Since the coming of the Internet in the early 1990s, the communications technology industry has undergone dramatic transformations. The spread of the Internet created a demand for high-speed communications, delivered by optical fiber. Century-old technology companies and service providers competed against, and often combined with new ventures. Meanwhile the wireless revolution brought new competitors and new markets into the industry, with developing countries participating in the ongoing process of technological change. Through research that delves into both the innovative capability and financial fragility of key competitors, theAIRnet seeks to understand how corporate strategies, national institutions, and global competition are shaping the dynamics of the communications technology industry.
INNOVATION AND COMPETITION IN THE COMMUNICATIONS TECHNOLOGY INDUSTRY
Since the 1990s the world’s wireline and wireless service providers, telecom equipment vendors and Internet players have experienced major transformations in the contexts of market deregulation and rapid technological change. Through deregulation, during the Internet boom of the late 1990s national monopolies had to become globally competitive firms. As deregulation proceeded and network structures became unbundled, comtech innovators saw new possibilities for network technologies, particularly as the development of the Internet and cellular wireless telecommunications piggybacked on the semiconductor industry’s ability to crank out ever more powerful chips. Meanwhile, innovations such as video on demand, IP applications, and 3G wireless services failed to meet investors’ high expectations for rapid growth. Major bankruptcies and reorganizations in the wake of the Internet crisis dampened these expectations. Despite continued double-digit growth in the demand for data services, most carriers saw their prices pushed downward by competition and overcapacity. That picture remains still valid today.
Leaders in telecommunications, be they global operators or equipment vendors, are seeking to respond to this tough market and technological environment . Operators are focusing on core performance: improving their operations and reducing costs and, more broadly, becoming more nimble and customer-focused. To cut costs, operators are increasingly outsourcing network management. To become more nimble and customer-oriented, operators are pushing the concept of wireless services to as many uses and users as they can in the wake of the success of Apple’s iPhone and iPad. While operators struggle with the task of coming to grips with wireless and on-line services, the equipment vendors face the challenge of reorganizing innovation in communications technologies. Throughout the 1990s and the beginning of the 2000s, the organizational recipe for success seemed linked to horizontal and vertical specialization: the ability of innovative firms to focus on specific products and processes in contrast to the horizontal diversification and vertical integration that typified the organizational structures of “Old Economy” telecom equipment vendors. In addition, comtech firms to varying degrees globalized their labor forces, following the path already taken by computer equipment manufacturers like IBM and HP and the semiconductor vendors. Enabling these highly focused modular organizations were open standards and modular technologies; now innovators could configure new products and systems much like Lego-toys. Following Cisco System’s lead in growth-through-acquisition, innovative firms engaged in M&A to add quickly to their technological portfolio or change technological focus.
That organizational recipe for success in the comtech business seems far less certain than just a few years ago. There is a new trend to co-mingling of development resources that are becoming a part of emerging productive model(s) for innovative enterprise. How the co-mingling will unfold exactly is still far from certain, but key industry actors such as Apple and Ericsson are questioning the existing division of labor in the industry as they vertically re-integrate into upstream activities in order to exercise more control over the development of new technologies.
All actors across the board are struggling with evolving technological forces that will shape market opportunities in the coming years:
- Access technologies: These technologies will enable the continued penetration of wireless which also will drive continued penetration of broadband into new uses and to new users.
- On-demand network access to computing resources delivered as services: Cloud Computing is what we call an “enhanced utility”. Like public utilities such as electricity, cloud computing resources can be accessed in user-demanded amounts once the pipe is connected through broadband or wireless access networks. Particularly when linked to wireless devices and the ever expanding range of sensors, the convergence of wireless and cloud resources will provide the future framework for on-line services.
- Regulation: A changing mosaic is taking form in the U.S., European Union, and the emerging markets of Asia as regulators address the viability of companies and their ability to launch new products and services. Particularly the convergence between wireless space and the emerging cloud computing resources calls for a new view on regulatory and policy issues. Unless these issues are tackled at an international level, the new services business will be limited by regulatory lag and impediments.
- On-line content: Growing sophistication – demonstrated particularly by non-telecom companies such as Apple – in how to profit from consumer and business content offerings, inspiring more partnerships like BT’s alliance with Yahoo UK.