External Analysis of the Telecommunication Industry Essay Example for Free

External Analysis of the Telecommunication Industry EssayEconomic Market summary by Insight Research predicts that telecoms-industry revenue will reach $1.2 trillion by the end of undermentioned year, and grow by a compounded crop of 5.9 percent to $1.6 trillion by 2010. Telecommunication remains an important part of the world economy and the telecommunication industrys revenue has been shoesd at just beneath 3% of the gross world product. Mobile reverberates hand over had a signifi kindlet impact on tele foretell networks. Mobile phone subscriptions now outnumber fixed- transmission channel subscriptions in many markets. Sales of mobile phones in 2005 totaled 816. 6 million with that figure being almost equally sh atomic number 18d amongst the markets of Asia/Pacific (204 m), Western atomic number 63 (164 m), CEMEA (Central Europe, the Middle East and Africa) (153.5 m), North America (148 m) and Latin America (102 m) In terms of new subscriptions over the five years fro m 1999, Africa has outpaced other markets with 58.2% growth size of it matters in telecom. It is an expensive business contenders need to be large enough and produce sufficient cash flow to absorb the cost of expanding networks and servicings that perplex obsolete seemingly overnight. Transmission trunks need to be replaced as frequently as every two years. Big companies that deliver extensive networks especially local anesthetic networks that stretch directly into customers homes and businesses be slight reliant on link uping with other companies to get calls and data to their final destinations. By contrast, smaller pretenders must pay for interconnect more often to finish the job. For little operators hoping to grow big some day, the financial challenges of sustainmenting up with rapid technological change and depreciation can be monumental. During the late 1990s, the tele communication theory industry experienced very rapid growth and massive investment in transmis sion capacity. Eventually this caused supply to significantly outstrip demand, resulting in frequently lower prices for transmission capacity. The excess capacity and additional arguing led to either declining revenues or slowing revenue growth, which has led to integrating within the industry, as many companies merged or left the industry.Socio-Cultural Telecommunication is an important part of many modern societies. Good telecommunication infrastructure is astray acknowledged as important for economic success in the modern world on micro- and macroeconomic scale. On the microeconomic scale, companies entertain used telecommunication to help build global empires, this is self-evident in the business of online retailer Amazon.com but even the customary retailer Wal-Mart has benefited from superior telecommunication infrastructure compared to its competitors. In modern Western society, home owners often use their telephone to organize many home services ranging from pizza del iveries to electricians. Even relatively poor communities have been noned to use telecommunication to their advantage. In Bangladeshs Narshingdi district, isolated villagers use cell phones to speak directly to wholesalers and arrange a better price for their safes. In Cote dIvoire coffee bean growers share mobile phones to follow hourly variations in coffee prices and sell at the best price. On the macroeconomic scale, in 2001, Lars-Hendrik Rller and Leonard Waverman suggested a causal link between good telecommunication infrastructure and economic growth. Few dispute the existence of a correlation although some argue it is wrong to keep an eye on the relationship as causal. However from any perspective the economic benefits of good telecommunication infrastructure are undeniable and, for this reason, there is increasing worry rough the digital divide.A 2003 survey by the International Telecommunication Union (ITU) revealed that roughly one-third of countries have less than 1 mobile subscription for every 20 people and one-third of countries have less than 1 fixed line subscription for every 20 people. In terms of Internet main course, roughly half of countries have less than 1 in 20 people with Internet advance. The September 11 attack reinforces the need for robust, interconnected networks that have a high opportunity of survival in the event of natural or man-made disaster. That argues for a consolidated base of carriers operating with agreed-upon disaster protocols Technological The largest sector of the telecommunications industry continues to be made up of outfit telecommunications carriers. Establishments in this sector principally provide telephone service via wires and cables that connect customers premises to primordial offices maintained by telecommunications companies. The central offices contain switching equipment that routes content to its final destination or to another switching center that determines the most efficient route for the content to take. While function used to be the main type of data transmitted over the wires, wired telecommunications service now includes the transmission of all types of graphic, video, and electronic data mainly over the Internet. These new services have been made possible through the use of digital technologies that provide much more efficient use of the telecommunications networks. champion major technology breaks digital signals into packets during transmission. Networks of computerized switching equipment, called packet switched networks, route the packets. Packets may take separate paths to their destination and may share the paths with packets from other users. At the destination, the packets are reassembled, and the transmission is complete. Because packet switching considers alternate routes, and gets multiple transmissions to share the same route, it results in a more efficient use of telecommunications capacity as packets are routed along less congested routes. One way wired carriers are expanding their bandwidth is by replacing copper wires with fiber optic cable. Fiber optic cable, which transmits wild signals along glass strands, permits faster, higher capacity transmissions than traditional copper wire lines. In some areas, carriers are extending fiber optic cable to residential customers, change them to offer cable television set, video-on-demand, high-speed Internet, and conventional telephone communications over a single line.However, the high cost of extending fiber to homes has slowed deployment. In most areas, wired carriers are instead leveraging existing copper lines that connect most residential customers with a central office, to provide digital subscriber lines (DSL) Internet service. Technologies in development will further boost the speeds available through a DSL connection. Wireless telecommunications carriers, many of which are subsidiaries of the wired carriers, transmit voice, graphics, data, and Internet access th rough the transmission of signals over networks of radio towers. The signal is transmitted through an antenna into the wire line network. Other radio services include beeper and paging services. Because wireless devices require no wire line connection, they are popular with customers who need to communicate as they travel residents of areas with inadequate wire line service, and those who simply desire the convenience of portable communications. Increasing numbers of consumers are choosing to replace their home landlines with wireless phones. Wireless telecommunications carriers are deploying several new technologies to allow faster data transmission and better Internet access that should make them competitive with wire line carriers. One technology is called third generation (3G) wireless access. With this technology, wireless carriers plan to sell music, videos, and other exclusive content that can be downloaded and played on phones designed for 3G technologies. Wireless carriers are developing the next generation of technologies that will surpass 3G with even faster data transmission. Another technology is called fixed wireless service, which involves connecting the telephone and/or Internet wiring system in a home or business to an antenna, instead of a telephone line. The replacement of landlines with cellular service should become increasingly common because advances in wireless systems will provide data transmission speeds comparable to broadband landline systems. Changes in technology and regulation now allow cable television providers to compete directly with telephone companies. An important change has been the rapid increase in two-way communications capacity. Conventional pay television services provided communications only from the distributor to the customer. These services could not provide effective communications from the customer back to other points in the system, due to signal interference and the contain capacity of conventional cable s ystems. As cable operators implement new technologies to reduce signal interference and increase the capacity of their distribution systems by place fiber optic cables and improved data compression, some pay television systems now offer two-way telecommunications services, such(prenominal) as video-on-demand and high-speed Internet access. production line companies are also increasing their share of the telephone communications market both through their network of conventional phone lines in some areas and their maturation ability to use high-speed Internet access to provide VoIP (voice over Internet protocol). VoIP is sometimes called Internet telephony, because it uses the Internet to transmit phone calls. While conventional phone networks use packet switching to break up a call onto multiple shared lines between central offices, VoIP extends this process to the phone.A VoIP phone will break the conversation into digital packets and transmit those packets over a high-speed Inte rnet connection. Cable companies are using the technology to offer phone services without building a conventional phone network. Wireline providers high-speed Internet connections also can be used for VoIP and cellular phones are being authentic that use VoIP to make calls using local wireless Internet connections. All of the major sectors of the telecommunications industry are or will increasingly use VoIP.demographic The telecommunications industry offers steady, year-round employment. Overtime sometimes is required, especially during emergencies such as floods or hurricanes when employees may need to report to work with little notice. Installation, maintenance, and repair occupations paper for 1 in 4 telecommunications jobs. Telecommunications line installers and repairers, one of the largest occupations, work in a variety of places, both indoors and outdoors, and in all kinds of weather. Their work involves lifting, climbing, reaching, stooping, crouching, and crawling. They must work in high places such as rooftops and telephone poles, or below ground when working with buried lines. Their jobs bring them into proximity with electrical wires and circuits, so they must take precautions to avoid shocks. These workers must wear safety equipment when entering manholes, and test for the presence of gas before going underground.Telecommunications equipment installers and repairers, except line installers, for the most part work indoorsmost often in a telecommunication companys central office or a customers place of business. They may have to stand for long periods climb ladders and do some reaching, stooping, and light lifting. Adherence to safety precautions is essential to guard against work injuries such as minor burns and electrical shock. Most communications equipment operators, such as telephone operators, work at video display terminals in pleasant, well-lighted, air-condition surroundings. If the worksite is not well designed, however, operators may experience eye strain and back discomfort. The rapid pace of the job and close supervision may cause stress. roughly workplaces have introduced innovative practices among their operators to reduce job-related stress. The number of disabling injuries in telephone communications, the principal sector of the telecommunications industry, has been well below the average for all industries in ultimo years. The telecommunications industry offers employment in jobs requiring a variety of skills and training. Many jobs require at least a high school diploma or an follower degree in addition to on-the-job training. Other jobs require particular skills that may take several years of experience to learn completely. For some managerial and professional jobs, employers require a college education. Due to the rapid introduction of new technologies and services, the telecommunications industry is among the most rapidly changing in the economy.This means workers must keep their job skills up t o date. From managers to communications equipment operators, increased knowledge of both computer hardware and software is of paramount importance. Several major companies and the telecommunications unions have created a tissue site that provides free training for employees, enabling them to keep their knowledge current and helping them to advance. Telecommunications industry employers now look for workers with knowledge of and skills in computer programming and software design voice telephone technology, known as telephony laser and fiber optic technology wireless technology and data compression. governmental/Legal Telecommunications Act Enacted by the U.S. Congress on February 1, 1996, and signed into law by President Bill Clinton in 1996, the laws main purpose was to stimulate competition in the United States telecom sector. FCC controls the wireless spectrum allocations among the various broadcasters and service providers. This allocation is through a competitive auction at h igh cost to service providers, which result in an increase of debt burden of these companies, eventually trickling down to consumers. FCC as a watchdog regulates that there be no monopoly of a single playerin the telecom market. Mergers and consolidation among companies is closely watched and evaluated before being allowedPorters 5 Forces Analysis1. Threat of New Entrants No surprise, in the capital-intensive telecom industry the biggest barrier-to-entry is access to finance. To cover high fixed costs, serious contenders typically require a lot of cash. When capital markets are generous, the threat of competitive entrants escalates. When financing opportunities are less readily available, the pace of entry slows. Meanwhile, ownership of a telecom license can represent a huge barrier to entry. In the US, for instance, fledgling telecom operators must still apply to the Federal Communications Commission to receive regulatory approval and licensing. There is also a finite amount of g ood radio spectrum that lends itself to mobile voice and data applications. In addition, it is important to remember that solid operating skills and management experience is fairly scarce, making entry even more difficult.2. Power of Suppliers At first glance, it might look like telecom equipment suppliers have considerable bargaining power over telecom operators. Indeed, without advanced broadband switching equipment, fiber-optic cables, mobile handsets and billing software, telecom operators would not be able to do the job of transmitting voice and data from place to place. But there are actually a large number of large equipment makers around. Nortel, Lucent, Cisco, Nokia, Alcatel, Ericsson, Tellabs are just a few of the supplier names. There are enough vendors, arguably, to dilute bargaining power. The limited pool of talented managers and engineers, especially those well versed in the latest technologies, places companies in a weak emplacement in terms of hiring and salaries .3. Power of Buyers With increased choice of telecom products and services, the bargaining power of buyers is rising. Lets face it telephone and data services do not much vary regardless of which companies are selling them. For the most part, basic services are treated as a commodity. This translates into customers seeking low prices from companies that offer reliable service. At the same time, buyer power can vary somewhat among market segments. Customers can be as small as individual residential users like you or me, or be as big as an ISP like America Online or a large university. While switching costs are relatively low for residential telecom customers, they can get higher for larger business customers, especially those that rely more on customized products and services.4. handiness of Substitutes Products and services from non-traditional telecom industries pose serious substitution threats. Cable TV and satellite operators now compete for buyers. The cable guys, with their own direct lines into homes, offer broadband Internet services, and satellite links can substitute for high-speed business networking needs. Railways and energy utility companies are laying miles of high-capacity telecom network alongside their own track and pipeline assets. Just as worrying for telecom operators is the Internet it is becoming a viable vehicle for dismiss-rate voice calls. Delivered by ISPs not telecom operators Internet telephony could take a big bite out of telecom companies core voice revenues.5. Competitive Rivalry Competition is cut throat. The wave of industry de-regulation together with the receptive capital markets of the late 1990s paved the way for a rush of new entrants. New technology is motivate a raft of substitute services. Nearly everybody already pays for phone services, so all competitors now must lure customers with lower prices and more exciting services. This tends to purport industry profitability down. In addition to low profits, the te lecom industry suffers from high exit barriers, mainly due to its specialized equipment. Networks and billing systems cannot really be used for much else, and their swift obsolescence makes liquidation pretty difficult.