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TIA paper probes challenges facing service provider market

A new white paper from the Telecommunications Industry Association (TIA) examines the many changes facing communications service providers. Confronted by challenging financial and market dynamics, tod...

September 1, 2002  

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A new white paper from the Telecommunications Industry Association (TIA) examines the many changes facing communications service providers. Confronted by challenging financial and market dynamics, today’s service provider community has changed the way it approaches new infrastructure and service deployments.

Through a series of interviews with service providers in North America, a team of TIA volunteers gathered information about the strategic business plans of network operators from several key sectors: competitive players, cable service providers and wireless carriers.

“In an effort to understand the customer better, TIA felt it necessary to have frank discussions with service providers about what they face in today’s marketplace,” said Eric Nelson, TIA’s vice-president of global network marketing. “With this project, it was our intention to understand the changing strategies service providers are implementing in order to remain successful. We hope that with these results, we can help our member companies better prepare the products and services required by their customers.”

Findings of the TIA paper include:

A fight for subscribers has pushed players into competing customer bases. Mature markets and lower growth rates have caused service providers to look outside their traditional markets for new customers. The future will see intensified competition for the same subscriber base;

More work with the subscriber is necessary. Subscribers are not adopting new services as quickly as had been predicted. To convince subscribers to buy, some new services must be packaged more affordably and provide more value than they currently do. Service providers also need to get closer to the consumer to better understand the kinds of services they will buy;

Data services will drive revenue in the near term; converged services still look years off. Due to the investment in legacy networks and uncertain financial markets, service providers plan only modest near-term changes to their infrastructure;

Service providers are returning to business fundamentals. For most, it’s “back to basics.” For the majority of those companies interviewed, their focus is on reducing capital and operational expenses in an effort to increase cash flow and profitability;

Service providers have become risk-averse. Economic downturn and uncertain financial markets have caused industry players to proceed cautiously with capital expenditures. Operators today focus on lowering network operation costs and increasing return on investment instead of seeking “killer applications” or hyped-up “disruptive technologies.”

Service providers represent one of the major customer sectors of TIA member companies. Between November 2001 and March 2002, a TIA volunteer group held telephone interviews with high-level strategic managers of communications service providers to ascertain qualitative details about how the companies have responded to, and are planning to respond to, industry dynamics.

During the hour-long interviews, respondents were asked approximately 30 questions that focused on strategic use of technology and services, timing and scope of technology introductions, purchasing processes, their views on established and emerging equipment suppliers, wish lists from equipment vendors, and general company strengths, weaknesses and positioning.

“Just as prosperity and ebullient financial markets once encouraged innovation risk-taking, economic downturn and uncertain financial markets have turned many service providers cynical and risk-averse,” the white paper states. “In reaction, major industry segments are rapidly consolidating. Yet, our discussions with service providers points to a way out of this cycle and to long-term recovery.”

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