheless many analyst have doubts about the potential of PTOs being Internet providers as well. The reason being that while they do have the deep pockets to help them recover lost ground, their assets are in a business which is dwindling at the margin, quoting here the words of telecom analyst William Deatherage. This remark comes from the pressure that is mounting on phone tariffs by Internet telephony, a way for Internet users to communicate via audio, the PTOs face a gruesome head to head battle with the Internet providers. Which ever way it goes, the fact is that long distance service and data transmission are becoming a high volume and low margin industry, so the PTOs will lose as even if the PTOs would one day be triumphant in the battle for being the largest Internet provider, its profit has already been squeezed.

Back to top

The New Technology of Fixed Lines

Maximising the present infrastructure

    The stunning growth of the Internet and of multimedia in general has taken the world's telecom operators by surprise. The traditional copper wire and even the newer co-axial cable networks struggle to cope with such traffic. As a result, two noticeable technologies has emerged as solutions, at least for the moment, which are called ISDN (Integrated System Digital Network) and ADSL (Asymmetric Digital Subscriber Line).

    ISDN is now beginning to make its mark as high-speed replacement for traditional modem connections. Despite the high installation cost and the unattractive high tariffs, ISDN offers an impressive 64Kbps per channel, and with most ISDN hardware capable of aggregating a number of these channels to provide increased bandwidth wherever required, the ISDN service is capable of offering the ideal means to implement multimedia applications across the wide area. So in the mean time, ISDN - with its cost-effective, bandwidth on demand approach - is capturing the imagination of those wishing to provide multimedia applications across the wide area today.

    As the stakes have risen, service providers continue to exploit new technologies to maximise the potential of their existing copper based infrastructure. As ISDN is beginning to make its mark, the PTOs (Public Telephone Operators) have come up with their answer to ISDN, the ADSL, which offers an impressive 6 MB over a copper line! This not only maximises the availability of connections provides sufficient bandwidth for real-time video services. To further improve their customer-centricity, service providers are increasingly offering tailored discounts on voice traffic as exemplified by discounts for residential users frequently used numbers and tailored business tariffs.
 

Back to top

Mobile Communications, a Finger in the Airwaves

    The spectacular growth being experienced by mobile personal communications in response to market forces is at the same time generating new tensions at the political, legal and economic levels. The rapid development planned for these mobile systems on a global basis may therefore encounter barriers that need to be overcome by a large degree of co-operation at the international level among all concerned parties including system operators, regulators and legislators.
 
    Over the last decade, the mobile communications market has proved to be one of the most dynamic, but also one  of the most difficult to forecast, of all the parts of the telecommunications sector. The forecasts produced by equipment suppliers, network operators and by specialist consultancies have consistently underestimated the actual market potential. This has had negative effects on the roll out of the network, analysis of spectrum requirements, capacity planning, availability of handsets and SIM cards etc. But ironically, because the level of demand has exceeded expectations, most of the business plan targets of mobile communications operators have been met easily, even when the cost of owning a mobile handset was at its highest. Consequently, mobile communications has proved one of the most profitable parts of the telecommunications sector.

    There can be little doubt that mobile communications has been the telecommunications growth market of the late 1980s and early 1990s. Worldwide, the number of cellular mobile phone users reached some 55 million at the end of 1994, or approximately one for every 100 inhabitant. In the Asia-Pacific region, the number of users was 11.3 million or 20% of the total, up from 10% in 1988. Figures for the end of 1995 are not yet in for all countries, but the world total is likely to be just under 80 million of which just under 20 million were in Asia-Pacific.

    Mobile telephone technology is now moving away from analogue and towards digital technology. PCS cellular phones will only use digital technology, and non-PCS phones are gradually moving to digital. Digital technology, with a number of improvements over analogue, has been a clear choice for users. While analogue phones have static and cross-channel interference, it is non-existent with digital phones. Digital can also provide 10 times as many channels for phone calls, and tighter security and privacy can be implemented through encryption methods. Europe made a clean break from analogue technology by adopting the first generation digital system, global system for mobile communication (GSM), and a purely digital network with no backward compatibility for older analogue phones.

    Even though there are now much better digital technology available, GSM has already establish for itself a strong global position. GSM already has 13 million users in Europe. And to make it even harder to beat in the world market, GSM's communication equipment is also cheaper because of high manufacturing volumes. GSM has simply been the technology of choice at present because there are lots of GSM equipment providers globally and its networks can be quickly established.

(a) Inclusive of telecoms operator business

Back to top

The Liberalisation of Trade in Telecommunication Industry

    Since the early 1980s, the telecommunications sector has witnessed dramatic restructuring. Changes include the separation of posts and telecommunications, corporatisation, privatisation, competition and foreign investments. The extent and type of change has varied worldwide but every region has been directly or indirectly affected. The restructuring of the telecommunications sector has tended to follow a specific sequence. First, post and telecommunication operations are separated. This is typically followed by corporatisation of the telecommunication operator. Then the operator is partly or fully privatised. Finally, competition may be introduced. Over the past fifteen years, around 40 countries have engaged in partial or total privatisation of their national telecommunication operators and some US$ 140 billion have been raised world-wide to date.

    The UK was the first European country to introduce competition for telecommunication services when Mercury Communications limited was granted a license in 1982 to compete with British telecommunications plc (BT), the existing service provider. BT, which was established as a public corporation in 1981 to operate telecommunication services previously owned by the General Post Office, was gradually sold and by 1993, it was 99% privately owned. In 1991, the duopoly in the UK was abolished and market entry is effectively completely open for most domestic telecommunications services.

    The telecommunications environment is changing in the direction of more competitive market structures. Telecommunication services in the European Union should be fully liberalised by 1998 and other countries have made steps to open their markets as part of their schedule of commitments in the World Trade Organisation negotiations on basic telecommunications. A PTO facing well-financed competitors may not be such an attractive purchase as one with a guaranteed monopoly. For the seller therefore, there may be conflict between the desire to get the best price and the desire to introduce competition. From the buyer's perspective, competitions in the home market as a spur to foreign investment. There is the hope that revenues lost to competition in domestic markets can be partially compensated by revenues raised abroad.

    Additionally, when a strategic partner is buying part of a foreign operator, the eagerness for returns on investment should not hide the other potential benefits that it is hoping to reap. Having a foot in several foreign countries is not a totally disinterested strategy. Owning partial or entire networks at both ends of international routes in becoming crucial to PTO globalisation strategies. When those PTOs are also part of alliances-such as GlobalOne, Concert or AT&T-Unisource-potential benefits are even greater as each member of the alliances can take advantage of other members' presence in foreign countries.

    In emerging markets, privatisation is sometimes a necessary step if the government is to benefit from external loans to the sector. Poland, which wanted to maintain its independence in the formulation of its telecommunication policy, had to forego loans from both the World Bank and the European Bank for Reconstruction and Development in July 1995. Privatising the telecommunication sector not only provides a source of ready cash but also makes it easier to get credit.
 

The Global Telecommunications Map

      As the topic of our project was Global Telecommunications Development and map, we have prepared this section with our very own International Telecommunications Map which covers among other things, the Cellular markets penetration as a percentage and also international routes of telecommunications traffic in terms of Million of Minutes. The data that we used to make our map is also included in the forms of tables and charts. Also included are other telecommunications indicators that we gathered from various sources.

   Click here to go to the Mapsite

Internet: The Future

    As already been discussed earlier, the Internet is ever expanding and its applications covers real-time video conferencing, audio and graphical applications. But the store-and-forward services still dominate, such as e-mail, bulletin boards, online databases or text retrieval. But the bigger market lies in real-time services. Using the Internet for real-time applications could threaten the revenue streams of future services, such as video-on-demand, music-on-demand or home shopping, which the PTOs are currently planning and testing the market demand.

    The Internet also provides a viable option for industries involved in the information distribution business, such as software, video distribution, compact discs or newspapers. In each of these potential markets, the principle of increasing returns to scale applies. This implies that the more people use them, the more popular they become. Thus the growth of the public Internet, and user familiarity with browsers, will promote the growth of parallel private Internet. The spread of Internet as an entertainment-based medium will greatly facilitate its acceptance for serious business purposes.

Back to top

The Future of Mobile Communication

    The US-developed code-division multiple access (CDMA) is one of the main digital wireless cellular phone technology. CDMA and GSM, are fighting to replace the analogue-based cellular phone systems with a digital service that can deliver data as well as voice and offer more capacity for phone calls and users. Many US companies are having difficulties in choosing between these two, in their bid to set up regional and national personal communications service (PCS) networks.

    CDMA is widely regarded as the best digital technology so far. It offers outstanding voice quality, strong signal hand-offs, position location abilities, fewer cell sites, more privacy, longer talk time and a dynamically changeable number of calls per cell. CDMA can handle more than 10 times the capacity of the current Advanced Mobile Phone Service (AMPS) system. CDMA however, has yet to prove its claims of superior performance and capabilities and CDMA equipment is still difficult to find. CDMA equipment, which are still in their first generation, will take some time before developing the same economies of scale that GSM is enjoying at the moment. But CDMA will be a serious contender for GSM, now that in the new generation of networks in the US, the key operators have opted for CDMA. Some companies are even waiting until CDMA is available before implementing their networks.

 
Back to top

The Network of the Next Millennium

    While many sees that ISDN and ADSL are the network that is capable of coping with the present load and types of traffic, the telecom industry are finally adopting the latest technology that is widely accepted as the network for the future, the ATM (Asynchronous Transfer Mode) and SDH (Synchronous Digital Hierarchy) networking technology.

    ATM takes a message - a telephone call, signals from a videoconference, computer data, or any other information - and turns it into small cells. With each cell having its own addresses of the call's destinations, at any one time along the network, each cell in the network can carry a different customer's traffic, travelling in the most efficient order. The cells come together at the end of the journey, as directed by the destination address to recreate the entire consignment. So the magic in ATM lies in the capability of ATM to allow efficient combination of high and low bandwidth traffic, with minimum delays and maximum efficiency. In theory, ATM allows customers to buy bandwidth on demand, to dial into a network and to send whatever traffic they wish. ATM has already made an impact in the health care sector, where hospitals, media facilities and university medical centres use ATM video conferencing, distance learning and remote diagnostics. When paired with the advances transmissions protocol such as SDH which uses fibre optics technology, a highly reliable, flexible and efficient network transmission protocol, the system is capable of transporting 2.5 gigabits of information per second.

    Interest in ATM in the public telecoms sector has been growing. Many are now turning to ATM. AT&T are now laying a network based on SDH and ATM technology across Europe. Infact it is essential, as many experts and analysts points out, that a change of the global telecommunications infrastructure towards ATM and SDH technology is a necessity in order to cope with the ever expanding telecommunications sector and the growing traffic, and also as a necessity if the greatest communications revolution in history is not to grind to a halt.

Back to top

Conclusions

    The world telecommunication markets are rapidly developing and changing through a combination of technology developments, market liberalisation and privatisation of Telecommunication Operators. A new pattern based on global competition is emerging for the international trade in telecommunications. So far all looks well for the telecommunications business and the signs are showing that we are moving in the right directions towards realising the potential of this new surge in Telecommunications Technology. But the future in the fast changing sector such as telecommunications is very uncertain and almost impossible to forecast. There is growing evidence that new services are beginning to compete with, and substitute for, existing services rather than creating new demand. The expected growth in demand for new and advanced telecommunications services is also slower than expected. So, how long can this industry keep up the windfall profits that have characterised the industry in the late 1980s and early 1990s?

Back to top

References: