BuddeBlog

Spectrum for PCS (Personal Communication Services) in the 800MHz and 1.8GHz can support a variety of new technologies including, but not limited to, CDMA (Code Division Multiple Access), TDMA (Time Division Multiple Access Standard), DCS-1800, and Digital AMPS (Advanced Mobile Phone Service – analogue). The only technology that is limited to operate under these new licences is analogue AMPS. The licences are applicable for a period of 15 years.

At the end of the auction process in mid-1998 seven companies ended up with licences. They included the three incumbent carriers. Telstra had been bidding for spectrum that would allow them to increase the capacity of its GSM mobile network. It also made sure it obtained sufficient spectrum for a possible D-AMPS service. In all Telstra got most of the 800MHz spectrum in capital cities allocated to the existing players. However, it looks like Telstra wants to keep all the options open, depending on further market and regulatory developments. There was also some evidence that Telstra was doing some defensive bidding, especially for 1.8GHz spectrum in rural areas. Vodafone bought 1.8GHz spectrum in the cities which they could use to complement their existing GSM networks.

The PCS operators

Company – City/region

AAPT – Sydney, Melbourne, Brisbane

Catapult Comms – Cairns

Hutchison – Sydney, Melbourne, Brisbane

Optus – Sydney, Melbourne, Brisbane, Adelaide, Perth

OzPhone – Sydney, Melbourne, Brisbane, Canberra, 6 regional areas

Telstra – Sydney, Melbourne, Brisbane, Adelaide, Perth, Canberra, 11 regional areas

Vodafone – Sydney, Melbourne, Brisbane, Adelaide. Perth, Canberra

It looks like AAPT, Hutchison and OzPhone are interested in creating a fourth digital network in some of the capital cities, possibly opting for the CDMA technology. OzPhone (owned by Qualcomm, the leading manufacturer of CDMA) has also shown interest in spectrum for high-speed Internet services. The three new competitors were already talking to each other soon after the process and it would make sense that they would, for example, set up a roaming agreement between them. The three new entrants all cover supplementary areas, so there is plenty of scope for cooperation. Both Hutchison and AAPT have evinced interest in WLL and AAPT has already been trialing this in Victoria.

It is believed that Catapult Communications Corp (Silicon Valley-USA) is possibly interested in regional markets such as Cairns for its wireless testing equipment and satellite businesses.

TURBO WEBCAST – AUGUST 1998

Hughes Network Systems launched its DirecPC 2.0 satellite Internet services: Turbo Webcast and Turbo Newscast. They are amongst the first true Internet push services. All Turbo customers will have 24-hour Internet access at speeds of up to 400 kilobits per second.

Nokia and Sonera have signed an agreement for the delivery of a HSCSD (High Speed Circuit Switched Data) solution to Sonera. Sonera is one of the first operators to adopt a HSCSD solution for faster and better data services in GSM networks.

HCSCD technology is a new feature of the GSM system. The software solution boosts data speed from the current 9.6Kb/s to 14.4Kb/s in a single traffic channel.

Furthermore, by multiplexing up to four channels into a single time slot, operators will be able to offer data rates up to 57.6Kb/s – six times faster than is currently available. With the help of compressing technology, data speed can be increased even more. A high data transmission speed makes it possible to transmit even live image in a GSM network.

Telecommunication companies around the globe, both public and private, driven by competition, are all registering strong growth.

At the beginning of 1997, a mere ten OECD countries had competitive policies, whereas 19 used monopolies to provide their telecommunication infrastructure. By early 1998 only eight countries retained monopolies, as another 21 had moved to open markets. This is bringing to the market not only new competitors, but also totally new forms of network infrastructure.

Mobile networks have become the second most important network infrastructure, with global annual growth rates above 30%. Several countries have seen a faster growth in mobile networks than in fixed networks. In countries such as Finland and Sweden (as well as in some parts of the USA) voice traffic over mobile networks is now greater than over fixed networks. According to the Siemens 1998 Fernmeldestatistik, 49 million mobile lines were added to the global networks during 1996, against 48 million fixed lines.

While large-scale fixed infrastructure projects such as those in China will secure an ongoing expansion of the global fixed network, there is clear evidence that in other markets convergence between the two and substitution is occurring. The trends that are fuelling these developments are: the demand for more convenience, simplicity and value-added features. Competition to gain new customers will lead to lower prices and lower interconnect rates.

The traditional network operators have been forced to upgrade their networks in order to be able to offer ISDN and value-added services at affordable prices, in order not to lose their customers to the newcomers. Apart from new customers, business and residential customers in countries which already have well-developed networks are also generating growth, mainly because residential customers want access to the Internet. For instance, in the United States since 1996 new telephone lines have been installed at a far faster pace than usual because of the demand for second residential lines.

At present, spending for leased lines, additional telephone lines and increased length of local calls stimulates Internet revenue. Leased lines, largely from the private network market of business users, represent an estimated 5% of the public telecommunication market, or about US$26 billion. This will increase sharply if the projected demand for ‘intranets’ – the private equivalent of the public Internet – is realised over the next several years. The OECD Communications Outlook shows that since the mid-1990s average prices for consumers for Internet access plummeted from over US$60 per month to less than US$20. On the other hand, local telephone charges, which dial-up users pay to access the Internet, have been rising across the OECD area.

In the medium- to long-term future, provision of Internet access should continue to be a very large market for telecommunication operators. Because virtually all potential Internet users are already customers of the carriers, since they own and manage existing customer access networks, they are likely to become the largest Internet service providers. The customer relationships they have already established and their skills in building networks will, in any event, make them formidable competitors in the market.

Yet, as with mobile communication, the infrastructure for Internet access will no longer be provided solely by these carriers. Alternative network providers are using cable, broadcasting and wireless technologies to develop new communication mediums. The main task for policy-makers will be to ensure that competition is on a fair and non-discriminatory basis. If all players are obliged to compete on the basis of such measures as quality, responsiveness and price, the outlook for the telecommunication market will be extremely propitious.

Cable TV networks and new IP-based data networks are increasingly offering more competition to the traditional telecommunications operators – in the UK over 2.5 million people use cable telephony. As soon as Optus in Australia gets their technical problems under control a similar surge in cable telephony will occur here. IP/telephony is set to take the world by storm with predictions that as much as 35% of all international traffic might be travelling over these networks by early in the next decade.

Other important developments here will be fax over IP and unified messaging. The demand on higher bandwidth due to new applications (WWW, teleworking, VoD) will transform the telecommunications industry. The access providers are going to meet this demand via fibre-in-the-loop, xDSL and cable modems.

In this fast-changing world there is a real concern about how the traditional operators will be able to survive. Their success currently depends on high monopolistic or semi-monopolistic profits. Prices are dropping on average at around 20%-30% per annum and there is no indication that revenues from all those new services will compensate overnight for the dramatic fall in telephone call charges.

While efficiency gains are another option used by nearly all operators to improve their balance sheets, this can’t go on forever. In the end it will mean that an always limited telecommunications pie will have to be divided up differently, with new telecommunications services providers taking up at least 50% of the retail market.

Worldwide revenue from telecommunications services and equipment – 1994-1998

US$billion

1994 1995 1996 1997 1998(e) Growth 1990-1998

690 740 788 840 905 7.7% compounded

annually

(Source: Paul Budde Communication)

Content constitutes the strategic core of the residential Internet market.

Over the next few years the emphasis will rapidly move away from telecommunications services as in basic voice services to value that is added to the traditional telecommunication services, including data. This makes customer services and marketing far more important than it has been in the past. Control over the end-user will be both a source of revenue and a strategic necessity.

The industry structure will change from a vertically integrated one to a horizontal one. A redefinition of the newly developed ‘Internet chain’ – access, selection, classification, marketing – will be needed. This will see a destabilisation of ‘traditional’ players such as the access or online service providers, navigators or search engines.

A large number of new players will enter the content market: telecommunications operators, traditional content publishers and companies with well-known brand names.

According to market researchers IDATA, the residential Internet market strategies of content services can be segmented along the following lines:

· The advertising model: diversity of advertising models, advertising market trends, maximising the audience, the platform model, segmentation strategy.

· The subscription model: payment for the content packaging service, access to specific services.

· Subscription and advertising: evolution scenarios, diversity of financing methods, importance of access providers in content services, the example of Yahoo! Online.

· Editorial promotion: birth of an economic model combining content and promotion, new competition for content publishers, towards direct marketing.

· Other financing methods: payment by connection time, pay-per-use, multiplication of revenue sources.