chapter 7 legislative and industry trends. introduction the computer and telecommunications...
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Chapter 7Chapter 7
Legislative and Industry Trends
IntroductionIntroduction
The computer and telecommunications industries employ millions of people worldwide
Changes in technology are rapidly changing the faces of these industries and effecting managers, employees, and customers
The computer and telecommunications industries employ millions of people worldwide
Changes in technology are rapidly changing the faces of these industries and effecting managers, employees, and customers
The Semiconductor IndustryThe Semiconductor Industry
Worldwide demand tops $200 billion The top 10 suppliers account for
nearly half the total market Greater than 80% of the market is
controlled by firms based in the U.S. and Japan
Worldwide demand tops $200 billion The top 10 suppliers account for
nearly half the total market Greater than 80% of the market is
controlled by firms based in the U.S. and Japan
The World’s Largest Semiconductor SuppliersThe World’s Largest Semiconductor Suppliers
The Computer IndustryThe Computer Industry
A dynamic industry with continual changes
A dynamic industry with continual changes
Hardware SuppliersHardware Suppliers
A diverse group of products ranging from notebooks to supercomputers, storage, and printers
Server sales amounted to $60 billion in 2000
Supercomputer sales are accelerating as corporations need higher levels of computing power to deliver services
A diverse group of products ranging from notebooks to supercomputers, storage, and printers
Server sales amounted to $60 billion in 2000
Supercomputer sales are accelerating as corporations need higher levels of computing power to deliver services
The Software BusinessThe Software Business
Continues to grow with 2001 sales of $195 billion
Employment in the U.S. in the packaged software business is 336,000
The industry leader is Microsoft with domination of the desktop operating system and application package markets
Continues to grow with 2001 sales of $195 billion
Employment in the U.S. in the packaged software business is 336,000
The industry leader is Microsoft with domination of the desktop operating system and application package markets
Industry DynamicsIndustry Dynamics
The industry is characterized by multinational corporations in multiple overlapping strategic alliances and partnerships
Regulation of the industry by government, intense competition, and consumer demand are continually impacting these industries
The industry is characterized by multinational corporations in multiple overlapping strategic alliances and partnerships
Regulation of the industry by government, intense competition, and consumer demand are continually impacting these industries
Information InfrastructureInformation Infrastructure
The US telecommunications market for equipment and services in 2003 is projected to exceed $700 billion
Two factors drive this demand: Transmission bandwidth Switching capacity
The US telecommunications market for equipment and services in 2003 is projected to exceed $700 billion
Two factors drive this demand: Transmission bandwidth Switching capacity
Telecommunications RegulationTelecommunications Regulation In the US, telecom firms are regulated
by local, state, and national government Major national legislation has included:
Communications Act of 1934 Cable Communications Policy Act of 1984 Communications Satellite Act of 1962 The 1956 Consent Decree with AT&T Modified Final Judgment of 1982 The Telecommunications Act of 1996
In the US, telecom firms are regulated by local, state, and national government
Major national legislation has included: Communications Act of 1934 Cable Communications Policy Act of 1984 Communications Satellite Act of 1962 The 1956 Consent Decree with AT&T Modified Final Judgment of 1982 The Telecommunications Act of 1996
The Divestiture of AT&TThe Divestiture of AT&T
AT&T was a monopoly provider of telephone service in the US
Over time, the government required a progressive opening of infrastructure to competitors
In 1982, AT&T was split into seven independent Regional Bell Operating Companies (RBOCs)
AT&T was a monopoly provider of telephone service in the US
Over time, the government required a progressive opening of infrastructure to competitors
In 1982, AT&T was split into seven independent Regional Bell Operating Companies (RBOCs)
The Breakup of AT&TThe Breakup of AT&T
Many startup firms entered the market Cable companies began to offer voice
service Phone companies attempted to offer
video RBOCs began to join with cable
companies in a regional focus to reestablish monopolies on communications
Many startup firms entered the market Cable companies began to offer voice
service Phone companies attempted to offer
video RBOCs began to join with cable
companies in a regional focus to reestablish monopolies on communications
1996 Telecommunications Act
1996 Telecommunications Act
A wide reaching act aimed at fostering an open market in communications based on aggressive competition
It covered cable, broadcast, and telephone providers
It fostered competition between RBOCs and Incumbent Local Exchange Carriers (ILECs)
A wide reaching act aimed at fostering an open market in communications based on aggressive competition
It covered cable, broadcast, and telephone providers
It fostered competition between RBOCs and Incumbent Local Exchange Carriers (ILECs)
1996 Telecommunications Act
1996 Telecommunications Act The Act increased the oversight of the
FCC with numerous ruling and judgments
The FCC set rates and formula for reimbursement in order to “level the playing field”
Unfortunately, this meddling created disincentives for investment and a confusing landscape for investors
The Act increased the oversight of the FCC with numerous ruling and judgments
The FCC set rates and formula for reimbursement in order to “level the playing field”
Unfortunately, this meddling created disincentives for investment and a confusing landscape for investors
FCC ActionsFCC Actions
The Act granted the FCC broad new powers They created 80 major regulations in the first
4 years The FCC has put in place rules that subsidize
some users at the expense of others These rule have created a confusing
environment resulting in massive litigation
The Act granted the FCC broad new powers They created 80 major regulations in the first
4 years The FCC has put in place rules that subsidize
some users at the expense of others These rule have created a confusing
environment resulting in massive litigation
Implementation RealitiesImplementation Realities Local wireline competition is minimal Long distance competition is robust, but
startups are unable to compete against established players
Established long distance companies are under extreme financial stress with WorldCom, Sprint, and MCI all in or near bankruptcy
Local wireline competition is minimal Long distance competition is robust, but
startups are unable to compete against established players
Established long distance companies are under extreme financial stress with WorldCom, Sprint, and MCI all in or near bankruptcy
Privatization Around the GlobePrivatization Around the Globe 69 members of the WTO opened their
markets to competition Governments sold off telephone assets
to investors Competition brought new capital flows
from around the world, modernizing and expanding the telecommunications infrastructure
69 members of the WTO opened their markets to competition
Governments sold off telephone assets to investors
Competition brought new capital flows from around the world, modernizing and expanding the telecommunications infrastructure
Industry TransformationsIndustry Transformations
With changes in the regulatory landscape, the industry underwent dramatic transformations, consolidation, mergers, joint partnerships, bust and bankruptcy, divestitures, and a sector depression
With changes in the regulatory landscape, the industry underwent dramatic transformations, consolidation, mergers, joint partnerships, bust and bankruptcy, divestitures, and a sector depression
Local Service ProvidersLocal Service Providers
Industry ConsolidationIndustry Consolidation
Bell Atlantic, NYNEX, Verizon, and GTE 1997 - Bell Atlantic and NYNEX
merged to control 30% of the US local lines – Entity renamed Verizon
1998 – Verizon and GTE merged to form the largest phone company in the US
100 million lines throughout the US
Bell Atlantic, NYNEX, Verizon, and GTE 1997 - Bell Atlantic and NYNEX
merged to control 30% of the US local lines – Entity renamed Verizon
1998 – Verizon and GTE merged to form the largest phone company in the US
100 million lines throughout the US
Industry ConsolidationIndustry Consolidation
SBC, Pacific Telesis, SNET, Ameritech 1997 – SBC merged with Pacific
Telesis 1998 – SBC bought SNET 1999 – Merged with Ameritech
59.5 million lines in 13 states
SBC, Pacific Telesis, SNET, Ameritech 1997 – SBC merged with Pacific
Telesis 1998 – SBC bought SNET 1999 – Merged with Ameritech
59.5 million lines in 13 states
Industry ConsolidationIndustry Consolidation
BellSouth Focused on international expansion
controlling 6.2 million customers in 10 Latin American countries in 2000
BellSouth Focused on international expansion
controlling 6.2 million customers in 10 Latin American countries in 2000
Industry ConsolidationIndustry Consolidation
US West, Qwest, Time Warner, Frontier US West pursued a cable strategy buying
Wometco Cable, Georgia Cable Holdings, and 25% of Time Warner Cable
In 1997 it bought Continental Cablevision Qwest bought US West and divested parts
to Global Crossing Global Crossing filed for bankruptcy, and
Qwest is in shaky financial shape
US West, Qwest, Time Warner, Frontier US West pursued a cable strategy buying
Wometco Cable, Georgia Cable Holdings, and 25% of Time Warner Cable
In 1997 it bought Continental Cablevision Qwest bought US West and divested parts
to Global Crossing Global Crossing filed for bankruptcy, and
Qwest is in shaky financial shape
Local and Long DistanceLocal and Long Distance
The MFJ created local and long distance areas of service; these areas were called LATAs
RBOCs could provide inter-LATA service if they could prove (with the FCC’s 14-point checklist) that effective competition existed in the local market
The MFJ created local and long distance areas of service; these areas were called LATAs
RBOCs could provide inter-LATA service if they could prove (with the FCC’s 14-point checklist) that effective competition existed in the local market
Traditional Long Distance ProvidersTraditional Long Distance Providers
With increased competition, profits decreased as pricing power eroded
Providers attempted to differentiate themselves by entering other markets such as data (WorldCom) or wireless (Sprint)
These moves required enormous amounts of capital expenses and huge debt burdens
With increased competition, profits decreased as pricing power eroded
Providers attempted to differentiate themselves by entering other markets such as data (WorldCom) or wireless (Sprint)
These moves required enormous amounts of capital expenses and huge debt burdens
Long Distance CompetitionLong Distance Competition AT&T started in a dominant position, but
pursued a cable strategy wasting capital WorldCom acquired MCI, but in the
succeeding years began to misrepresent its finances, and filed for bankruptcy
Sprint created a wireless network, but is currently in financial difficulty due to its highly leveraged balance sheet
AT&T started in a dominant position, but pursued a cable strategy wasting capital
WorldCom acquired MCI, but in the succeeding years began to misrepresent its finances, and filed for bankruptcy
Sprint created a wireless network, but is currently in financial difficulty due to its highly leveraged balance sheet
Cellular and WirelessCellular and Wireless
Consolidation of the parent wireline companies is producing needed consolidation in wireless companies
Consolidation is more difficult in the wireless sector because not only do the geographic service areas need to work, but the cellular technologies of the two companies need to be similar (TDMA, GSM, or CDMA)
Consolidation of the parent wireline companies is producing needed consolidation in wireless companies
Consolidation is more difficult in the wireless sector because not only do the geographic service areas need to work, but the cellular technologies of the two companies need to be similar (TDMA, GSM, or CDMA)
Major U.S. Wireless OperatorsMajor U.S. Wireless Operators
International WirelessInternational Wireless
People in many countries worldwide are exchanging wireline phones for wireless
In 2002, there were more than 1 billion wireless subscribers
Ericsson predicts 1.6 billion global subscribers by 2005 as China and other third world countries begin to build out a cellular infrastructure
People in many countries worldwide are exchanging wireline phones for wireless
In 2002, there were more than 1 billion wireless subscribers
Ericsson predicts 1.6 billion global subscribers by 2005 as China and other third world countries begin to build out a cellular infrastructure
Leading Global Wireless OperatorsLeading Global Wireless Operators
Satellite CellularSatellite Cellular
At one time this was thought to be the next frontier with cell sites in orbit
Eight companies attempted to build an orbital system
To date none of these have been successful, and investor capital has dried up, closing this cellular mode for the foreseeable future
At one time this was thought to be the next frontier with cell sites in orbit
Eight companies attempted to build an orbital system
To date none of these have been successful, and investor capital has dried up, closing this cellular mode for the foreseeable future
Global TelecomGlobal Telecom
Privatization in the 1990s has begun to radically reshape the global marketplace
As emerging economies grow, the demand for voice and data services will continue to expand
These markets are immature, and will require huge capital outlays to develop
Privatization in the 1990s has begun to radically reshape the global marketplace
As emerging economies grow, the demand for voice and data services will continue to expand
These markets are immature, and will require huge capital outlays to develop
The World’s Largest Phone CompaniesThe World’s Largest Phone Companies
The Fall of the Monopoly SystemThe Fall of the Monopoly System The current phone system in the US
has its roots in the Bell System Over the past two decades, enormous
changes have reshaped the industry Stresses from regulators, customers,
competitors, technology and financial markets have radically transformed the face of the playing field
The current phone system in the US has its roots in the Bell System
Over the past two decades, enormous changes have reshaped the industry
Stresses from regulators, customers, competitors, technology and financial markets have radically transformed the face of the playing field
ImplicationsImplications The IT industry is undergoing rapid changes
that are profoundly affecting managers at all levels and in all segments of business
The dynamic nature of the telecommunications landscape will offer bold and innovative management the tools and technology to deliver competitive products and service; it will also punish those unable or unwilling to adapt
The IT industry is undergoing rapid changes that are profoundly affecting managers at all levels and in all segments of business
The dynamic nature of the telecommunications landscape will offer bold and innovative management the tools and technology to deliver competitive products and service; it will also punish those unable or unwilling to adapt