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Title: ITU Regional Workshop on


1
The changing Market Environment
  • ITU Regional Workshop on Strategic HR
    Management Cairo Egypt 13-17 April 2008

Lecture 3
2
The changing market environment Presentation
Outline
  • Structure changes
  • Major changes in the Service Providers' revenue
    structure
  • Pricing policies, Interconnection and Peering
  • New actors and new business models
  • Development of Broadband accesses and IP based
    services (fiber and wireless)
  • Conclusion Impact on Human Resources

3
Telecommunications is the fastest changing
industry
  • Regulation, privatization and competition are key
    drivers
  • Mobile is becoming a substitute to the fixed-line
    telephone
  • Data is overtaking voice
  • Internet business model has changed the Industry
  • For end users, scarcity is being replaced by
    abundance
  • Telecom demand is driven by need and
    affordability
  • Networks are gradually becoming multimedia
  • Inefficient operators are driven out of business

4
Vertical integration and monopoly
Monopoly
The monopoly owns the infrastructure and provides
services
Services
Infrastructure
Market
5
Vertical integration and competition
Incumbent
Competitor
The incumbent still owns the infrastructure and
provides services. Accounting separation of
infrastructure activities
Services
Services
Infrastructure
Market
Market
6
Vertical separation and competition
Incumbent
Competitor
The infrastructure is vertically separated but
still owned by the incumbent, which also provides
services
Services
Services
Infrastructure
Market
Market
7
Vertical separation and competition
Incumbent
Competitor
The infrastructure is vertically separated to an
independent company, which is not permitted to
provide services
Services
Services
Independent firm
Infrastructure
Market
Market
8
Joint ownership of infrastructure
Incumbent
Competitor
The infrastructure is vertically separated to an
independent company, jointly owned by the
incumbent and the competitor. Both permitted to
provide services
Services
Services
Jointly owned
Infrastructure
Market
Market
9
Infrastructure or facility-based competition
Incumbent
Competitor
Services
Services
Interconnection
Infrastructure
Infrastructure
Market
Market
10
Assignment Example Sweden. The actual situation
in Fixed line. Vertical separation and competition
TeliaSonera
Competitor
The infrastructure is vertically separated but
still owned by the TeliaSonera, which also
provides services
Services
Services
Infrastructure
Market
Market
11
Assignment Example Sweden. The preferred
situation in Fixed line. Vertical separation and
competition
TeliaSonera
Competitor
The infrastructure is vertically separated to an
independent company, which is not permitted to
provide services
Services
Services
Independent firm
Infrastructure
Market
Market
12
Assignment Example Sweden. Mobile telephone 2G.
Infrastructure or facility-based competition
TeliaSonera
Vodafone (Telenor)
Tele2
Services
Services
Services
Interconnection
Interconnection
Infrastructure
Infrastructure
Infrastructure
Market
Market
Market
13
Assignment Example Sweden. Mobile telephone 3G.
Joint ownership of infrastructure
TeliaSonera
Tele2
Vodafone
Hi3G
Services
Services
Services
Services
Jointly owned
Infrastructure
Jointly owned
Infrastructure
Market
Market
Market
Market
14
Changes in revenue structure
  • Changes impact both developing and developed
    countries with different consequences
  • Examples
  • End user revenue market in a developed country
  • Overall market view in a developing market in a
    highly competitive environment Lithuania
  • An instructive case study analysis Telecom
    Poland (TP Group) revenue structure analysis
    based on the last 5 years Annual Reports number
    of employees
  • How does it compare with a telecom operator in
    Africa? (Tel One Zimbabwe)
  • Impact on operator strategies
  • Note on case studies All figures are directly
    derived from published market figures by Telecom
    Regulation Authorities and from TP and TKL
    (chosen for case exemplarity and company
    reactivity on market changes)

15
End user revenue market in developed countries
Electronic communication end user market in
France
Mobile services including SMS, VAS, MMS, 3G
Internet and multimedia mobile services
Fixed telephony including PSTN and invoiced
Telephony over IP (excluding ToIP part of
multi-play bundles)
Internet services including fixed Internet
access, VAS, IP TV and multi-play services
Change in accounting
Source ARCEP, France
16
Telephony becomes IP in developed countries
Part of IP in fixed telephony services originated
traffic (France)
Source ARCEP Fixed IP telephony services offered
by High Speed Internet access, providers
excluding VoIP services on best effort Internet
  • Delivered as a value added service on top of
    broadband access, IP telephony is a qualified
    substitute to traditional telephone services

17
Overall communication market revenues in Lithuania
Market overall revenues (in million LTL) and
growth over the preceding year in
Revenue distribution in
1
3
5
9
11
22
34
48
50
18
Leased lines Data
Internet access services
Interconnection
Mobile communications
Fixed telephone
transmission services
communications
Source Communication Regulatory Autority,
Republic of Lithuania
18
Study case Telecom Poland A rather stable
business (at first glance)
TP Group results 2002-2006
20
15
Billion PLN
10
5
0
2002
2003
2004
2005
2006
Net profit
Revenue
Operating profit
1 PLN 3.9
Source TP group annual reports and
presentations of financial results
19
Stable and profitable, but
TP Group results 2002-2006
20
15
Billion PLN
10
5
0
2002
2003
2004
2005
2006
Net profit
Revenue
Operating profit
Source TP group annual reports and
presentations of financial results
20
  • What preparations
  • Staff count present jo classification
  • Future job demand competence gap
  • Define capacity building strategy
  • What training resources needed where to find

21
with a deep and fast change in business and
revenue structure
TP Revenue distribution 2002-2006
20
Other
15
Data services
Mobile services
10
Billion PLN
Interconnection to Mobile
Interconnection to Fixed
5
Fixed Telephony services
0
2002
2003
2004
2005
2006
Includes incoming from International
22
Impact of Economical Change Looking for margins
and new revenues
  • New priorities
  • Operation cost reduction
  • Broadband accesses and IP networking
  • Becoming customer centric
  • Need to innovate and be first on market
  • Need to invest on IT, Service platforms, OSS,
    Business and Service Management
  • Re-engineering
  • Revenue decline on voice traffic (e.g. from 80
    of fixed incumbent revenues in 1995 to 20 in
    2006 -Due to VoIP pricing model and competition)
  • Incumbent operators to lose margin and renounce
    to use voice traffic revenues to subsidize Access
    costs
  • Interconnection still growing
  • but Bill and Keep and Peer-to-Peer trends will
    make it decline later on
  • Wireless communication is strongly growing in
    traffic and penetration
  • but will be impacted by revenue decline on voice
    traffic
  • Broadband access and services are strongly
    growing
  • With high competition in service offering

23
How will these New Priorities impact on the
Management of Human Capital?
24
The changing market environment
  • Major changes in the Service Providers' revenue
    structure
  • Pricing policies, Interconnection and Peering
  • New actors and new business models
  • Development of Broadband accesses and IP based
    services
  • Impact on Human Resources

25
Voice pricing is impacted by the disruptive
Internet pricing model
  •  Bill and Keep  and peer to peer agreement is
    the basis of Internet pricing model
  • Currently applies to flat rates Internet access
    and for unlimited Telephony over broadband for
    local or national calls to fixed telephone lines
  • Usage based pricing used to be the traditional
    model for voice services
  • CPP Calling Party Pays
  • CNP Calling Network Pays (Interconnection fees)
  • RPP Receiving Party Pays (applies to mobile in
    the US)
  • Call connection/attempt fee
  • Volume or Call duration based pricing (even when
    it is a bulk price for x hours of usage as in
    mobile)
  • Development of Mobile networks worldwide (outside
    the US) benefited from CPP, CNP models

26
The future of voice service pricing
  • Unlimited flat rate already almost generalized
    for voice (VoIP) and Internet connectivity on
    fixed networks
  • The transition to a flat rate is facilitated by
    the huge capacity made available on networks by
    recent technology improvements and by the
    aggressive drive of some players seeking to build
    market share.
  • Trend towards flat-rate charging expected to
    continue at a moderate pace and include
  • national/local voice services, internet
    (broadband) access and usage
  • International to all networks where Bill and Keep
    or RPP prevails
  • Internet access and basic multimedia/IPTV
    services
  • Billing on duration for international calls
    (several different international termination
    rates) and on duration or by event for new
    services or value added voice and multimedia
    services likely to continue
  • Billing by minutes and interconnection (CNP) fees
    should continue when Peer to Peer may not apply
    Case of developing countries for fixed and
    more specially for calls to mobile for which
    Interconnection plays a strong role in the
    prepaid model of business

27
Price Wars
  • In Africa Price Wars have broken out in Nigeria,
    Uganda, Kenya
  • Free Cares after Midnight
  • Uganda 50 free Airtime (MTN
    CELTEL)
  • Response by regulator was for free calls at
    certain hours

28
The changing market environment
  • Major changes in the Service Providers' revenue
    structure
  • Pricing policies, Interconnection and Peering
  • New actors and new business models
  • Development of Broadband accesses and IP based
    services
  • Impact on Human Resources

29
New Market Entrants
  • Two New Mobile Operators Licenced in Uganda
    bringing total to 5
  • One more Mobile Operator licenced in Kenya, plus
    fixed Operator getting a mobile licence
  • New Operators need Staff to roll out their
    networks. Who is the likely victim?

30
New services are booming, each with different
actors and different revenue model
  • I can make a phone call on my PC
  • I can receive mails on my mobile
  • I can watch TV on my PC
  • I can connect my old telephone set on ADSL modem
  • I can connect my TV on ADSL modem instead of an
    antenna, a cable or a dish
  • I hear music and watch movies on my home cinema,
    my PC or even on my mobile
  • I can pay my parking of my car with my mobile
  • Change in social behavior

Technological evolution, Economical
revolution New business models, multiple
interaction
31
Communication services are not any more the
private domain of telecom operators
Service Provider (open)
Service Provider (Wholesaler)
Interaction
applications
wholesales of services
End User
Retailer
subscriber data native applications
Multiservice subscription
wholesales of network resources or revenue sharing
access
Access Provider
Connectivity Provider
Connectivity Provider
32
The changing market environment
  • Major changes in the Service Providers' revenue
    structure
  • Pricing policies, Interconnection and Peering
  • New actors and new business models
  • Development of Broadband accesses and IP based
    services
  • Impact on Human Resources

33
In many countries ADSL is the initial driver for
broadband and IP services
34
High speed Internet access is a facility The
issue is to grow revenues and margins
35
The broadband revolution
  • DSL is shaping the market in terms of
  • Growth pattern and need to have
  • Service delivery oriented business models
  • NGN architecture deployment
  • Competitive landscape and service providers
    interactions
  • Wireless broadband access (e.g. WiMAX, 3G 4 G)
    likely to take over the market
  • Nomadism and Mobility,
  • Access to service where DSL is not available
  • Affordability in remote areas, even dense areas
    diversification, fair competition

36
The changing market environment
  • Major changes in the Service Providers' revenue
    structure
  • Pricing policies, Interconnection and Peering
  • New actors and new business models
  • Development of Broadband accesses and IP based
    services
  • Impact on Human Resources

37
Key strategic move impacting HR management
  • Accelerating broadband access penetration (
    local loop unbundling when applicable)
  • Impact on subscriber line management and outside
    plant quality handling, reduction of cost of
    ownership by automation of operation support
    systems and processes
  • Deployment and management of new Broadband
    Wireless Access
  • Introduction of new services
  • Marketing and Market Strategy in Company driving
    seat
  • Aggregating content and dealing with Content
    Providers
  • Deep change in commercial practice and
    organization
  • Convergent Point of Sales for residential and
    mass users
  • Reinforce (or create) business customer sales
    including Key Account Managers
  • New distribution channels
  • Flexible pricing strategies
  • Maintaining cost control and rebalancing
    resources
  • Re-engineering and restructuring into separate
    business units
  • Replacing static remotely localized teams by
    centralized mobile intervention teams

38
Human Resources What is changing what ?
Competition (driven by Internet, Regulation and
Globalization)
  • Ability to carry out instant deployment of the
    staff
  • Growing guidance provided by the Marketing and
    Finance Departments
  • New skills required from ALL Managers financial,
    legal, regulatory, coaching ability, team
    leadership, etc,
  • New corporate requirements in terms of career
    management
  • improving internal efficiency (process
    transformation)
  • Improving CRM supporting platform and associated
    processes
  • Reducing time to market for new services
  • Managing customer satisfaction

CRM Customer Relation Management
39
Human Resources What is changing what ?
Technology, New Services and Convergence
  • Growing number of virtual Job positions
  • Drastic reduction of the number of technical
    staff
  • Growing dependence of the staff from the
    Management Information System
  • Growing number of nomad employees
  • Intensive use of Knowledge Management (learning
    entreprise)
  • Towards all-IP networks and services
  • Regrouping fixed line / Internet / mobile
    commercial organization to mass users
  • Developing and marketing convergent solutions for
    residential and mass users
  • Developing and marketing convergent solutions for
    business users and application providers

40
Changing Mentality and Organization
  • From infrastructure and basic service delivery
    operations to customer-centric commercial
    activities in a competitive environment
  • In depth changing of mentality toward innovation,
    sales and marketing and streamline operations
  • Setting up and managing a strong CRM system and
    organization
  • Ensuring that each employee benefits from
    end-to-end visibility on the network as well as
    on the delivery of services
  • Enterprise and business customers as a key target
    for the former incumbent operator
  • Country coverage Network and Points of Presence
  • New converged communication service handling IP
    VPN, IP Centrex, fixed and mobile voice and data
    services.
  • Communication management services offered to
    large enterprises and organization (outsourcing)

41
Major issues in HR management
  • Change in employee status (from Public
    Administration to private company rules)
  • Ability to hire qualified personnel for
    accelerating the development of new services
  • Ability to promote and managed the careers of
    most qualified and efficient personnel
  • Developing new capacity building to handle new
    range of activity
  • Managing and defining new job families (design)
  • Setting up talent review and focused career
    development programs for highly qualified
    employees
  • Setting up extended personnel conversion programs
    and organizing career-oriented deployment
    scenario
  • Facilitating staff mobility and personal
    initiatives

42
CONCLUSION
  • Without an Understanding of the Business, its
    direction and Challenges, HR cannot be in a
    position to make a meaningful contribution in
    terms of planning and responding.
  • The environment is changing too fast and only
    those who invest in anticipation have chances of
    survival.

43
CONCLUSION
  • Telecoms is a Technical field. We need to
    understand the technical aspects of this
    business.
  • But business is about money. HR needs to
    understand the financial aspects of the business.
  • Even in Regulation, you cannot regulate
    businesses you do not understand. Those who
    practice HR in a regulatory environment need to
    understand the businesses of their industry.
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