Massoud Saghafi, Robert M. Janowiak & Jagdish N. Sheth
Over the next one to two decades, the worldwide telecommunications industry and its broadly based parent, the information industry, will undergo massive change. What will be the dimensions of the new information industry? Which drivers will be most significant in industry convergence? What will be the societal, economic, and trade impacts? How can traditional telephone, cellular, personal communications services, and cable companies thrive in the new information age? These compelling questions are the basis of research studies at the University of Southern California’s Center for Telecommunications Management, the International Engineering Consortium, and the Institute for Communication Research and Education. These studies have included fundamental research coupled with hundreds of executive and expert interviews. This paper summarizes two recently completed research studies which look at today’s industry, the expected changes over the next decade, and the impact of those changes on the economic, trade, and social paradigms.12
Information Industry Today
Figure 1 presents a broad view of the information industry. As depicted in the columns, Information exists in five basic forms: voice, text, image, data, and audio/video. Historically, each form of information has been dominated at the ‘retail” level by one or two industries. For example, Imaging consists of cameras, films, industrial imaging, xerography, and so on. Video information has primarily been the domain of entertainment-related industries such as consumer electronics, broadcast and cable-television networks, and Hollywood studios. The horizontal dimension of the matrix captures what see do with information in each one of those industries: we create, display, store, process, or distribute information. We first examine the vertical columns: the forms of information. Information industries have traditionally been defined in terms of the “form” of information, the underlying technologies for handling each type of information have been vastly different in the past, and each technology uniquely handled the form of information used by the industry.
The imaging industry is large and diverse; it includes camera manufacturers, copier makers, film makers, and industrial and medical filming. The primary industry for images has been photography. Related industries include xerography and mimeography. The functions most emphasized in this industry have been information creation (via capture), storage, and display. The underlying technologies have historically been chemical. Text. The principal technologies at the heart of the industry were the mechanical and electro-mechanical ones of printing and publishing. Several Supplier industries, such as the printing-press industry, type foundries, the offset printing industry, the printing paper industry, and so on have been supporting the publishing industry. With the advent of word processing and desktop publishing in the Last two decades, the industry has started moving into digital technology. Voice. The industry includes phone companies and other service providers at the “retail’ level and equipment manufacturers, copper-wire producers, and numerous others at the supplier level. The primary functional emphasis of the telephone industry has been voice distribution, though recent growth has come through image (fax) and data transport. The principal technological underpinnings of the industry have been in the transmission and switching of electronic signals. For nearly a hundred years, these signals were analog, switches were first mechanical (human opera- toes), then electro-mechanics (crossbars), and are now electronic. The technology is moving rapidly toward 100% software-controlled digital switching. Data. Here, the major industry has been computing, which has its origins in the “tabulating” and “calculating” businesses. From mainframe computers, the industry moved to add minicomputers, and more recently personal computers, workstations, and supercomputers. For computing, the main emphasis has been on information storage and processing. Audio/Video. This category includes audio information (such as music) as well as video information. The entertainment industry has “owned” these forms of information from the outset. Hollywood, music studios, and television networks have predominantly concentrated on content creation, though there are clearly storage, distribution (done by movie theaters, video. CATV or broadcast), and processing aspects to their business. The consumer electronics industry has been based largely on information display. Video-based businesses have thus been the most pervasive across the functions; they have excelled in content, display, and distribution (broadcast and cable networks). Each information industry form must perform a series of functions to ultimately serve its markets. This is depicted as five major functions In Figure 1. Creation. The first function is the creation and collection of information content. The greatest opportunities lie in the collection, packaging, and channeling of content that is already being generated, while the development of new types of content represents a potentially large business in the future. Distribute. Industries based on different forms of information have developed elaborate and largely separate infrastructures for distribution. The telecommunications industry has developed a vast, near-ubiquitous network of copper wires. In the past decade, a wireless infrastructure based on cellular technology has also been created for voice communication. Text information has historically been distributed in a manner very similar to manufactured goods from ‘factory” to intermediaries to end users. Image Information has largely ridden on the same Infrastructure, which also includes the postal system and various express delivery companies. Process. This function is the processing of information or the applications business: creating information out of data through intelligent manipulation. For voice information in the telecommunications industry, companies have used voice-processing technologies. For text information, publishers have used word processors and desktop publishing software. In the imaging business, companies have primarily used chemical processes to improve images. For audio/video information, companies have relied heavily on editing and mixing technologies. Finally, processing has been (almost by definition) the most intensive for data applications. Storage. Since the creation and consumption of information are typically separated and since information tends to have lasting value, storing information is a very valuable function. Information can be stored through a variety of means books, various magnetic media, write once, read many times (WORM) disks, CD-ROMs, microfiche, answering machines, film, videotape, audiotape, and game cartridges Display. This function is information display through terminals and devices. Display can be on papers, telephone arts photographs, radios, PC screens, and televisions. The traditional information industry depicted in Figure 1 is undergoing a major transformation to a new convergence model which will result in substantial risks and opportunities for corporate players, Corporations which recognize this major structural change and concentrate on being prominent within the new infrastructure will be well-positioned for the future.
Digital Technology – The Primary Driver of Convergence
The primary driver of convergence of different forms information is clearly technological change. The key technological change has been the rapid diffusion of digital technology into an ever-wider array of information business. Beyond digitalization, dramatic changes in the computing and telecommunications industries are also driving convergence. Figure 2 shows the economics of the digital age. Compared with former forms of applications, there is a large fixed cost in digital technology. The development of a chip and investment in plant costs billions of dollars. Software developments may cost hundreds of millions. The marginal cost of chips and software is very small. The impact of these cs is low selling-price potential to mass markets.
The costs of computer hardware, relative to capabilities, declined dramatically during the l980s and early 1990s, reflecting experience based Cost reductions and aggressive pricing strategies adopted by producers in order to expand their markets Already, the next generation of $300 Video-game machines will put in children’s hands the graphics power of a 1980s vintage Cray super computer. By 2010, the same device may lit in the palm of your hand and deliver photo-perfect images on a razor-thin display. At the end of 1995, over 60 million PCs were shipped world-wide and approximately 40% of US. households now own at least one PC. There are approximately 12 million multimedia PCs in use, and the multimedia market is growing at more than 50% per year, with an estimated market size in l995 of $10 billion.
Software is becoming easier to use and more versatile. The widespread popularization of graphical user interface (GUI) systems (such as Macintosh’s operating system and Microsoft’s Windows95) has made computers much more accessible to inexperienced users. The number and variety of application programs continue to grow rapidly.
Advances in digital technology driven through fiber-optic telecommunications promise eves greater change of a discontinuous nature — we are likely to see an explosion of bandwidth in coming years that will dwarf anything seen in the past. The new explosion of bandwidth will enable interactive multimedia and video information to come into every household in various ways — through the air from satellites and terrestrial wireless systems, fiber optic cables and cable and even phone-company coaxial cables. As the information technology properties of convergence, versatility, and affordability illustrate, the new technological realities are far different. All Information companies now harness essentially the same technologies. These technologies are all rapidly becoming multimedia by design. Prevailing industry configurations are thus being rendered obsolete, some at faster rates than others. Successful companies will have to be able to define the logic of their businesses along some other essential dimension or else risk irrelevance in the near future.
The convergence of the Information Industry
There will be a structural impact on the migration of the entire information industry toward digital electronics
- The industry will reorient itself along the horizontal axis depicted in Figure 3 (i.e., based on functions).
- There will be a series of within, and cross-industry consolidations as major industry players position themselves for the future based on a chosen functional specialization.
- The transformation will result in only three major industries (not five) which suggests that it is going to become more efficient in the process. The three industries will be providers of digitized content, multimedia devices, and convergent networks.
Companies that thrive in the future will therefore have:
- a bias toward personal rather than institutional markets
- greater expertise and experience with digital electronics
- a functional edge (i.e.. outstanding expertise in perform. ing one or more information functions)
- more experience with video-based information (since, technologically, other forms of information are a subset of video)
- Each new industry will be multimedia in nature, given the convergent nature of digital electronics
- Each of the sectors will be global.
- The industry will become increasingly driven by model in which personal markets rather than institutional markets will become the lead markets for technology deployment.
Of the three primary sectors of the new information industry, the content area is farthest along in moving to the new model. First, a great deal of content is already digitized and ready to be used in multiple ways. Second, the rationalization of content businesses hat been underway for some time, so that we already have large content entities such as Time Warner (which may soon add TBS) and the Viacom-Paramount-Blockbuster combination.
Highways — Distribution
Public telephone networks, cable television, broadcast media, and private networks will be consolidated into the information-transport business. These players will provide broadly based communications and content obtained from content providers in a variety of forms that meet the specific needs of the markets they serve. The nerve system of the future information industry, indeed of the future global economy, will be a communication network of enormous capacity and sophistication. By the year 2010, a global network of virtually infinite capacity will be in place. It will be the “network of networks,” consisting of multiple, overlapping, and interconnected webs that collectively will realize the promise of huge two-way bandwidth to virtually every mode. During the next ten to fifteen years, convergent technologies will lead to worldwide end-to-end voice, data, fax, video, and image services. These services will begin between hub cities and work their way outward toward suburban and rural areas, much the way telephone service did in the 1920s and l930s as well as the railroad and highway systems. The global network of networks will be both a transparent communications service and a platform for content-filled or content-enhanced services.
Consumer electronics companies and personal computer manufacturers will converge into the multimedia devices (or as we prefer to call it ‘information appliances”) industry. As the PC gets more passive (receiving video streams like today’s televisions), the TV will get more interactive; hence the convergence. The convergence of the telephone, television, and computer will lead to hybrid devices that combine the strongest features of each: like the television, the new devices will display video, sound, text, arid be familiar and easy to use; like the telephone, they will allow people to communicate anywhere; and like the computer, they will be intelligent, powerful machines that take raw data and turn it into useful information. As the convergence of the information industry proceeds there are many dimensions that will drive change. Research by the University d Southern California’s Center for Telecommunication Research and the International Engineering Consortium’s Committee on the Future has provided considerable insights into competition, customers, and markets. Also, the economic, trade, and societal impacts have been forecast by panels of 300 experts for the 1997-2007 time frame.2
Competition, Customers, and Markets of Tomorrow
Long-distance telephone revenues in the United States are expected to grow to $100 billion in ten years. Local exchange revenues, including access charges, will reach $120 billion by 2007. The average monthly bill of a typical American household is expected to rise very slowly over time to just under $21 per monthly 1997 from its current $20 level and to only $25 by 2007. Over a ten-year period, the bill for local charges is expected Write merely by 25% in nominal term. or by an average of half a dollar per year. Adjusting for inflation, this amounts to virtually no real dollar rise at all. Although residential consumers are not expected to spend much money on suds services as call waiting, call forwarding, etc., the rate of increase is expected to be quite high. A monthly total of $10 is expected to be spent on additional residential telephone services by 2007. This puts the rate of increase at 100% over the next ten years. The combined local and long-distance bill of an average American family will reach $55 by 2007. This suggests that at the end of this decade, the long-distance part of the residential bill will grow gist slightly faster than the local. With the opening of the long-distance market to new competition and competition from wireless, the Internet, and other resources, long-distance rates will continue to be under pressure and margins are expected to drop further. Adding the overall voice, data, and video services, an average American household is expected to spend $100 by 20O per month. Assuming 100 million households in the United States in 2007, the total voice, video, and data revenue generated in the residential market will reach $120 billion in ten years. For business markets, the cost of voice communications for inter-city business is expected to drop by 15% in the long run. The competition, not only from wireline providers but from wireless and other alternative companies, will force down the business rates offered by telephone companies. RHC entry into the cable-TV market is another extre1 important issue. How much of the cable-TV industry RHCs expected to capture? Our experts believe that in ten years, RHCs will achieve 18.5% of the cable-television market. Competitive pressure will require further productivity improvements and cost reductions in RHCs. Experts at RHCs will reduce their work force by an addi1 0% in the next decade. Bell operating companies are expected to hold the major share of the residential US local exchange market in the foreseeable future. Even though the interexchange carriers are ready to enter local competition, the chances that RHCs’ share will drop below 50% Is only 15% in ten years. Local number portability permitting residential subscribers to move easily from one LEC to another is expected to penetrate 50% of the US market by 2007. AT&T is expected to maintain its dominance over the long distance market. Experts evaluate the odds of AT&T’s long distance market share dropping below 50% as virtually. non-existent in the short term but rising to 50% in 2007.
Total revenue generated in the U.S. wireless market is expected to reach nearly $50 billion by 2007. Wireless communications is expected to constitute 35% of new telephone subscribers for their voice calls at the end of the decade. New users in the advanced nations are likely to follow the American trend, with 30% of new telephone users expected use wireless by the end of the decade. The developing nations are building their modern communications infrastructure over the next ten years. Experts predict that wires transmission will constitute up to 50% of their voice traffic by the year 2007. The new users in developing nations, starting with a relatively primitive telecommunication as infrastructure, may resort to wireless as an expeditious aid economical system for voice-telephone traffic. A major issue in the US wireless markets what will be the wireless medium of choice. There are, of course, several options known to us at this time, and many more may be on the horizon. Digital cellular is now available. PCS is now a reality, and global satellite connections (e.g., Iridium) will be available soon. Experts still believe that PCS will succeed in ii initial market entry, capturing a 5% market share of all wireless traffic in the near future. This market share will rise to” 35%” by 2007. PCS Is expected to compete on price with, cellular services and to position itself as the lower-priced cellular alternative. Experts believe that PCS services will enter the market with prices that are just about twice those at wireline There is no doubt that wireless services will become more affordable, relative to wireline, over the long run with prices 40% above wireline. Cellular is expected to maintain its dominant market share in the ‘business on the move” market, at least through the beginning of the next decade. The odds that cellular will maintain at least 50% of its market share m this market drop to 50% by 2007. Hence, the doors are open to PCS over the longer period for it to penetrate the business on the move market, Competing effectively against cellular.
Economic Impact of the Telecommunications and Information Infrastructure
The economic impact of the information age telecommunications infrastructure will be immense, globally. The information age can only be compared with the industrial revolution. Increased competition among service providers will lower rates, resulting in more usage. Convergence, leading to mergers, within the telecommunication and information technology sectors will set off a competitive war with some employment and displacement in the early stages followed by significant economic expansion as new technology leads to new applications and growth Increasing global competition will force the less nimble companies to go out of business. Those effectively utilizing the infrastructure will be very successful. The competitive position of the United States will improve, helping it gain larger market share on a worldwide basis. Since technology accelerates the pace of change and, in general, small business can change more quickly, small business growth and start-ups will continue. Another explosive input to the economy will come with the consumer ease-of-access to more avenues for spending disposable income. This will be generated from the child who can play video games with friends outside the home, to the shopper with virtual mail, electronic stores, and catalogs that provide personalized shopping. Today, over 70% of U.S. output consists of services. The information age will help to further facilitate growth in the services sector. Human resources required today to “hand- deliver” information will need to be re-educated and redeployed, much as steel employees and farmers were in yesteryear. The public will not use the post office to pay their bills when they can do so electronically, nor will they want to pay the local phone company for dial tone. The significantly large satellite office/home office (SOHO) segment — with its need for video conferencing, fax, personal computers, and telephones all in the home and paid for by corporations as business expenses — will help businesses save on office space with “time share” offices for employees. This will also help with child-care and elder-care responsibilities in addition to reducing commuting requirements, expense, and pollution. The market for telecommunications infrastructure equipment will continue to grow, exceeding $300 billion by the year 2000. The services that will be enabled by the infrastructure will be In excess of $700 billion by the year 2000.
Hundreds of companies will start to offer information products and services, arid millions of jobs will be tied directly to the telecommunications industry. The new information age will further decentralize business to smaller communities outside of major cities, hastening the decline of urban areas. This trend will significantly reduce the cost of information, which will be seen more and more as a commodity. More information means lower margins in competitive products, implying an overall post’ five impact on economic growth. This will result in greater diversity among businesses with fewer large corporations and many smaller niche companies. Businesses which involve physical handling or transfer of information will be reinvented by on-line services. People and intellectual capital will be transferred more rapidly, creating vast wealth and further accelerating change. Information technology will have Implications for the development of a new tier of cottage industry businesses, and it will drive competition into broadband markets. New entertainment, distance education, and sports options will also result. Large productivity gains will take place in the information sector: communications, advertising, entertainment, software, education, medical diagnosis, and securities. Telecom will support the productivity gains in all these segments, enabling, speedier distribution, and transactions (interactively), while facilitating decentralization and globalization.
Trade Impact of the Telecommunications and Information Infrastructure
Advanced countries will have access to vast new markets that today may be economically infeasible to access. Once an infrastructure becomes available, it allows global access to consumers, resulting in an increase in trade volume. Information can be delivered to more people and more places. Intellectual services will be available from anywhere at any time. As the trade barriers fall, rate cuts will follow, and the number of services provided will increase. Businesses find immediate value in electronic commerce that will replace paper correspondence for price quotes, purchase orders, bills, electronic payments, and similar activities. Business around the world will move to 7-days, 24-hours for multinationals. The international marketplace will simply look much like today’s domestic markets after one generation. The telecommunications infrastructure with its advances in communications and transmission technologies will make international trade and investment easier and less expensive. Competitors who for years could not compete will now have an open playing field.
This influx will force each and every company to perform better out of necessity. As a result of the increasing global awareness of products and services, the rising ability to purchase, and the resulting higher demand, physical-distribution challenges will emerge to keep up with the demand for increased worldwide access to all offerings will all emerge. The positive gains in the U.S. national economy related to infrastructure enhancements directly contribute to improvements in the global business viability and efficiency of U.S. companies. American telecommunication services and equipment suppliers will additionally be benefited in their global efforts through investments in the advanced domestic information-technology infrastructure. They should become leaner, healthier, and more enduring competitors gaining advantages in technical as well as market power and scale. The new global information infrastructure encourages the development of information content, the global electronic information market, education and management-consulting services, telemedicine, and entertainment, helping the United States to retain leadership in those areas. Exports in these areas will be stimulated. A large part of infrastructure will be software, and the United States will have a larger share of world markets. The United States will likely be exporting much of the computer and telecommunications technology. On the manufacturing side, however, there are two important issues. First, it is significant that many underdeveloped countries are transitioning directly from “primitive” modes to current technology, jumping over the intermediate stages. The Asian and South American countries will have the fastest growth rate of any countries for infrastructure development. Europe will be a major market. Africa and the nations of the former USSR, though still politically risky, will eventually become somewhat significant markets for telecom and information-infrastructure equipment and services. Smaller localized companies in advanced countries will provide niche services unique to countries or regions while global companies will provide the basic infrastructure.
This signals a significant potential for major players in the industry. At the international trade level, the experts suggest a similar phenomenon will occur between the “have” and the “have not” countries. Developed nations will have access to and will be able to use their massive telecommunications and information infrastructure to improve their economic wellbeing and trade status. The developing nations, on the other hand, will not be able to participate. The global information infrastructure will simply increase the gap between the advanced economies and the less- developed nations. Since the ability to produce at lower cost will be tied to both information technology and the infra’ structure on which it rides, nations with more advanced “users” and structure will mostly benefit.
Societal Impact of the Telecommunications and Information Infrastructure
While many positive economic and trade outcomes are expected to flow Out of the emerging information 5nd telecommunications infrastructure, experts point to a number of negative societal issues as well that may needs redefinition of the public-policy agenda to resolve. Both the positive and the negative Outcomes of the information era, as expected by the expert panel, are listed below.
- The generation that is “plugged into equipment” will become more isolated and accordingly, ineffective in interpersonal skills.
- Access to and art ability to use the technology will be key factor for economic success, both of which will depend on the financial means of various economic classes. Thus, a potential widening of the gap between “have” and “have not” segments of society could result.
- The society will expand usage of infrastructure for “blue” applications. Pornography and gambling will become the primary applications. Coping with these applications will become hotly contested social issues.
- There will be drastic changes in the way people live, work, and play. Many companies will be primarily “work at home” companies. Everyone will have cheap devices for information retrieval and storage.
- The drive for convenience will increase the demand for wireless solutions- People will have more free time to spend on activities of their choice, focusing on society, home, and family.
- The ‘traditional” concept of job security will disappear. Employees will be treated as consultants are today.
- Movement toward “the family” will be greater, and the, intellectual work force will ensure that “blended” lives ad adulthood are the norm and not the exception.
- The environment will benefit significantly, especially in larger metropolitan areas with less pollution, smog, and fewer automobile accidents.
- The “virtual corporation” will be common. Work will be viewed more as a process and not as a place. The virtual corporation will be one in which employees and consult ants will be indistinguishable. Employees who are comfortable with a constantly changing environment will be more inventive and prone to risk-taking, and they will have higher self-esteem. Employees who are comfortable with their skill base and knowledge will not require long- term employment with one company.
- Companies will transfer into flat, horizontal organizations in which groupware will be the bonding fabric. This will put the traditional managers in a position again as producers and not merely overseers.
- Pay-for-performance instead of pay-for-time may become the basis for compensation.
- The social impact of the information and telecommunications infrastructure will be greater than the economic and trade impacts. People will be able to live where they wish and still have better access to good 1obs, lifelong education, good health care, entertainment, and a better understanding of the world and the life enrichments that such understanding brings.
Executives are somewhat concerned about the societal impact that the information infrastructure will entail. Although the information age Is expected to create much Comfort for the working class and telecommunications and create a more global rather than parochial work force, it is expected to cause a wider economic gap and generate greater social tensions between various social groups. It is also expected to make parental control much harder and its censorship of unwanted material into homes more difficult. For better or worse, it will create a more individualistic society that will feel more comfortable teletalking than conducting personal conversations.
Telephone Companies Ten Years from Now
The regional holding companies, GTE, and the long-distance carriers will be in cable, entertainment, content, data, long distance, and local services. Smaller telcos will merge for economies of scale. Full-service, full-content, fully interactive organizations managing the vast majority of information and interaction with end users — emphasizing reliability, privacy, and total services — will emerge. They will also partner with content providers outside of the United States, as one can already see the occasional BBC program on U.S. cable. Most plain old telephone service (POTS) providers are in other lines of business today. In ten years. a POTS provider will make less than 50% of its total revenues from wireline voice service, compared with more than 80% today. Mergers, acquisitions, and partnerships crossing every industry line is a sample of what the future will hold. Bell Atlantic, Pacific Telesis, and NYNEX have formed a joint venture with Creative Artists Agency to develop new multimedia programming, while Ameritech, BellSouth, SBC, and GTE have joined with Walt Disney for the same purpose. NYNEX has invested $1.2 billion in Viacom. SBC Communications, Inc. has paid $650 million for the I-louses Communication system in Maryland and Virginia. US West has teamed up with Time Warner and merged with Continental Cable in investments valued over $11 billion. AT&T has invested $12.7 billion in McCaw Cellular Communications and has acquired a number of technology start-ups — including game-maker Spectrum Holobyte, and General Magic, which is a consortium with three cable companies to enter the wireless market. British Telecom and MCI have recently announced plans to merge. The new firm plans to spend $2 billion to build local loop telephone networks in twenty of the largest cities in the United States. Sprint teamed with three leading cable companies to acquire a large position in PCS licenses. Bell Atlantic and NYNFX and Pacific Telesis and SBC have already begun their historical merger process. Although these ma)or changes amount to $50 billion, they represent only the beginning of a ma)or repositioning of the information industry. Mega companies will dominate markets in transport, content, and appliances. It will be interesting to observe the strategies of the individual players as the competitive marketplace accelerates corporate positioning decisions.
Cellular Companies Ten Years from Now
Growth of cellular penetration will continue well into the future even though the rate of growth will decline over time as the penetration level increases. Cellular companies will be full-service providers offering digital technology with near-nationwide coverage. They will provide local and long distance services, wireless local access, fax, and paging services and will be low-speed data transmitters and billing- management integrators. They will have expanded more into advanced messaging and services that support businesses, virtual organizations, and people working on the move from home. They will be in a highly competitive environment similar to today’s local and long-distance companies whose price competition will be prevalent. Cellular will be in direct competition with PCS and will be challenged to differentiate itself in the marketplace with competitive offerings, product packages, and service offerings. If cellular companies reduce price as a trade-off for volume and effectively handle increased capacity, they may maintain their strong market share against the thrust of PCS companies. On one hand, economics will continue to favor wireline for volume users. On the other, the intense competition that is expected with the implementation of P(3 systems and even satellite will force mergers among cellular companies and between cellular, personal communication, and complementary wireline companies. Hence, the cellular-only companies may, by and large, become extinct, Rather, they will be a component of a MI-service company (cable, POTS, and long distance). As stand-alone companies, they will serve very niche markets and will not likely survive in the long run as telcos and cable companies enter the wireless market.
Personal Communications Services (PCS) Ten Years from Now
The future of PCS services is perhaps more in doubt than any other area in the industry. Although billions of dollars have already been spent to acquire PCS licenses, the service is still unknown to the average potential American user. Furthermore PCS is entering an existing market that already has a number of wired and wireless alternatives with more on the horizon. These realities suggest that it is uncertain whether PCS companies will gain a substantial foothold in the wireless market ten years from now. Positioning the service an7 the device as the low-price alternative to cellular, PCS companies are more likely to develop the mass market for mobile services in 10 years. PCS providers can be the primary providers of what is now basic telephone service by trying to replace the wirelirie handset. Alliances with RBOCs, IXCs, cable companies, and CAPs will be completed in major markets, continuing in the second- and third-tier markets. PCS companies will change wireless competition by introducing methods of packaging services, new features, and billing since they are implementing new primary and supporting systems that will be state-of-the-art and customer-focused.
Cable Companies Ten Years From Now
Trios and long-distance companies have no reservations about their strong desire to enter the area of home-content delivery in the near future. Cable companies, on the other hand, have plans to expand into other areas of the industry: telephone and data transmission in the broadband age. Cable companies are typically undercapitalized and individually hold a minority share of communications revenues. To expand beyond their current role, cable companies have several choices. The most likely ones include: mergers and alliances with long-distance companies or local telcos, consolidation and alliances with other cable companies, or remaining “as is” in their current regions. Other than the external (e.g.. deregulation) forces, three internal forces will determine the fate of cable companies: their lack of capital, lack of technology and infrastructure for growth, and lack of positive public image. Only 3% to 5% of major cable-only companies are expected to remain in their current form. Others will be acquired. Cable-only companies will serve small areas of the country — mainly rural for video and low-end telecommunication services — competing primarily with satellite companies. Cable companies are in the core business of delivering entertainment, including video-on-demand over many channels. They are capable of leasing their facilities to other companies, such as CAPs and out-of-region LECs for use in providing true two-way communications including POTS. Telcos are interested in acquiring or establishing cable companies in their own regions for easier entry into broadband markets. The opposition of the Justice Department may be an impending factor only in the short run.
Over building wireline networks is too expensive a proposition today. Broadband radio technology offers telcos a relatively inexpensive alternative. Cable companies will also be owned by other companies — companies which want local’ loop access. Cable companies will be in the process of “mass customization” to differentiate themselves from the direct broadcast satellite companies. Cable companies will upgrade their infrastructure 30 become one-stop multiple telecommunication and distribution companies providing telephony, cable television, interactive video, video-on-demand, home shopping online/Internet access, gaming smart home environment telemedicine, and tele-education. Acting as enablers to other content providers, they will offer these service on a bundled or Ia carte basis. Cable companies will not only concentrate on the residential markets but will become global in reach, providing combined entertainment and communications service to homes and broadband facilities to businesses. Cable will emerge as a major competitor for commercial bandwidth applications and as a source of services in the areas of residential electronic commerce games, and Internet/World Wide Web access. Cable will ally as well as compete with telephone wireless and entertainment companies. Their contribution will be to stimulate consumer demand by broadband delivery of vast quantities of data to the home via coax and cable modes. The next decade will see more change in telecommunications than most professionals have experienced throughout their careers. Technology, globalization, convergence, and competition will significantly impact all information-industry corporations. Only those who effectively prepare for the changes ahead will prosper in long term. It is hoped that the research results summarized in this paper will help to provide insights and stimulate executives, managers, and professionals who are stewards of corporate well-being.
1. The consolidation of information industry – A paradigm shift, published by the International Engineering Consortium, 1996. 2. Telecom Outlook Report: 1997 – 2007, published by the International Engineering Consortium and University of South California – Centre for Telecommunications Management, 1996.