The Outlook for the Telecommunications Industry and the Implications for the Economy and for Business

By Dadd, C. Mark | Business Economics, January 1998 | Go to article overview

The Outlook for the Telecommunications Industry and the Implications for the Economy and for Business


Dadd, C. Mark, Business Economics


Information technology, of which telecommunications is a principal part, is going to be the biggest technological driver of economic and business change over the next decade. Understanding the nature and breadth of that change is critical for those who use business economics in their jobs. The impacts of information technology will be spread across all sectors of the economy. It will enable business to improve customer service as well as reduce costs. The growth of electronic commerce will lead us toward a virtual market in retail and distribution. Information technology is also likely to raise the bar of global competition and require new policies that encourage flexibility in the economy.

The Telecommunication revolution will have a profound impact on us all -- on our everyday lives and on our jobs. Indeed, telecoms, together with the closely related but broader category of information technology, is going to be the biggest technological driver of economic and business change during the next decade and more. This paper focuses on the main forces driving the telecommunications sector, i.e., deregulation and technology, and on the impact of telecommunications and information technology on the economy and on business.

Telecoms and information technology already represent a significant and a growing part of the U.S. economy. Table 1 shows that U.S. telecommunications industry output totaled $334 billion in 1996, reflecting revenues from local exchange service, local and long-distance toll service, wireless service, cable TV, and telecommunications equipment. Information technology (IT) industry output, i.e., telecommunications output plus broadcasting services, computer equipment, and software products and services, totaled $675 billion in 1996, or 8.8 percent of GDP. Other analysts sometimes use a broader definition that puts IT output at well over 10 percent of GDP. Table 1 also shows that Telecoms and IT are growing as a proportion of GDP since 1993. That trend is expected to continue.

Table 1
The Size of the Telecoms and IT Industries

                                          Average
                            Billions $    Annual %
                          1993     1996    Change

Local Service(a)           80        96      6.3
Toll Service(a)            75        93      7.4
Wireless Service           12        27     31.0
Cable TV                   23        27      5.8
Telecom Equipment          63        91     13.0
Total                     253       334      9.7
Memo IT(b)                500       675     11.0
GDP                      6558      7636      5.2
IT Share of GDP           7.6%      8.8%

(a) FCC basis

(b) Telecoms services and equipment, broadcasting systems, computer equipment, software pro services.

DEREGULATION

The 1996 Telecommunications Act set the United States on a new round of deregulation. While the act is complicated and has numerous provisions, the main elements are: (1) it opens the $95 billion local telephone market to new competitors; and (2) it allows the regional Bell operating companies (RBOCs), such as Nynex, Bell Atlantic, and SBC, into the $75 billion a year long-distance toll (LD) market in their regions.

The complexity of the act partly reflects the importance of the correct sequencing of market entry: The RBOCs cannot enter the LD market in their regions until they prove to the Federal Communications Commission that they face meaningful and credible competition in their local markets. The reason for that sequencing is that, absent competition in the local exchange, the RBOCs will be able to keep prices for their monopoly local services at inflated levels and use the excess profits from those services to cross-subsidize their entry into the LD market.

LD companies can enter local markets in basically two ways. They can either build their own local networks, an extremely expensive proposition costing about $1,500-$2,000 a line (up to $200 billion for the entire United States), or they can resell RBOC local services that they purchase at a discount. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

The Outlook for the Telecommunications Industry and the Implications for the Economy and for Business
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.