Discussion Papers

Patrick Anell, Dieter Elixmann

The future of fixed-line operators

No. 312 / December 2008

Summary

Since several years the telecommunications market undergoes major and sustainable technological and economic changes. The present study focuses on fixed network carriers, i.e. “local exchange carriers” (incumbents as well as competitors) with own network infrastructure in the local loop. Mobile carriers, ISPs etc. are only considered inasmuch they are relevant for the fixed network market. The approach of this study is mainly theoretical; an empirical survey of real market conditions in a specific country is not intended. The analysis is mainly forward looking and it is taking up a rather longterm perspective. The focus is first and foremost on the type / the business model “fixed network carrier”, case studies are not intended.

Crucial issues addressed in this study are (1) What are the driving forces and trends in the market that are relevant for fixed network carriers? (2) Which general options do fixed network carriers have to (better) adapt their traditional business model to the market conditions? (3) What are the chances and challenges of these options? (4) What are the changes with regard to competition and regulatory and competition policy, respectively, that are to be expected in the fixed network sector?

For the analysis and evaluation of factors that are relevant for the positioning of fixed network carriers in their market we have chosen „Porter’s Five Forces“ approach as a didactical frame. Therefore in this study we analyse: (1) Facets of intra-sectoral competition, (2) new competitors and their threat of entering into the market, (3) the threat of products or services substituting existing ones, (4) the negotiating power of the supplying branches/sectors/companies and (5) the negotiating power of the customers of products and services of fixed network carriers.

Chances and challenges for the business model “fixed network carrier” are analysed (on the basis of partial analysis) for the following strategic options: Improvement of cost structures, development of new business segments, strengthening of the market position (customer retention / acquisition). Regarding the improvement of cost structures we have in particular addressed a (more rapid) migration towards Next Generation Networks (NGN/NGA), a (more intensive) reduction of staff, the outsourcing of (parts of) network operation, and (increased) „merger and acquisition“ activities in the home market. Concerning the development of new business segments we have focused in particular on the integration of activities on the expanded multimedia value chain as well as on cross-border expansion into new markets. As to the strengthening of the market position we have analysed the following options: comprehensive integration of customer relationship management (CRM) across all business processes, expansion of the portfolio by offering also products and services from “non-telco” companies, an increased differentiation by „increasing“ Quality of Service as well as an increased differentiation regarding the pricing policy and pricing structure in connection with a multi-brand strategy.

[only a german version available]

Discussion Paper is available for download.

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