Trends in World Telecom Industry

Note: This essay was resulted from an assignment on Media Industry research in DIGC102 (Method in Research in Digital Communication) subject in Autumn 2008, lectured by David Marshall and Chris Moore, University of Wollongong. Thanks both for allowing me to attend to the class.

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Where will the world telecommunication infrastructure industries head to?

In the global internet map (picture below), you can see that the international bandwidth in each country or region is largely different. As shown from the size of strips between USA and EU, compared to very thin strips connect from USA to Latin America and Africa. The international bandwidth for USA is the second large strip, which is 1,400 Gbps (Gigabit per second). In Europe, overall region possess 2,777 Gbps.

Scr: ITU (2007) World Telecommunication Indicators 2006
* : International Bandwidth at September 2005 info; ** : 2004 info; Map from: http://www.telegeography.com/products/map_internet/index.php [click the map to enlarge.]

This global digital divide can be explained by looking at the leading telecom company in the world (see next picture). Telecom Industry can be categorized into three sub-sectors.

1. Telecom carrier or operator sub-sector: two most biggest firms areAT&T and Verizon in USA. Other are in Europe, like Telefonica (Spain), Vodafone and British Telecom of UK, Deutshe Telecom, France Telecom, Telecom Italia, etc. In the other part of the world, NTT of Japan is also the giant telecom firm, plus China Mobile which is the new and hot comer.
2. Software subsector: the three leading companies all are in USA, which are Microsoft, IBM, and the new challenger Google.
3. Hardware and equipment sub-sector: the leading firm are in Europe and USA too, as you can see Ericsson (Sweden), Nokia (Finland), Cisco (US) and Alcatel-Lucent (France, and US).

This all leading firm are in three regions, North America, Europe, and East Asia (plus Australia, Telstra).

[click the map to enlarge.]

The scale of each leading firm can be pictured as describing in the graph below, showing that for example, AT&T’s revenue (the red color graph) in 2008 is about 118.93 $bn (note: all currencies here are in US Dollar). China Mobile, even get not much revenue (37.06$bn) compared to AT&T or Verizon (93.47$bn), but its market value (the gray color graph) is very high (308.59$bn), even more than AT&T a lot. For software sub-sector, IBM got the highest revenue (98.79$bn). Google, even got not much revenue (16.59$bn) in comparison to IBM and Microsoft (57.9$bn), but again, as a new comer, its market value is very high (147.66$bn) fewer just a bit from IBM (157.62$bn). The revenue of leading firm in hardware-equipment sub-sector were shown as in the graph. (Nokia:74.54$bn; Cisco:37.68$bn; Alkatel-Lucent:24.35$bn)

src: Data in the graph are complied from Frobes (2008), “The Global 2000”.
[click the map to enlarge.]

Therefore, according to the data, the world telecom powers are very condense in North America and Western Europe. This means one trend that all investment in developing the physical telecom carrier or hardware in both region are in decline. All investors would be heading to the other parts of the world that still in the laggard, like China, Latin America, and Africa.

However, in North America and Europe, there is another trend.

Now, in both regions, the telecommunication carrier infrastructure is reaching its saturation. So that many physical telecom operators are shifting their business to be content provider (see next picture). The most recent application is IPTV (internet protocol TV) in which the telecom operators and hardware / equipment sector use their own infrastructure to provide real time video stream with high quality service as they own the very high bandwidth infrastructure. AT&T and Verizon in US, Bell of Canada, or BT, Telefonica, and Telecom Italia in Europe, or even the hardware and equipment firm like Cisco and Alcatel-Lucent, all are struggling (with the ‘over-the-top’ player like Google) to direct the customers and many regulatory agencies to this application service.

While the software sectors led by Google, as web-based software service, are going to provide the I-TV (internet TV) service which is less quality of service, but allows the user to make and share their own video clip, like YouTube for instance. Microsoft and IBM also are changing their business strategy to this application.

This competition is even hotter in USA as the ‘Net Neutrality’ debate is involved in US election campaign too. Net Neutralityis about promoting the free flow of information on the internet, without any control or intervention from any agency based on origin source. This means that information should be flow over the different owner/brand of telecom carrier too, which means further that the telecom operator can’t block some content from the contested firm.

Most of telecom operators and hardware/ equipment sector disagree with Net Neutrality, while the software firms, spearheaded by Google, prefer it, due to its search engine would benefit from opened information infrastructure.

More interestingly is about the very soonly presidential election in USA. John McCain takes the opposition side of Net Neutrality, with his motto that lets the ‘market-based approach’ drive the internet. While Barack Obama stands at the pros-Net Neutrality side, as he promote the access rights. This is so interesting that who will win the US election. If Obama win, the software firms would take more advantage. And the small firm like e-bay and amazon.com would be the free riders to take the benefit too. But if McCain wins, the giant firm in telecom operators and hardware sector firms will gain its power and control the direction of telecom market.

However, whoever win, it seems that telecom world have to direct their head to the service sector, whatever in which sub-sectors. The matter is just the service market will be in whose hand, giant firm like AT&T, Verizon and other telecom opertors and equipment firm, or the firms in software sub-sector, like three giant: Google, Microsoft and IBM, plus other small internet content provider firms.

However, again, these trends of heat struggle within world leading telecom industries have nothing to do (and to care) with the extremely poor people in developing countries, except that such new gold mine as China or Africa’s submarine cable installation. The world is so apart!!

(more world apart, click here.)