Challenges and opportunities in telecom

What are the challenges that business in the telecom and wireless industry are facing?

Presently a large portion of the Telecom value chain is experiencing massive cost reduction pressures. This is due to a global consolidation of manufacturing of the more mature technologies in Taiwan and China. This is true for most mass-market products like handsets, WLAN equipment, etc.

This outsourcing trend is causing many companies to change the way that they do business. Some, like Motorola, have been outsourcing for several years and are being quite successful at it. Others, like Kyocera are only beginning the process and will yet experience some bumps in the road.

Another challenge faced by telecom providers is the business environment that they are selling into. Traditional baby bells and long distance carriers are losing revenue each quarter in their traditional markets. Many of the more innovative companies are supplementing these reductions with the sale of broadband internet services, bundled satellite/wireless/internet/long distance. In some limited markets, carriers are even experimenting with television programming carried to the home on new FTTH (Fiber To The Home) networks.
Much of the industry is affected in some way by regulatory requirements or changes in legislation. Changes are still shaking out in the wake of the Telecommunications Act of 1996 and the momentum seems to be swinging back to the incumbents (baby bells) with recent rulings in disputes over access to physical metropolitan networks.

New technologies offer challenges and opportunities for companies in telecom. VOIP offers a lower cost model of sending voice traffic and is one of the factors driving down price in long-distance. Combining VOIP and WLAN may prove to be a disruptive technology to both cellular carriers/equipment providers and traditional land based carriers.

What measures are business taking to compete with the rapid change of technology?

Successful companies recognize the changes in technology early on and invest aggressively in technologies and services despite the potential to cannibalize their traditional sources of revenue. Verizon has done this with its wireless joint venture Verizon Wireless, and is now experimenting with converged services over FTTH networks.

It is an exciting time to be a customer and provider of telecom products and services.