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E-Business in Telecommunications: The Impact of the Internet on the Communications Industry April 13, 2000 PowerPoint PPT Presentation


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E-Business in Telecommunications: The Impact of the Internet on the Communications Industry April 13, 2000. Contents. Introduction - impact of the Internet on the communications industry Household Market Corporate Market. Introduction.

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E-Business in Telecommunications:The Impact of the Internet on the Communications IndustryApril 13, 2000


Contents l.jpg

Contents

  • Introduction - impact of the Internet on the communications industry

  • Household Market

  • Corporate Market


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Introduction

Despite playing a leading role in providing services for the Internet, the telecom industry lags other segments in generating revenues through E-Business initiatives

E-Business Revenues by Industry

- 2003 Projections -

Source: Business Week

Percent of Total Industry Revenues

Computing & Electronics

Financial Services

Travel

Energy

Retail

Telecomms

E-Business

Market Size$410B$67B$170B$80B$108B$15B


Pwc uses a 4 box model to explore the implications of the internet within the telecom industry l.jpg

4-Box Model

PwC uses a 4-box model to explore the implications of the Internet within the telecom industry

PwC’s 4-Box Model

Restructuring the value chain to create ‘many-to-many’ relationships, new value propositions & new business models

  • Box 4:

  • Convergence

Transformer

  • Box 3:

  • IndustryTransformation

Companies entering new industry sectors and competing outside of their core business areas

Degree of change to business model

Connections with trading partners and process changes across the value chain

S

E

C

Box 2: Value Chain Integration

Enabler

Enhancing current channels and adding new channels to market

S

E

C

Box 1: Channel Enhancement

Enabler

Transformer

Role of E-Business


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E-Business as an enabler

Our recent survey of telecom companies in the US and Europe revealed that E-Business investments are focused almost entirely on channel enhancement and value chain integration activities

  • Box 1:

  • Channel Enhancement

  • Box 2:

  • Value ChainIntegration

  • Bill presentment, review, payment

  • Self-service inquiries

  • Individual product sales

  • Order entry and status

  • Employee enrolment

  • Performance monitoring

  • Online account management

  • E-procurement

  • E-HR (salary/ benefits admin)

  • Financial and sales management and reporting

Current Activities

  • Electronic catalogues

  • Account profiles

  • Account access

  • Web-based CRM

  • Integrated order provisioning

  • Real-time cross-selling

  • Virtual reps

  • Product info/training

  • Real-time inventory and transactions

  • Network performance

  • Integrated purchaser/ vendor

  • Network activation

  • Capacity provisioning

Planned Activities

Source: PwC Survey of Telecom E-Business Plans


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E-Business as a transformer

We anticipate significantly more Box 3 and Box 4 activities as the industry transforms through the adoption of current and future E-Business applications

  • Box 3:

  • IndustryTransformation

  • Box 4:

  • Convergence

  • Personalization and recommendations across broad service set (wholesale and retail)

  • Price buyer services

  • Personal router management

  • Traffic geolocation mapping

  • Network E-products

  • Multi-provider tracking

  • Billing aggregator

  • Total network inventory analysis and marketplace (public, competitor, corporate)

  • 3G wireless infocom applications

  • Home network services provision

  • Household services management

  • Integrated infocom services provision

  • Personal infocom services management

  • Applications and coms service hosting and provision

Sources: PwC Survey of Telecom E-Business Plans, PwC Telecommunications Industry Visioning, internal review of E-Business activities across industries


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Mass Market

Corporate

Impact by market segment

The impact of the Internet should be analyzed by market segment, given fundamental and increasing differences among the household, corporate and mobile segments

Today we will focus on the Mass Market and Corporate Market

  • The skills and products needed to serve business customers are now very different from those needed to effectively serve the mass market

  • The introduction of new services (advanced data services in business markets, mobility, Internet access, etc) in both markets has resulted in differing end-user requirements for both groups

  • The geographic focus of the market segments differ - mass markets are more local, corporations are more global

  • In addition, the operational demands associated with effectively serving customers with complex product requirements are very different

Mobile

Skills

Geographic Scope

Products

Processes

Competitors

Network

Key Success Factors

Value Chains

Branding / Bundling

Valuation Metrics


We will explore three areas related to the impact of the internet on the communications industry l.jpg

Tomorrow’s Business

Focus

Today’s Business

Focus

We will explore three areas related to the impact of the Internet on the communications industry

The Internet as a ...

source of demand for telecom products/services

enabler

transformer of business models

Buyers

Sellers

  • Services

  • Access

  • Applications

Exchanges

S

E

C

Mass Market

Supplier

Enterprise

Customer

Auctions

Aggregators

Customer segments

  • Telecom services

  • Professional services

  • Backbone capacity

S

E

C

Corporate

Supplier

Enterprise

Customer


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The Internet as a ...

source of demand for telecom products/services

enabler

transformer of business models

  • Services

  • Access

  • Applications

Mass Market

Customer segments

Corporate


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Consumer spending

Consumers have over the past 10 years increased their spending on telecommunications services as a percent of total household spending from 2.76% to 3.57%, belying the notion that telecommunications is a utility category

  • Consumer spending on core telecommunications products has outstripped underlying economic growth by a factor of two, three and sometimes four

  • Since 1978, spending on multi-channel television services has grown more than 14% per year, with cable penetration standing at over 66% in 2000

  • Internet usage has increased from 20% of households in 1997 to 30% of households in 1999. This number is expected to double over the next 5 years, reaching over 60% by 2003

Monthly Spending per US Household on Telecom Services (1940-1998)

1996 Real $

Sources: Census Bureau, Department of Commerce, FCC Industry Analysis Division, Paul Kagan Associates, CTIA, Simba, AOL Annual Reports, Lehman Brothers


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Change in Components of Spend

In the future, traditional telecom services will become a smaller portion of overall service value; new services will be offered and could include retail transactions, entertainment, equipment leasing and billing

  • Since 1970, household spending on telecommunications as a percent of discretionary spending has tripled. New communications services will perpetuate this trend

  • The total pool of value available to telecom service providers is not fixed, but expanding rapidly

  • In the not-so-distant future, one-stop shops will supply all basic and advanced telecommunications, entertainment and online purchasing needs -- with one bill and one point of customer contact

  • Conservative assumptions regarding the proportion of consumer spending moving to Web-enabled channels over the next five years generates the monthly bill to the left. This will double the growth rate of the traditional telecommunications industry, adding $50 billion annually to the new industry value chain in the U.S. alone

Intermediary Plus

A Communications Solutions Provider

Bill Summary

Network Connections (flat rate)

On-Net Purchasing

High Speed Access

$70.00

Victoria’s Secret

$59.95

Mobility

$65.00

1-800 Flowers.com

$49.99

Unified Messaging

$12.00

On-Line Mall

$275.00

Digital Television Services

Equipment Leasing/Financing

DBS Package

$60.00

HAN w/HCC

$15.00

VOD

Mobile Web Surfers (2)

$10.00

Hong Kong Gangsters (Movie)

$2.95

Miss Internet Pageant (Event)

$3.95

Total - All Services

$797.79

European Cup Final (Sports)

$7.95

Monthly Internet Services

Daily Customized News Service

$5.00

Where local and long

Appliance Monitoring

$6.00

distance calling is free !!

Remote Security

$15.00

Publix Grocery Delivery Services

$120.00

Amazon.com Book of the Month

$20.00


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Digital Terrestrial TV

Telephone return path

Satellite to TV

Telephone return path

TV

Home Area Network

A variety of needs in the household market are increasing demand for bandwidth and driving the development of new applications that support the emergence of the home area network (HAN)

Home Area Network

  • Needs

  • Sharing of:

    • Peripherals: printers, scanners, cameras

    • Internet access

    • Files and application

    • Multimedia and games

  • High bandwidth for voice and video applications

  • High speed access for telecommuting

  • Automation of home devices such as environmental controls and security systems

Smart

Device

Terrestrial Wireless

(Narrow & Broadband)

HCC

Cable

Company

Local

Exchange

Local

Server

Telco

Fiber

& Copper

Fiber

& Coax

Broadband Wireless.

Mobile


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Broadband technologies

Increased demand for local bandwidth and exponential growth in Internet traffic is generating the development of multiple forms of broadband access and an increase in backbone capacity

  • xDSL and cable modems are predicted to be the dominant forms of local broadband access

  • xDSL is being driven largely by telco’s who can build on their existing networks to provide broadband service

  • Cable modem’s are being deployed by cable operators over existing cable TV lines already deployed in millions of US households

  • Satellite technology is less developed than xDSL and cable modems, and will therefore take longer to be deployed

    • Satellite systems are well suited to provide service to developing regions because there is no need to deploy last mile infrastructure

Forecast of North American Residential Broadband Access

CAGR

xDSL

328%

Cable Modem

83%

Broadband Satellite

260%

Broadband Wireless

113%

Source: 1999 Communications Industry Researchers, Inc


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Broadband Satellite

Home Area Network Applications

New applications and household devices that will increase the convenience and comfort of the home user will result from the emergence of the Home Area Network and deployment of broadband access

New Applications

  • Voice and video applications

    • Digital video networking

    • Video-on-demand

    • Interactive programming

    • Internet telephony

    • Videoconferencing

    • Internet radio

    • Distance learning

High-speed Access

Terrestrial Wireless

(Narrow & Broadband)

  • Services

  • Monitoring / Home Automation

    • Security

    • Electricity

    • Heating

xDSL

Cable Modems

HCC

Local

Exchange

Local

Server

Fiber-to-the-home

E-Commerce/Home shopping

  • New Generation CPE

    • Control center for home communications


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ILLUSTRATIVE

Home Area Network Applications

An intelligent interface will develop, combining content and transport

A Vision Of The Future Intelligent Interface

Facility (Home And/Or Office)

Intelligent Interface

Communications

Entertainment

  • COMMUNICATIONS

    • Visual

    • Voice

    • Data

ENTERTAINMENT

Voice

Visual

Data

Office

Facilities

Management

Applets

Electricity

Heating

Security

FACITILITIES MANAGEMENT

OFFICE

Electricity

Heating

Security

  • Key Characteristics

  • Voice activated

  • Intelligent search

Source: Forrester Research, Telephony, PwC analysis


There are a number of key value imperatives in the new household communications industry l.jpg

Access network providers

Capture content spending

Capture on-net spending

Enable new applications

Support the HAN

Establish net currency

There are a number of key value imperatives in the new household communications industry

Key Value Imperatives


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The Internet as a ...

source of demand for telecom products/services

transformer of business models

enabler

Mass Market

Customer segments

  • Telecom services

  • Professional services

  • Backbone capacity

Corporate


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The Internetworking Revolution

The internetworking revolution is transforming the corporation and creating new opportunities for telecom providers to service their emerging needs

  • Growth of enterprise-wide applications

  • ERP (eg SAP, Oracle)

  • Knowledge Management (Lotus Notes)

  • E-mail (MS Mail)

  • Video Conferencing

  • Interoperability around Internet Technologies

  • TCP/IP

  • HTTP

  • HTML,XML, Java

Internetworking

Revolution

  • Global Competition

  • Privatisation and liberalisation

  • Free trade (WTO, Single market, NAFTA)

  • Emerging markets competition

  • Global manufacturing, servicing and marketing trend

  • Electronic channels to market

  • “Death of distance”

  • Optical fibre physical medium

  • Transmission technologies (SDH/Sonet)

  • Packet switching (frame relay ATM, IP)

  • Telecom sector liberalisation (CLECs, infrastructure)

Telco opportunities

  • “The Global LAN”

  • Growth of E-business

  • Unbundling of the Corporation


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The Global LAN

The global area network constitutes the virtual private network of the global enterprise, provided either end to end across owned facilities or through local service level agreements

“The Global LAN”

Global Network

Desktop (LAN/WAN Integration)

WAN

Desktop (LAN/WAN Integration)


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Advanced Data

ATM

Frame Relay

SMDS

X.25

Corporate Internet Access

Advanced Voice

800/900 Services

VPN

Dedicated Access

The Global LAN

The creation of the global area network creates new opportunities for telecom providers in providing new services such as managed network services and network integration for advanced voice and data products

US Managed Network Services Revenues: 1998 - 2002

Total CAGR: 22%

Advanced

Data

Advanced

Voice

  • In market research undertaken by PwC in 1999; 40% of corporate customers had already established a global buying function for communications products, revealing the expectations of corporations to receive true global solutions, and not piece-meal national solutions


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Growth in US E-commerce Transactions (Billions U$S)

E-Commerce growth

The growth in E-Business will generate increased bandwidth demand and will provide new outsourcing opportunities in IT and communications services

  • Both Business-to-Consumer and Business-to-Business commerce, will drive bandwidth demand

    • the creation of vertical marketplaces and increased supply chain integration require infrastructure and will be a major driver of demand

  • The economics of the global economy will drive corporations to use the Internet to improve efficiencies and focus on their core competencies

    • will lead to increased outsourcing of non-strategic IT and communications activities (infrastructure, applications, network management, operations and IT support)

Total CAGR:82%

Source: Forrester Research


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IT/(E)-Business Consulting

Systems Integration

Sales

Marketing

Applications Hosting

Web Hosting

Tomorrow’s Business

Focus

Network Management

Network Design and Integration

Today’s Business

Focus

Product Development

Capacity Provisioning

Service Activation

Service Assurance

Billing

Customer Care

Customer Relationship

Management

Unbundling of the corporation

As corporations increasingly outsource core IT, communications and operational activities to focus on their own core competencies, the internetworking providers will have to fundamentally change their business model from a network-centric focus, to a customer and solutions-centric focus


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On-Net (Corporate)

Customer ownership

Customer ownership in the corporate market will shift from communications service providers to application and information service providers

Business Customers

Application and Professional Services Provider

End-to-End Communications Service Providers

Billing

and

(Customer

Management)

Product and Content Providers


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Market success

Customer and solution-centric companies are showing signs of success in the market when compared to network-centric service providers

  • Customer-centric companies, like Level 3, were able to increase their stock price by 271% over the past two years

  • Integrated telecom companies like Bell Atlantic and AT&T have only increased their stock by 29% and 16% respectively over the past two years

Level 3

Bell Atlantic

AT&T

  • Application service focused companies like Exodus Communications were rewarded by the market with an increase in stock price of 3,216% since March 1998


The issue for operators is to decide where to play in the value chain l.jpg

The issue for operators is to decide where to play in the value chain

IT Services

Communications Services

Corporate Network Integration

IS/IT Consulting

Systems Integration

Corporate Network Management

Managed Network Services

Basic Access and Transport Services

Network Infrastructure Provision

  • IT/IS Consulting

  • Application Development

  • Systems Integration

  • Software Integration and Support

  • Hardware Integration and Support

  • IT Training and Education

  • Network Consulting and Integration

  • IS Outsourcing

  • Desktop Management Services

  • Network Management

  • Application Outsourcing Services

  • Business Process Outsourcing

  • Process Services

  • Managed Voice Services

  • Managed Data Service

  • Local Service

  • LD Service

  • Dedicated Access

  • Wireless

  • Private Circuits

  • Dark Fibre

  • “Right of Way”

  • Private Circuits

  • IRUs


A number of players are currently addressing this opportunity l.jpg

EQUANT

A number of players are currently addressing this opportunity ...

IS/IT Consulting

Systems Integration

Corporate Network Integration

Corporate and Network Management

Managed Network Services

Basic Access and Transport Services

Network Infrastructure Provision

Non core

Mid

Core

Core

Core

Core

Non core

Core

Non core

Non core

Non core

Non core

Core

Core

Non core

Mid

Core

Core

Core

Core

Mid

Core

Core

Mid

Mid

Non core

Non core

Non core

Core

Mid

Non core

Non core

Non core

Core

Mid

Non core

Mid

Core


Value imperatives l.jpg

Value Imperatives

Key Value Imperatives

  • Enter the human capital business

  • End-to-end 100% ownership

  • Own the desktop

  • Be global

  • Build Wholesale Business


Slide28 l.jpg

The Internet as a ...

source of demand for telecom products/services

transformer of business models

enabler

S

E

C

Mass Market

Supplier

Enterprise

Customer

Customer segments

S

E

C

Corporate

Supplier

Enterprise

Customer


Slide29 l.jpg

E-Business Initiatives

Telco’s are pursuing a variety of E-Business initiatives in eMarketing, eSales and eCare to more effectively interact with the customers

Selected Customer Touchpoints

Develop

Products/

Services

Service Activation & Assurance

Perform

Marketing

Customer Care

Sales

Billing

eMarketing

eSales

eCare

  • Collect order information, and generate service order

  • Provide on-line credit validation

  • Reduce product delivery costs

  • Enable customers of low value commodity products self activation of service

  • Enable account management from sales through implementation among equipment, network facilities, suppliers and customers

  • Collaborative management of network services and inventory management

  • Communicate test and turn-up of service/service activation

  • Reduce cost of sales through electronic transactions

  • Provide real time inventory of product availability

  • Establish one touch and done customer product inquiry - order

  • Synchronize demand forecasts with inventory

  • Provide high value customers with tailored services

  • Promote real time cross-selling and up-selling

  • Enable the timely and accurate distribution of sales leads

  • Create and manage price, terms, conditions, service level agreements and contracts

  • Automatically update resource loads, service and provisioning schedules, force management and provide updates to customer order tracking files

  • Provide intelligent virtual service representative

  • Allow widespread monitoring and management of customer

  • Provide information and internet-based training on new products/services

  • Improve timeliness and quality of service

  • Monitor and track performance vs. SLAs

  • Electronic billing, review and inquiry

  • Electronic bill payment

  • Develop customized products

  • Integrate various products and services offerings

  • Improve new product take rates, and bring products to market more quickly

  • Simulate and rapidly test new product ideas through online research or direct customer inquiry

  • Differentiate product offers

  • Establish key customer focus groups to collaborate in product packaging

  • Quickly test and deploy alternative pricing, terms, or product strategies in days rather than months

  • Use agents to develop pricing or promotion response

  • Customer segmentation capability

  • Widespread access to real time service/product availability

  • Push product information and tailored promotions to customers

  • Extend brand

  • Provide rapid alerts to changes in inventory, pricing and promotions

  • Identify customers at risk of churn

E-Business Capabilities


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Efficiency

eMarketing

  • Decreased customer churn

  • Improved profitability comparisons for different prospect types

  • Accurate profitability comparisons for orders from different channels

  • eSales

  • Decrease lead turnaround time

  • Increase margin contribution

  • Decrease sales cycle

  • Decrease promotion cost/discounts per order

  • Decrease training time

  • Decrease average time per sale

    eCare

  • Increased speed and accuracy of resolution

  • Increased outbound call capacity

  • Decreased cost per service customer

The Case for eCare

By focusing on the customer rather than on the enterprise, the web provides a more efficient and effective medium for the delivery of telecom services

Effectiveness

  • eMarketing

  • Improved customer loyalty (win-back)

  • Increased analysis of marketing program effectiveness

  • Improved visibility to win-rate comparisons for different prospect types

  • Extending the life of customer

    eSales

  • Increase cross/up selling

  • Increase margin contribution

  • Increase average order size

  • Increase win/loss information

  • eCare

  • Increased customer satisfaction

  • Increased lead conversion rates

  • Additional sales channels through live contacts and teleweb

+


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Customer Markets

The distinct character and needs of the each market suggests that the household market should focus on marketing and sales activities, whereas the corporate market should focus on customer care

Degree of Loyalty

  • ePriorities

Customer Base/Needs

Product/Service Offering

Market

Economics

Care Needs

Household

  • Over 15 million customers

  • Bundling emphasis

  • Standard service offerings

  • Voice and simple data

  • Very high volumes

  • TBR < $100/ month

  • Fixed pricing

  • Lower margin services

  • Routine interactions

  • Simple inquiries

  • Service availability

  • Low

  • Customers price sensitive

  • eMarketing and eSales

  • Routine and complex interactions

  • Service availability and SLA reporting

  • Billing analysis

  • Customized service offerings

  • Voice & data

  • Hosting (web/applications)

  • Network management

  • Negotiated pricing

  • Contracts, SLAs master service agreements

  • Very high volumes

  • TBR < $100/ month

  • Higher margin services

  • Long-term relationships

  • Less than 1 million customers

  • Solutions emphasis

Corporate

  • eCare


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Tomorrow’s Business

Focus

Today’s Business

Focus

The Internet as a ...

source of demand for telecom products/services

transformer of business models

enabler

Buyers

Sellers

Exchanges

Mass Market

Auctions

Aggregators

Customer segments

Corporate


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Introduction to Web-based business models

New business models are already beginning to impact the way telecom services are packaged and marketed

Web-based Competitive Segmentation

eRetailers

Aggregators

Auctions

Supply

Exchanges

Beyond LD

LD

Traditional

Reverse

Demand

directory

reseller

Exchanges provide a market mechanism for trading commodity assets online. They work effectively when there are multiple buyers and sellers, the asset is a defined and uniform good and there is market liquidity.

Supply aggregators - consolidate telecom and/or other services on a portal or other platform.

  • eRetailers are facilities based service providers that use the Internet as a sales and delivery channel

    • V-o-IP LD providers

    • Unified Messaging

    • Free ISP’s

Traditional auctions are seller driven online auction for wide variety of products and quantities

Reverse auctions are buyer driven online auctions where there is one buyer and many suppliers

Demand aggregators consolidate the needs of fragmented markets to gain purchasing power with suppliers

Definition

Resellers usually capture retail revenues, complete the entire transactions on their web site, and many times provide billing and customer care to the end-users

Directories act as “neutral navigators” allowing buyers to comparison shop, customize, evaluate and purchase products/services on the Web

Household

Wireless

Small Business

Household

Wireless

Small Business

Household

Wireless

Small Business

Household

Wireless

Small Business

Large Business

Wholesale

Large Business

Wholesale

Small Business Large Business

Markets

Advertising.

Retail revenues

Volume/ wholesale discounts

Transaction commissions

Advertising.

Commerce revenue.

Licensing fees

Advertising

Transactions commissions

Subscription fees

Advertising

Bounties/ commissions paid by service providers

Advertising

Transactions commissions

Advertising

Transactions commissions

Subscription fees

Revenue

Model


Most new telecom emarketplace players fall in the supply aggregator category l.jpg

Web-based players

Most new telecom eMarketplace players fall in the Supply Aggregator category

Communications Industry Web-based Business Models

Aggregators

Auctions

Supply

Exchanges

eRetailers

Demand

Traditional

Reverse

directory

reseller

  • Bandwidth.com

  • Band-X

  • FreeMarkets

  • imandi.com

  • Killerbiz.com

  • Priceline.com

  • 1stUp.com

  • Dialpad.com

  • Deltathree.com

  • eVoice

  • Fax Sav (Mail.com)

  • Juno

  • Linx Comm.

  • Net2Phone.com

  • NetZero

  • OneBox.com

  • Phone.free.com

  • RocketTalk

  • Talk.com

  • ThinkLink

  • U-Reach.com

  • Z-Tel

  • BuyTelco.com

  • CollegeClub. com

  • Essential. com

  • Extant

  • MVX.com

  • ServiSense

  • Telegea.com

  • Telstreet.com

  • Universal Access

  • Utility.com

  • BandX

  • CommerceOne

  • BizBuyer

  • BuyersZone

  • DealTime.com

  • Decide.com

  • Lowermybills.com

  • MyRatePlan.com

  • MySimon.com

  • OfficeClick.com

  • Onvia.com

  • Point.com

  • Reasonware.com

  • ShopNow.com

  • Simplexity.com

  • LetsTalk.com

  • Totally Wireless (ePhones.com)

  • Demandline. com

  • Accompany. com

  • Mercata.com

  • Arbinet

  • Band-X

  • Enron

  • RateChange


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Summary of impact

Emerging web-based business models will have varying impact on different sectors of the communications industry

Communications Industry Web-based Business Models

Aggregators

Auctions

eRetailers

Supply

Exchanges

Demand

Traditional

Reverse

directory

reseller

  • Local

  • LD

  • Wireless

  • Internet Access

  • Vertical Services

  • BellSouth.com

LD coming

Consumer

*

  • Local

  • LD

  • Wireless

  • Internet Access

  • Vertical Services

  • BellSouth.com

Non-complex Businesses

  • Local

  • LD

  • Wireless

  • Internet Access

  • Wholesale

  • BellSouth.com

Complex Businesses

* Note: Harvey ball refers to Entertainment services, not Vertical services


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Summary of strategic alternatives

Telco’s should aggressively manage those business models that represent the most opportunity for growth and the largest threat of disintermediation such as supply aggregators, both resellers and directories

Summary of Strategic Direction

Buy Stake/ Acquire

Support

Fight

Ignore

Join

Create

High

Business Impact

Low


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