Telecommunications Industry

Telecommunications industry is global in nature with the telecom equipment segment larger than the services segment. In years past, the telecommunications industry has been tightly regulated in most countries with state-owned entities having a monopoly over telecom services. In the past few years, most countries have opened up their telecom services sector to private investment, but still restrictions on foreign investment remain.

The global telecommunications industry is largely driven by telecom services. The telecom equipment segment largely plays a supporting role in the telecommunications industry. Telecom services can be divided into fixed-line services and cellular services. Fixed-line services involve connecting the consumer to the telecom company physically through wires and cables. The fixed-line services also include resellers, who buy capacity from existing telecom networks and resell them to consumers. The telecommunications industry also encompasses e-mail and facsimile services; radar stations; and radio networks.

The telecommunications industry also includes cable networks. These networks distribute television programming and other entertainment fare through fibre optic cables or coaxial cables. Direct-to-home is an emerging segment of the telecommunications industry involving broadcast of programming directly to the consumers using satellites and mini-dishes.

Though liberalization of telecom markets has gained momentum in the past few years, the telecommunications industry is yet to spawn giants that operate globally like ExxonMobil in petroleum industry or Coca-Cola in non-alcoholic beverages. This phenomenon is more apparent in the fixed-line markets than mobile services market. Though most countries allowed the private sector into fixed-line services, a single entity reigns supreme. For instance, Deutsche Telekom dominates fixed-line services in Germany while China Telecom is the major fixed-line operator in China. Similarly, Indian government allowed private sector companies to offer basic services. Yet the state-owned Bharat Sanchar Nigam Limited continues to dominate the Indian fixed-line market.

In recent years, the mobile subscriber base has overtaken fixed-line subscriber base. With increasing number of fixed-line consumers switching to mobile services, the mobile subscriber base is set to grow at a faster pace. Already global telecommunications brands have begun to emerge in the cellular space. T-Mobile International, a part of Deutsche Telekom, offers mobile services in both USA and Europe. Similarly, France Telecom’s Orange SA offers mobile services in France and UK besides holding stakes in mobile operators in Europe and the Middle East.

Services in the telecommunications industry

Telecommunications industry has also witnessed a sea change in the range of services. It has gone beyond voice to become a medium for:

• exchanging data,
• audio,
• video
• text.

In recent years in the telecommunications industry, value-added mobile services such as text-messaging and multimedia messaging have become popular. For companies, the telecommunications industry has begun to provide value-added services such as electronic data interchange, virtual private networks and call centre services.

By all accounts, competition in the telecommunications industry has led to better services and improved quality. Though telecom markets have been liberalized worldwide, crucial reforms such as privatisation of state-owned telecom entities are still pending. The biggest challenge confronting telecom companies, however, is technological. With telecom technologies constantly evolving, technological obsolescence has become a key issue in the telecommunications industry—something that can make or break companies.