Latest Comments

  • PREMCHANDRA J LOKHAN... More
    i support ericsson as rcom can dupe anyone , they had... Sunday, 14 October 2018
  • Bud Biswas More
    Our company, Polaris Networks, has helped other smaller... Friday, 12 October 2018
  • Developing Telecoms More
    That is correct - it is the coastline of Equatorial Guinea,... Friday, 12 October 2018
  • Xavier Muñoz More
    This photo is not from São Tomé e Príncipe Thursday, 04 October 2018
  • adewalebeke@yahoo.co... More
    Hello,
    My name is Adewale. I am a Healthcare Manager in... Friday, 21 September 2018

Driving down the cost of communications

The first half of 2007 saw the launch of Nokia-Siemens Networks. Industry mergers such as this have become a feature of the telecoms scene in recent years. But although the merging companies are based in developed markets, the mergers are being driven by the need to drive down costs in order to compete in emerging markets.

We looked at the implications of the Nokia-Siemens Networks merger back in July 2006. Following as it does hard on the Alcatel-Lucent merger it is difficult not to think these deals reflect a kind of Moores law for telecoms, where the ability of technology to deliver services increases while the cost falls. Think no further than VoIP.

But now, more than anything, it is the need to do business in emerging markets which is driving industry change, of which the recent mergers are a reflection. Much has been written about the contribution of deregulation and the massive growth of the wireless industry at the expense of fixed line in opening emerging markets. These are key developments.

But there have been others developments on the vendor side which have made equally important contributions to making telecoms affordable in emerging markets world-wide. Some of the most important of these are:

Technology breakthrough

VoIP is just one technology advance amongst many. All IP networks, HSDPA, WiMAX, VSAT and many others have transformed the technology field, delivering quality and affordability. The common feature of all such developments is that they have come from vendors, not service providers. That is where the creativity resides. Many of these developments have acted to disrupt the service provider business models. All act to drive down costs and adversely affect high cost base vendors.

The emergence of low cost vendors from emerging markets

China has been the key market here with two companies in particular - Huawei Technologies and ZTE making massive inroads into other emerging markets and becoming world-class technology vendors. But India in particular is not so far behind and there are a number of companies there threatening to go global such as BNSL and Crestex.

The expansion of IT vendors into the telecoms market

Alongside emerging market vendors, companies better known in the IT field such as Cisco, Intel, Microsoft and Oracle have been making major inroads into the telecoms sector. Standards based systems have been one of the key developments and increasingly these can be shown to have the necessary technical resiliance to compete successfully against proprietary - and expensive - systems.

Mega-mergers of traditional vendors

Twenty years ago there were around 20 heavyweight North American, European and Japanese vendors of equipment such as switches. In the case of the latest mergers of Alcatel, Lucent, Nokia and Siemens, every one of these companies were themselves created as the result of earlier mergers. By definition these have failed, or they would not be merging for the second, third or even fourth time.

Business always has winners and losers. The fundamental problem all these companies have had is their high cost base and inability to compete successfully. While it may have been possible to side step this issue when the major markets were in North America, Japan and Western Europe, now the focus is firmly on emerging markets it is not.

Will the latest round of mergers change this? At Developing Telecoms we hope so - anything which brings down the cost of communications in emerging markets is to be welcomed. So we wish all these new companies every success. But we also add a rider - long live competition and open markets!

Comments powered by CComment