Academic journal article Business Economics

Industry Corner: Global Telecommunications: The Market and the Industry

Academic journal article Business Economics

Industry Corner: Global Telecommunications: The Market and the Industry

Article excerpt

The central driving force behind global telecommunications is the desire of individuals and organizations to keep in touch and to be informed. The transmission of both voice and data is both pleasurable and profitable. In today's world, one can claim that everyone has a phone or wants a phone. We wish to transmit from the home, at the office, and even as we drive or fly.

While there are rapid technological advances in the transmission of voice and data, the majority of individuals and organizations will see evolutionary changes in their telecommunications. The shift is from basic to enhanced services, from analog to digital networks, from wireline to wireless equipment, from regulation to liberalization, and hence from monopolies to a wide array of competition and cooperation among telcom vendors.

PRODUCT CATEGORIES

Telecommunications equipment consists of a vast array of telephone network and related apparatus used by the carriers in their own facilities and marketed to households and organizations. The two major categories are: (1) switching and transmission equipment, basically infrastructure hardware; and (2) subscriber or customer premises equipment. A further distinction can be made between wireline and wireless equipment.

The heart of wireline systems is the central office switching equipment, which routes messages between senders and receivers. Analog switching has given way to digital networks, resulting in better system performance, i.e., higher speeds and more reliability. Just as important, going digital permits the conversion of analog voice signals into digital format understandable by computers. The net result is integration of voice and data communications and augmentation of subscribers' telephone sets with computer power.

The developed nations have been replacing analog with digital systems for the past two decades; this process continues. Some developing nations are leapfrogging directly to digital switching systems when revamping or installing their network. Table 1 shows that location of the digital networks is by no means confined to the West. Progress comes at a price: developing the generation of digital switches for the 1990s is put at $2 billion compared to the $200 million for the first generation of electro-mechanical switches of the 1960s. Little wonder that equipment makers seek economies of scale and seek partners for R&D consortia.

Table 1

Network Digitalization

(Percent of Access Lines Connected to Digital Switches)

Company                                       Percent

Hong Kong Telecom                              100.0
Telekom Malaysia                                82.0
Telefonos de Chile                              76.0
Bell Canada                                     65.0
British Telecom                                 64.0
TelMex (Mexico)                                 57.0
Regional Bell Oper. Cos (USA)                   56.1
NTT (Japan)                                     50.0
STET (Italy)                                    48.4
Telefonica de Argentina                         34.0

Source: Merrill Lynch, as quoted in U.S. Industrial Outlook, 1994,
Washington: U.S. Department of Commerce, 1994, p. 29-3.

Transmission equipment has been affected by technical advances as well. The traditional copper wire is being replaced by fiber optic cable. Such cable - basically, strands of glass, ceramic, and plastic fibers - offers a major step forward in terms of speed, security, and information-carrying capacity. But once again, costs are significantly higher and installation is more difficult than was the case for copper wire. The cost of laying the 17,000 mile fiber optic cable between London and Tokyo, by Nynex and its partners, is put at $1.4 billion.

While signals can be transmitted through "wireline," i.e., copper or fiber optic cables, the latest trend is toward wireless, i. …

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