Where com- petition is now a reality, the public telecommunications operators PTOs are forced to minimize PTOs are forced to adopt a much more commercial attitude towards marketing and b
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Telecommunications Service Providers
Historically, telecommunications networks have been run by state-owned organizations, who have operated as legally protected monopolies These organizations tended to run telecommunications
services, while simultaneously reducing unit costs and attracting private capital investment; in
other words there is an attempt to make the PTOs more commercially responsive Where com-
petition is now a reality, the public telecommunications operators (PTOs) are forced to minimize
PTOs are forced to adopt a much more commercial attitude towards marketing and business
strategy This chapter reviews briefly how some of the basic principles of marketing may be applied
to a telecommunications marketplace and in addition outlines some of the PTOs’ options for
business development
Like any good business, a PTO needs to define its business objectives clearly, including
A typical mission of a PTO might be:
to meet business (and/or residential) customers needs
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Networks and Telecommunications: Design and Operation, Second Edition.
Martin P Clark Copyright © 1991, 1997 John Wiley & Sons Ltd ISBNs: 0-471-97346-7 (Hardback); 0-470-84158-3 (Electronic)
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manner, developing the business to sustain growth in company earnings
groups, including the handicapped
The mission needs to be sufficiently clear to motivate company staff appropriately, but
sufficiently flexible to allow for change in business circumstances
company management Each of the various functions and organizational departments
so unaware of it that they do not buy it Similarly if it is far too expensive, not well enough made, simply too difficult to purchase, or if the customer service is poor, then customers will not want to buy it
activity easier, more effective, cheaper, more enjoyable, or may be attractive for some other reason
A large PTO will be wise to maintain a balanced portfolio of products and services
whenever there is a sudden and significant change in market demand, or when a rival company rapidly introduces a much better product Nonetheless, each product must be
service terms we interpret these as follows:
46.2.1 The Product
be defined as well The ‘quality’ is not only the service or manufacturing quality, but
expected speed of repair should be defined
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46.2.2 The Price
Price is an important consideration in the customer’s final decision whether or not to purchase The customer may be unable to afford too high a price, no matter how ‘fair’
As a first estimate of a suitable price, it is valuable to undertake a ‘cost-plus’ analysis
and the exchanges These items are needed by all customers, irrespective of how many calls they make
c o s t s
and revenue
Break Number
u n i t s f- I More
[loss) 1 units
I (profit)
Figure 46.1 Determining product price
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match the actual inter-exchange call demand Other variable costs include those
associated with staff costs (service level could be adjusted), administration, etc
The revenue from the telephone service is the total money collected, and it is equal to
costs and revenues is as shown in Figure 46.1
equals the costs At this ‘point’, sufficient products (i.e calls or whatever) have been
made for the company to break even Selling fewer units than this will result in a loss
Selling more will generate a profit
The number of units that have to be sold to break even can be adjusted, by adjusting
‘unit’, the smaller the number of units that need to be sold in order to break even This
is also illustrated in Figure 46.1
The degree to which the number of sales is sensitive to price is known as the price
elasticity Normally, one expects a lower price to attract more sales and a higher price
commodity products the only important factor in the buyer’s decision may be which competitor’s product is the cheapest
46.2.3 The Place
products, customers’ loyalty will make them travel long distances to purchase a given
‘brand’ of product For other products (for example, foodstuffs) the customer is likely
to choose from the brands available on the nearest supplier’s shelf (e.g supermarket)
‘lines are available in major cities’) The plan also needs to lay out the location of sales and customer support staff, and the method by which customers may ‘buy’ the service (e.g by going to the local telephone office, or by calling a freephone number, etc.)
46.2.4 Promotion
Promotion is the means by which the intended customers of a product or service get to
many techniques used in this field
46.3 PTO PRODUCT DEVELOPMENT
procedures detailing the product, its launch and subsequent support One possible
means of doing this is by means of a ‘product manual’ Suggested topics to be covered
in such a manual are given below
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46.3.1 Product Manual
e
e
e
m
e
e
m
e
e
0
e
m
0
A full description of the product (or service), describing its customer applications
connected to the network
companies); the expected product lifetime, and the changeover strategy for products which it is planned to replace
‘upgrade’ dates
service quality assurance monitoring checks
The price of the product and any discounts; the warranty, service, maintenance and regulatory conditions
equipment ( C P E ) may have to be type-approved for connection to the network
behalf of customers
advertising and promotional methods will be used?
Is the product to be sold and transported to the customer’s premises (e.g an item of
should either be freely available to meet the demand of customers or be deliverable within the target lead-time
procedure should to be established
demonstrate complex services, and shops are needed for retail sales A full price list must be available
Records of customer names, and of the applications to which products will be put,
predominantly in conjunction with a facsimile machine may help maintenance and network design staff
A telephone number is needed for customer enquiries and fault reporting
available
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uct, not just in technical, quality and reliability terms, but also from the marketing and sales perspective, and in financial viability terms
0 A proper procedure should be established for updating the product manual
Finally, we consider the directions in which the world’s major public telecommunica- tions companies are likely to evolve and develop their business over the next few years Historically, most PTOs were restricted to providing telecommunications network
services within a single country, with international extension of network services made
available as a result of bilateral agreement between two or more PTOs
interconnection market’, though there is growing business resulting from international
sales and value-added services
From this position, each PTO must develop its business strategy, taking into
network development and its capital resources
1 Information technology and value -added service
m a r k e t s
sales, cellular radio etc
lnternational
t r a f f i c Main business
i n basic home market telecomms
Basic telecommunications interconnection
market
Figure 46.2 Typical PTO business (late 1980s)
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concentrated on developing the sophistication of its established network, on increasing
phone), and maybe by diversifying the number of basic services offered (for example,
by introducing a packet switched data network) In support of this strategy, finance is
expanded home customer base, until the point of home market saturation is reached
spheres of activity Opportunities for diversification include the specialist international service markets, and the whole field of value-added and information services It seems possible that by the early 21st century a small number of major PTOs will have grown
than their previous operations Notably British Telecom (BT), AT&T, France Telecom,
goal Figure 46.3, illustrates an example in which a PTO’s business is diversified over a large range of markets throughout the world, with steady and balanced growth in each
of the markets
How will these companies achieve this level of expansion? Well, their first step will be the generation of spare cash from their established business Then, diversification into
@ Balanced business Information technology
and value -added service markets
Basic telecommunications interconnection
market
Figure 46.3 Business sphere of major international PTOs (mid to late 1990s)
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turers, computer hardware and software suppliers, and may even see enormous PTO conglomerates, operating in a number of regions of the world Aspirations to become a
‘global’ PTO have already been demonstrated by a number of PTOs, which have sought
basis
telecommunications and value-added service needs of the world’s multi-national corp-
will ignore this business at their peril
In Europe we can expect a fight for the domination of the single European market
( S E M ) in the European Union and a ‘goldrush’-like scrambling between western PTOs
Europe The fight for the North American domestic market is already raging and the gloves are off for the world market battle! A major business conflict is in prospect, and
company survive!