World Telecommunication Day 1999 |
The scramble for the riches promised by electronic commerce is resulting in some of the most surprising alliances and partnerships ever seen.
Jim Sloane, Deloitte Consulting's partner overseeing the communications industry, says: ''Everyone is constantly looking for new routes to market. In every sector, there is an ongoing battle for market share, and everyone must constantly ask themselves: 'How can we use what we've got in more ways?' All companies need to leverage whatever assets they've got, and converged communications, along with the next generation of mobile communications, offer whole new distribution channels that will allow companies to tailor their messages to very specific audiences.''
Telecommunications companies traditionally consider small and medium-sized businesses as a different sector with different needs and a different tariff scale from large corporations.
In addition, telecommunications companies have yet to differentiate between consumers and the many millions around the world who work primarily from home. The growing army of home workers will probably be generating and sending as much data as they receive, and for them the planned rollout of digital subscriber loop technologies, which provide large pipes in and small pipes out, will not be appropriate.
For all these reasons, telephone companies need partners; marketing and distribution are skills that supermarkets and content providers, for example, have honed over many years. It is no coincidence that it took a mainstream electrical goods supplier, Dixons - and not a telecommunications company - to ignite the market for Internet services in Britain by introducing the first free Internet access offering.
Tim Kelly, head of operations analysis at the International Telecommunication Union (ITU), says: ''It is a very rare company that has all the skills it needs in-house. You have to have Web expertise in constructing, maintaining and developing sites; large-scale retail experience; sophisticated marketing and technical skills; plus an understanding of distribution and security issues. Mostly, that means companies are seeking a telecommunications company as a partner. E-commerce is such an enormous and varied issue that even governments are struggling; no single department in any country deals with it. There are always lots of different ministries involved.''
Betrothed behemoths
In the United States, the world's biggest PC software company, Microsoft, has invested $5 billion in the country's largest telecommunications company, AT&T, to help realize an ambitious vision of a ubiquitous, interactive Internet. Earlier this year, AT&T went on a shopping spree, buying, for example, the television cable company TeleCommunications, Inc. It will use Microsoft's software in a new generation of decoders that aim to make interactive television - and all its commercial possibilities - a reality. In turn, the telecommunications giant has enlisted Lockheed Martin, the big military contractor with experience in managing complex projects, to help keep track of all the undertaking's moving parts.
On both sides of the Atlantic, cable infrastructure is being converted into a high speed, two-way network that will support telephony and fast Internet access as well as interactive entertainment services. Cable's new role has been in part driven by regulation - the Telecommunications Act of 1996 in the United States and the drive for a single market in Europe, pushed along by the European Commission.
The incumbent operators in Europe's two biggest markets, Germany and France, are just about to divest themselves of their substantial cable holdings. In particular, the potential sale of the German network is causing enormous interest. Even though it is still an all-analog system, it is the largest cable network in Europe, encompassing 18 million homes. The French cable infrastructure is already almost completely digital, but it is comparatively small, covering only 7 million homes.
John Moroney, managing consultant with the London-based consultancy Ovum, says that some of the partnerships forged to cash in on the convergence of cable, Internet and television are still somewhat vague. He highlights the alliance between France Telecom, the French incumbent, and the American entertainment programming companies Viacom and CBS.
''They have some notions about vertical integration, but really they have no more idea of why [they are doing it] except to get bigger,'' Mr. Moroney says. ''That desire is driving a lot of activity in the United States and Europe as the worlds of cable and telecommunications move nearer together.''
Mr. Moroney says that the real revolution is the change in the television from a static analog device to a high-performance, computer-mediated one. He says: ''This is particularly true in Europe. It is true that digital is replacing the old analog standard in the United States, but in Europe digital is being used to deliver more than just channels with good picture quality, but for interactive television, with defined applications and the ability to deal with transactions. In the United States, there is still a big mental and cultural division between the idea of Web TV (a technology owned by Microsoft) and television as entertainment. It is thought of as a computer supplementing 'enhanced' TV for certain purposes. But in Europe, the television itself is rapidly moving toward being a 'converged' device that handles everything.''
Mr. Moroney says that for the longer term, the scope of convergence has not been fully appreciated. ''It will happen across lots of industry sectors and create a new global industrial order,'' he says. ''Three things will shape the world's commerce over the next decade: technology, branding and the way services are packaged. That recipe can be applied to just about any industry sector, and the dance between unlikely partners has barely even begun.''
Annie Turner