The following text is copyright 1998 by
Network World, permission is hearby given for reproduction, as long as
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Pity the poor telco
By Scott Bradner
What's a poor PTT (a.k.a.
Post, Telephone, and Telegraph authority, a.k.a. government owned
telecommunications monopoly) to do? The world from its point of view is
undergoing a lightning fast change. Used to no competition and decade long
planning cycles, many of the world's PTTs on January 1st were suddenly put in
the position of having to earn their customers rather than have them captive
and beholden by the right and might of the power of the law. This is a result
of the World Trade Organization's (http://www.wto.org) General Agreement on Trade in
Service. This agreement opened almost all telecommunications markets to
competition at the start of this year.
Well at least in theory.
Some of the competition may take a while to develop (sort of like the instant
competition that showed up in the local telephone business in the US after the
passage of the telecommunications act). But not all of the PTTs can be
complacent and lethargic in their response to the change. For example, with
three companies competing for the international phone business, Israel now has
some of the lowest cost international calling in the world, cheaper even than
the US. This must have been quite a shock to the old guard monopoly.
The German PTT Deutsche
Telekom (http://www.dtag.de) is an interesting case study.
Deutsche Telekom (DT) is the largest telecommunications provider in Europe and
the third largest in the world (according to their own placement of
themselves). They are responding to the change in a number of ways, some
positive and some not.
They have been cutting
employees, down 15% from 1993 (following a "socially conscious workforce
reduction programme"). They have been making significant price reductions
in their services, 45% reduction to North America, for example (with ISDN calls
actually cheaper than analog- a rather different philosophy than the US telcos
seem to have.) They have service offerings in a number of non telephone areas
including cable TV and Internet connectivity. As we are seeing in the US, it
does not hurt to be big in the telecommunications business and DT is big.
DT even formed its own
venture capital subsidiary known as T-Venture (http://www.t-venture.de) to invest in high-tech
telecommunications and information technology companies. They are also a
significant investor in the IP telephony company Vocaltech
(http://www.vocaltec.com/) just in case this Internet thing starts to have an
impact on normal telephone usage.
At the same time DT has
proposed to charge their customers a "processing fee" of as much as
$52 if they want to switch to a another telephone service provider. This does
not make their competitors all that happy and the German government may still
force the fee to be lower. (There is still some place for government control in
this age of competition.)
Unfortunately, DT's
ability to react to the change to a competive world is the exception not the
rule -- take a look at the US regional telephone companies for an alternative
approach.
disclaimer: The change
process at Harvard is "deliberate", thus the above support for change
is my own opinion.