Until recently, there was no significant international telecommunications services market. Outside of the United States, almost every county had its basic telecommunications services provided by a monopoly operator, for the most part government run PTT (Post Telephone Telegraph) organizations. In a few countries competition was allowed for value added services and data networks, but the competing carriers were prevented from flourishing by a combination of government regulations and anti-competitive practices by the PTTs. Even in the United States, the competition was severely restrict by the then prevailing FCC regulations.
The breakup of AT&T in the U.S., and the introduction of a full range o f basic service competition in the U.K. in the early 1980s, started a trend toward ever freer competition around the world. This is illustrated in Figure 1. Today, examples of almost all possible combinations of competition type and service and facility combination can be found around the world. The zigzag arrow in Figure 1 indicates the general trend.
The trend shown is now clearly established and the benefits of deregulation in terms of consumer prices, service availability and quality of service have been convincingly demonstrated; it is almost certain that all countries are headed toward a competitive market, but each county at its own speed and following its own path.
There are handful of countries with virtually unregulated competition in all forms of telecommunications services and facilities. New Zealand and Chile are the best known examples. Sweden is fast approaching this state and there are many other countries heading toward it at varying speeds.
There are many areas in North America and Europe with full or managed competition in some or all services and less competition in transmission facilities. There are also some countries in South America that are starting to exhibit this pattern. There are various combinations of services and transmission facilities, and how much competition theyre open to, but the general pattern is for countries in the process of liberalization to retain monopoly (usually PTT) status for portions of basic switched telephone service and for all transmission facilities after other services have been deregulated. There are two rationales offered for this pattern. It is justified as fulfilling an obligation of the government to provide universal service to all citizens. Its also seen as protecting the existing infrastructure investments by the PTT. The common practice of deregulating long distance service by limiting the number of competitors is an indication the second rationale is most often the real motivation. There are many combinations of services and facilities that are partially or fully deregulated and no single progression path. There are also other interest groups that influence the process. Other infrastructure providers (electric power, railways) are exerting pressure for liberalization, particularly for transmission facilities.
In the U.S., Wiltel established a large facility provision business based on pipeline right-of-ways before being combined with a service provider and in the U.K., Energis has entered the telephone service directly based on power company infrastructures. On the other hand, liberalization is being slowed in some countries, such as France, by resistance from public service unions.
Although the general pattern in North America and Europe for liberalization has been to introduce competition within a framework of formal regulation and then relax the regulatory requirements progressively, a different pattern has been used in some countries. This pattern, seen in Asia, may be characterized as directed competition. In directed competition the government is as much concerned with the ownership and market share of competitors as with the prices and quality of service. Some analysts have characterized the telecommunications markets in Japan and Korea as directed competition. Directed competition takes several forms, ranging from very close regulatory control to pure political influence. It is not clear whether countries with directed competition will evolve toward gradual liberalization as is occurring in North America and Europe or will simply move straight to full competition.
A large number of countries in the world retain monopoly structures for all or almost all
telecommunications services, particularly in Africa and South America. In most cases the national
government is the sole service and facility provider, usually with a PTT type of structure. In some
countries the beginning of competition on a directed or managed basis is emerging with the
licensing of separate carriers for data services or mobile radio usually in duopoly competing with a
PTT provided service.
Opportunities in Monopoly Markets.
As long as monopoly markets remain as such there are no business opportunities for newcomers. However, the characteristics of present monopoly markets give rise to different niches when they do liberalize than those in already competitive markets.
Monopoly telecommunications markets are concentrated in countries with relatively underdeveloped infrastructures in telecommunications but also in electric power, road systems, etc. Government monopolies exist in these counties as part of a philosophy to shape or control development to meet national goals. Those countries that are moving away from monopoly structures are often doing so because the goals have not been realized and there are insufficient economic resources for government development of all sectors.
One consequence of this situation is that many new opportunities will require large capital expense. There is little room in these markets for resale and value added service type operations that dont require amounts of capital because the basic infrastructures to support such operations dont yet exist.
An opportunity that is possible is to offer dual infrastructures, to upgrade both power delivery and telecommunications. Unlike more developed areas where existing facilities have been deliberately separated to minimize interference, these countries provide a clean slate for economically combining power transmission and fibre-optic-based telecommunications.
The underdeveloped aspect of current telecommunications monopoly countries in many cases applies to commercial activities as well as physical infrastructure. One area of expertise that Canadian power utilities have that could be of value in such markets is billing, collection and customer relations. This could be packaged as part of a network provision project, as a service to existing power and telecommunications providers or as a partnership with, for example, a long distance telecommunications service provider without a customer relations background.
It is also important to remember that rapid change is very real possibility. The two most
competitive markets today, Chile and New Zealand, went from near total monopolies to full
competition without an intermediate step.
Opportunities In Directed Competition Markets
These markets must be approached with considerable caution. The rules of competition are often unstated or disguised so apparent opportunities are not necessarily real.
Local partners are highly desirable in any venture in another country but are indispensable in directed markets. The choice of a local partner is not always easy, particularly where the direction is more overtly political than institutional.
A major consideration in deciding to approach a directed market situation is the likely future of
the present situation. In cases where the direct market seems to reflect a local business culture not
limited to the telecommunications sector, it is reasonable to assume the direct market structure
may continue for some time or evolve slowly to a managed competition situation. In other cases,
more sudden changes might occur with changes at a political level.
Opportunities In Managed Competition Markets
In these markets it is worthwhile to look at individual telecommunications market segments.
In many countries value added services or data services have been opened to full competition before other telecommunications services.
There are two factors Canadian power utilities should consider before entering into this sector overseas.
First, the field is crowded with many international and local companies having established themselves in this segment with the hope it can be a platform to move to bigger segments of the market. Second, the technology and the services tend to be highly specialized, tending to favor entrants with expertise in the area.
The recent developments in cellular ratio technology have resulted in an explosive growth in mobile services around the world. Many countries have opened bidding for mobile licences tied to particular technologies in order to gain government revenue. This allows them to introduce competition without diverting support for existing fixed network structures and to respond to service demand without requiring capital expenditure by the government.
At first glance this segment would as seem crowded and specialized giving few opportunities for outsiders. Closer examination may reveal special niches where power utilities may have value to offer. In some countries mobile service is only offered in high population density areas, for example in one or two metropolitan areas. Expansion is limited either by economic considerations in serving less dense areas, or by the need to continually reinvest in improving capacity in existing coverage areas. In this situation, there might be opportunities to offer general services in other areas in conjunction with the local power utility. It may be possible to use its existing rights-of-way and physical structures and the outsiders capital resources and technical expertise. Another possibility is to apply specialized low density vehicle communication systems developed in remote areas in Canada.
The biggest markets are in switched telephone service, be it local, long distance or international. It is common in managed competition markets to have different rules for each of these segments. There are no general rules as which is likely to be deregulated first, how open the competition will be or how fast particular countries will proceed toward full competition. Thus research on a particular country and comparing its situation to your strengths is a key in deciding to compete in telephone services. In general, the more developed and sophisticated the existing telephone system is, and the broader the opportunities, the more desirable it is to have complementary partners.
A Canadian power utility that has expertise in providing physical links and fibre optic transmission might be able to provide long distance telephone service, but it would be more likely to succeed if partnered with another company with experience in telephone switching and interconnection with local telephone operators. Another opportunity might be to combine a power utilitys expertise in customer care with an international carriers technical background in a market where the international carrier has previously only operated wholesale.
A great deal of publicity has been given by the entry or potential entry of electric power utilities into telecommunications facility markets in the U.K., Japan and Germany. Is this another area of opportunity for Canadian power utilities? Unfortunately, probably not. Usually a power utility or other infrastructure provider has first established a fibre optic transmission capability and only then sought to enter the telecommunications network market. Government have most been much more careful and slow to open facilities competition than service competition. As a result, there are likely to be few cases where a Canadian utility has value to add to the facility provision by local infrastructure providers.
There will possibly be some market niches where a Canadian power utility can find an opportunity
together with a local partner if researched carefully. There is also the possibility that some utilities
might want to participate in overseas telecommunications facility projects to gain experience to be
applied back home in Canada.
Opportunities In Fully Competitive Markets
The few markets like this today will increase in number in the near future. Many monopoly, directed competition and managed competition markets will quickly move in this direction. Opportunities in this segment are not in a any way limited by government restriction. This yields an environment that is quite unlike the regulated environment that Canadians are used to in both electric power provision and telecommunications. It is most of all characterized by being highly entrepreneurial and fast changing.
It is possible that many Canadian power utilities will conclude that while this segment has large rewards, their expertise and corporate culture are not suitable for it. On the other hand, others may conclude that entry into such an environment provides a vehicle for a quick awakening and learning process for coming changes at home.
Markets outside North America in general have better potential for opportunity. The rapid
deregulation and higher growth rates in telecommunications make this sector more attractive than
electric power provision. Canadian power utilities have certain areas of expertise and resources to
succeed in these markets, but any utility that enters this area has to do its own research and,
usually, select appropriate partners.