Abstract
This paper reviews corporate strategies and government policies
in the international telecommunications sectors of the United
States, the European Union, and Japan. Countries and carriers
experience different rates of growth in telecommunications revenue
in their domestic markets. An analysis of market data revealed
that the timing of the opening of domestic markets to competition
made no difference in the rate of growth. Instead, the level of
development and rate of overall economic growth were the determining
factors. Trends of the international telecommunications industry
are evaluated with strategic options for globalization for smaller
countries and carriers.
Introduction
The domestic telecommunications markets in the United States,
the states of the European Union, and Japan differ in their structures
and their rates of growth. Between 1985 and 1995 telecommunications
revenues for the surveyed countries have generally grown at rates
faster than new line activation or increasing call volume. Tariffs
have been restructured, the mix of calls—local, long distance
(trunk), and international—has changed, and leased-line and
mobile services have grown relative to traditional switched, wireline
telephony. The revenues for telecommunications carriers have increased
dramatically with the liberalization of domestic markets. Yet,
there is no obvious correlation between a relatively "early"
or "late" opening of domestic markets and overall rates
of revenue growth.
Countries differ in the amount of domestic foreign investment allowed and carriers differ in the nature of their foreign direct investment (FDI) in telecommunications markets abroad. The United States, for example, currently allows 25 per cent foreign ownership of its domestic telecommunications carriers, while Japan is only just beginning to open its market to foreign investment and partnering. While carriers in the EU and the United States invest heavily in liberalized cellular markets, EU-based carriers tend to invest in markets to which they have a "natural" cultural or historical affinity. U.S.-based carriers are more motivated by market opportunities and expectations of growth in their choice of FDI.
Two major trends characterize the international telecommunications industry:
These two trends hasten the liberalization of telecommunications markets around the world. The role of national governments is changing from that of a direct player to that of policy maker and regulator. The nature of international telecommunications trade is evolving from a bilateral, nation-to-nation framework to a multinational, multilateral company-to-company paradigm. Major international telecommunications alliances have taken many forms with the potential to dominate segments of international. Nevertheless, demand will increase for smaller firms able to provide local presence and technological expertise.
There are various strategic options available to smaller countries and carriers. These strategies range from domestic to regional to international:
The domestic telecommunications markets in the United States, the states of the European Union, and Japan differ in their structures, rates of growth, and reliance on inflows associated with terminating international calls. They also differ in their openness to foreign investment and in the nature of the relationships between equipment manufacturers and carriers.
1.1 Transition to competitive home markets
The domestic telecommunications market in the United States was dominated by AT&T for most of the twentieth century. GTE, a much smaller local carrier, offered service in isolated parts of the country, and there were approximately one thousand very small local operating companies. In 1982, Judge Harold Green approved the Modified Final Judgment (MFJ), settling an antitrust case first brought in 1974. The MFJ broke up the Bell system into seven large regional holding companies and their operating company subsidiaries (the RHC's and RBOC's or "Baby Bells"). A new AT&T was created with long distance (including international) and manufacturing divisions, and two smaller companies formed out of the non-wholly-owned Bell subsidiaries of Cincinnati Bell and Southern New England Telephone. The divestiture of AT&T into the smaller units formally took place in 1984.
As dramatic as the break-up of AT&T was, it is useful to remember that entry into long-distance (trunk) carriage, by MCI and Sprint, and entry into equipment manufacturing, by Nortel, Ericsson, etc., had been allowed prior to the divestiture. The "new" AT&T had both carrier and manufacturing arms and kept the strong international presence of the pre-breakup company. (The manufacturing functions have recently been spun off into Lucent Technologies Corporation.) From the start, the Baby Bells have sought to expand beyond their local-service orientation by entering the long-distance business and, in several cases, cable television or video delivery. Many have invested in operating companies abroad, and all have sought international roles. As the result of recent mergers, at the time this is being written there are now five remaining Baby Bells, each with a number of international holdings but no significant long-distance or international traffic.
In Japan, the reform of the telecommunications industry began in 1985. In April of that year, competition was introduced by privatizing NTT and allowing new common carriers (NCC's) to operate for domestic long-distance and international telephony. New carriers were also allowed to operate regionally with mobile telephones and satellites.
During the period from 1985 to 1991, NTT reduced the price of long distance calls. The NCC's started to compete with NTT in the long-distance market in 1986. It was clear that the introduction of competition reduced prices. As the NCC's tried to gain market share and NTT, in trying to keep market share, lowered its prices, a cycle of price wars took place.
Japan's Ministry of Post and Telecommunications (MPT) believed that the monopoly power of NTT, particularly the bottleneck in access services, was slowing down the development of the Japanese telecommunications industry. A division of NTT would introduce more competition and the speed of growth of the industry would be greater. In December 1996, MPT and NTT agreed upon a plan for restructuring NTT. NTT will be divided into NTT Long-Distance, NTT East-Japan, and NTT West-Japan. NTT East-Japan and NTT West-Japan will be heavily regulated by the MPT, while NTT Long-Distance would be allowed to enter into the international telecommunications market and KDD, the major supplier of international services in Japan, will be allowed to supply domestic telecommunications services. Divestiture of NTT should be completed by the end of the 1999 fiscal year, and KDD started to supply domestic telecommunications services in July 1997.
One can view the European Union (EU) as a single entity that is only now opening up its telecommunications markets to competition. An alternative view is that the EU is in the process of moving disparate countries toward common policies, or at least common policy objectives in telecommunications. EU telecommunications policy has been driven by two major themes:
The Telecommunications Review of 1992 concluded that monopolies would no longer be sustainable. The European Commission adopted a Council resolution in 1993 that agreed to the liberalization of the telecommunications infrastructure with a deadline of accomplishing this by January 1, 1998.
Individual countries have different policies in completing the transition to a competitive home market. Countries such as the United Kingdom, Sweden, and Finland have already liberalized their markets to a considerable extent and are characterized by a competitive environment in many portions of the market place. By engaging in market liberalization for a number of years, these three countries have gained expertise in creating and fostering a competitive telecommunications industry.
The United Kingdom has long had competition in several sectors of the market. Policies concerning terminal equipment and VANs were liberalized in 1981 and competition in analogue mobile services was introduced in 1985. Since 1991, over 150 new companies have entered the fixed-link market. Since 1987, there has been steady deregulation of all market segments in Sweden. Competition was introduced into the mobile cellular market in 1981, and in the fixed-link segment in 1991. There has been competition in virtually all market segments since 1993. Finland has allowed competition in data networks and services since 1988, competition in cellular services since 1992, and in 1994 began to introduce competition at the local and international levels.
Denmark, Germany, France, and the Netherlands are on schedule to open up their markets to competition in 1998. These countries are developing regulations for ending their fixed-link telephony monopolies and each allows competition in the cellular market. Although de jure monopolies are officially ended, de facto monopolies often remain. France and the Netherlands have been slow to liberalize their markets so that they could protect the incumbent from competitive pressures.
Denmark opened up the supply and service of telecommunications equipment in 1990 and the mobile telecommunications market in 1992. Competition was opened for using leased lines for data communications in 1993, and for using leased lines for voice services in 1994. As of late 1995, Tele Danmark no longer has exclusive rights to install local area broadband networks, and direct interconnect traffic between national and mobile operators was permitted. Full liberalization of the telecommunications industry in Denmark was achieved on July 1, 1996.
Germany separated the regulatory and operating functions of the telecommunications sector in 1989 with the principle that competition is the rule and monopoly the exception. In the early 1990’s, terminal equipment, value added networks services, satellite and data and mobile communications services have been liberalized. As competition is being introduced, the key issues of interconnection and pricing of network components have been raised.
France introduced competition into its analogue cellular mobile communications in 1989. Since 1992, there has been competition in the digital cellular services as well. Full scale competition in network infrastructure and telecommunication services is scheduled for 1998 in line with the EU deadlines.
In the Netherlands, competition for VANs, terminal equipment and satellite services has been introduced. Data communication policies were liberalized in 1993, and competition in mobile services was introduced in 1995. The telecommunications sector was fully opened to competition on July 1, 1997.
Progress towards liberalization has been slow in Italy, Spain, and Portugal, where it has been necessary to overcome internal vested interests. Competition in digital mobile services began in 1995 in Italy. Opening up other sectors of the telecommunications industry to competition is behind the EU guidelines. In Italy, telephony services and infrastructure will open to competition in 1998. Spain and Portugal have asked for and received extensions to meeting the January 1, 1998 deadline, and will open their markets on December 1, 1998 and January 1, 2000 respectively.
1.2 Rate of growth of domestic markets
There have been different rates of growth in the domestic markets of the United States, Japan, and the countries that comprise the European Union. As one can see in Table 1, telecommunications revenues for the ten-year period from 1986 to 1995 have generally grown at rates faster than those of activating new lines or of increasing call volume, though the rate of increase has differed among countries. It is useful to look at the possible determinants of the different rates of growth across the twelve countries that are studied in the papers in this volume. Two possible hypotheses are that the differences in the rates of growth are determined either by the extent and timing of the opening of domestic telecommunications service markets or by relative level of economic development and rates of average economic growth.
Before examining the two hypotheses we look more closely at the telecommunications growth data. While one might expect the growth in revenues to be easily decomposed into the growth in main lines and the growth in call minutes—where such data are available, this is not the case. First, the rates—and more importantly, the structures of rates—have been changing in many countries. Second the mix of local and long distance (trunk) calls also continues to change. Third, there are many other sources of revenue, such as leased lines that, while generally small, are growing rapidly in many of these countries. And finally, mobile telephony accounts for an increasing share of traffic and has a differential share of the market across these countries. As we have complete data on main (fixed) lines in operation and total telecommunications service revenues from the ITU, we focus on these measures.
First we look at whether early or late opening of domestic markets appears to affect growth in telecommunications services. It does not appear that there is a correlation of when domestic markets were opened and the rate of revenue increases nor is there a correlation between the amount of increase of revenues over new lines or call rates. (Although it is difficult to fix a single date, this discussion focuses on Europe and uses the dates presented in the papers by Elixmann and by Scanlan, Williams, and Whalley. See Table 2 for a complete listing of these dates.) For example, Sweden opened its cellular market to competition in 1981 and its fixed-link segment in 1991, and Sweden’s rate of telecommunications services revenue increased 7% per year, substantially more than the increase in new lines (1.3%) or the increase in minutes (2.8%). Yet Finland, which opened its markets in 1992 and 1994 respectively, had revenues increase at a rate of 8.2% per year with new lines (2.4%) and minutes (3.8%) increasing only marginally over the rates of increase experienced in Sweden.
France opened its cellular markets in 1992, and just opened its fixed-link segment as of January 1, 1998. Revenues for telecommunications services increased at a rate (4.7%), close to the increase in minutes of telephone service (4.5%) and slightly better than the rate of increase for new lines (3.4%). Yet Italy, which only liberalized its cellular market in 1995 and its fixed-link segment 1998, had increases in revenues (10.3%) that were far higher than the increase in new lines (3.5%) and almost 50% higher than the increase in domestic calls (7.4%). Clearly there are factors which influence telecommunication revenue increases other than when domestic markets were liberalized or the percentage of new lines installed in the domestic market.
We tested the hypothesis that growth in telecommunications services was related to the level of development and the rate of overall economic growth using more formal methods. Given the nature of the data, we chose to employ both non-parametric tests that compare rankings and linear regression methods. The results from the two approaches gave similar results, and we found that growth in telecommunications was inversely related to the initial level of economic development and positively related to the level of growth in the aggregate economy, although with varying levels of statistical significance. In other words we found that, in general, the countries that started with the lowest levels of per-capita gross domestic product (GDP) in 1985 had the highest rates in telecommunications growth over the next nine years. Additionally, the rate of telecommunications growth was positively correlated with the rate of overall economic growth. In these analyses we used per-capita GDP, converted to U.S. dollars at market exchange rates, as the measure of economic development.
The correlations for the rankings of the twelve countries by telecommunications lines and revenues, on one hand, and economic level and growth, on the other, are shown in Table 3. The telecommunications data used are shown in Table 1 and the values of 1986 GDP per capita and growth in GDP per capita (both in U.S. dollars) are shown in Table 2. Both sets of data were taken originally from tables provided by the ITU.
We also used linear regression methods to investigate the relationships between the telecommunications growth variables and the variables based on aggregate economic data. The same data set was used. Although one should worry that the small sample size and limited range of the growth rate variables may lead to violations of the assumptions of the linear regression model, one can draw modest conclusions from the results. (See Table 4.) We ran two sets of regressions, one with growth in telecommunications lines as the dependent variable, the other with growth in telecommunications revenues. Each set consisted of three equations—one with the level of 1986 GDP per capita as the independent variable, one with the rate of growth of GDP per capita, and one with both independent variables. As shown in Table 4, three of the four single-variable regressions were statistically significant and all the coefficients in these equations had the expected signs. Only two of the four coefficients from the multiple regression equations had significant coefficients, and one of the coefficients that was not statistically different from zero had the wrong sign. Overall, we found that the regression results confirm the results of the non-parametric tests in that overall growth in telecommunications services in the twelve countries, by either measure, was inversely related to the initial level of GDP and—in most cases—positively related to the growth of the overall economy. Again, to restate these findings in less technical terms: in general we found that the lower the initial level of economic development, the faster the growth in telecommunications. Furthermore, growth in telecommunications was usually correlated with overall economic growth. In fact, we see from the R2 values that the variation in overall aggregate growth (on a per-capita basis) accounted for approximately 20% - 40% of the growth in telecommunications.
1.3 "Natural" markets for international communications
Countries often have "natural" foreign markets for their goods and services. The criteria for these "natural" markets include geographic proximity, common language, and former colonies. There are also high telecommunications traffic destinations that may be influenced by the presence of multi-national corporation traffic as well as the presence of immigrants within a country. For investment in international telecommunications, some countries may try to enter their "natural" markets or markets of high traffic destination. Others may pursue a different course of action based on other factors, such as experience in a certain technology. Table 5 through Table 16 indicate the "natural" and high traffic destination markets for the countries that are being discussed
Many of the telecommunications carriers in the US have invested in telecommunications carriers in other countries. (This is described in detail in Braunstein.) All five of the outgoing high traffic destinations are covered by strategic alliances with Concert (MCI), Global One (Sprint), and World Partners (AT&T).
During the years 1986-1995, main lines that became operational in the US increased an average of 3.4% per year, while at the same time minutes of telephone service increased 5.6%. Revenues from telecommunications services increased to 6.3% each year.
Canada ranks highest as a "natural" market, a major trading partner, and in international telecommunications traffic. Mexico also appears on all three lists, but there is not perfect commonality across these categories. (See Table 5.) In the case of the United States, it appears as though telecommunications traffic is more correlated with the volume of trade than with any notion of "natural’ markets, but this conclusion is weak at best.
Japan passed the 1985 Reform legislation liberalizing telecommunications, and domestic long-distance competition has emerged. Further competition in its domestic markets will be seen in 1999 when NTT will be divested. In the period from 1987-1995, a period which saw several price wars among NTT and the new common carriers, Japan’s telecommunications sector experienced an annual increase of 3.0% in new phone lines, a 3.4% increase in telephone minutes, and a 5.8% increase in revenues.
In the case of Japan, it appears as though international telecommunications traffic is related to both the volume of international trade (United States being the largest trading partner) and "natural" markets (with China, with its similar ideographic language and cultural ties, accounting for the second highest level of traffic).
The carriers based in the countries that make up the European Union are discussed on a country-by-country basis. These sections draw heavily on Elixmann.
In the UK, both BT and Cable & Wireless (C&W) have a large number of investments around the world that cover both cellular and fixed-link ventures. "Comparing the target countries of BT and C&W’s FDI with the main destinations of outgoing traffic from the UK…BT is active in four out of five of the most important traffic destinations either by itself or by the alliance with MCI. In the case of C&W there is, however, only one correspondence, namely in the U.S, (which is the most important outgoing traffic route from the U.K.)." (See Table 7.)
The U.K. has experienced a growth rate of new main lines of only 3.4% in the past ten years and yet has seen upwards of 150 new entrants into the telecommunications market. Minutes are more than double the rate of new lines (7.8%) and revenues have almost kept pace with an increase of 7.3% annually.
The Swedish carrier Telia has invested in Eastern and Western Europe and—to a lesser extent—in other parts of the world. There is a high correlation between FDI investment and the main destinations of outgoing traffic, with Telia investing in fixed-link ventures in four of the top five countries (Finland, Norway, Denmark, UK). For Germany, the Unisource alliance links the two markets. (See Table 8.)
Telia experienced "competition in its home market relatively early (and) has since then developed an…international strategy consisting of FDI and Unisource." Results of this strategy may be seen in that Sweden experienced only a 1.3% increase in lines between 1986 and 1995, 2.8% annual increase in minutes of telephone service, yet saw revenues climb 7.0% each year.
Telecom Finland has focused on cellular ventures abroad, in keeping with its own experience at home. Telecom Finland has invested in Sweden, Estonia, and the UK, all high traffic destinations, as well as in Latvia where it has close ties. Telecom Finland is not a shareholder in any strategic alliance nor is it formally allied with any other carrier. (See Table 9.)
Even though growth of new main lines going into operation in Finland averaged only 2.4% each year from 1986-1995 and calls increased slightly more at 3.8%, revenues jumped on average 8.2% each year.
Tele Danmark’s focus of FDI has been on cellular ventures in foreign countries, possibly due to experience in cellular technologies. Investments by Tele Danmark in other countries seem to correspond with Denmark’s opening up of the home cellular market in 1992. The high traffic destination countries of the UK, Norway, and US have not seen any direct investment, but are covered by the Concert alliance. (See Table 10.) Ameritech, the Chicago-based Baby Bell, has recently acquired 42% of Tele Danmark and now has operating control.
Although Denmark has experienced the lowest rate of annual percentage revenue growth of any of the countries studied (4.2%) with a miniscule .4% annual increase in the number of calls, the 4.2% is almost twice the rate of the number of new lines activated (2.2%).
KPN of the Netherlands has made few investments, and none in the high traffic destination markets. Those markets are served by the Unisource alliance and the alliance with AT&T in North America. (See Table 11.)
The Netherlands has seen an increase in lines of 3.4% each year, the number of calls increasing 5.5%/year, and revenues up 7.9% a year (1986-1995).
Foreign direct investments by Deutsche Telecom have concentrated mainly on cellular ventures in Eastern Europe and Asia, but none are in its five top outgoing traffic destination markets. (See Table 12.) Those destination markets are served by DT’s Global One partners.
Germany has seen an increase in active lines grow at the rate of 5% a year from 1986-1995. At the same time, the number of calls increased 7.1% annually, and revenues kept pace with the increase in calls to grow at the rate of 7.8% annually.
France Telecom aligned much of its FDI with its strategic Global One partners and has recently broadened investments outside that partnership. FT is a major cellular player, distributes global mobile satellite services, and is setting up its own international data ventures. (See Table 13.) Activity in high traffic destination markets is covered by Global One in Germany and the UK, and recent FDI in Italy and Spain.
Telecommunication services revenues, increasing an average of 4.7% for the years 1986 through 1995, have only kept pace with new lines (3.4%) and increased minutes of telephone service (4.5%).
Telecom Italia has made a number of foreign direct investments in both fixed-link and cellular markets. An investment has been made in the high traffic destination of France, but in no other outgoing high traffic destination country. (See Table 14.) Telecom Italia is "based on a more or less closed home market, has gained substantial international position as an investor in markets abroad (but is) still lacking presence in important markets in Western Europe, Asia, and North America….It is a latecomer with respect to global strategic alliances."
Revenue increases (10.3% annually) have far surpassed the number of new main operating lines which increased 3.5% a year. Revenues also were higher than the annual increase in domestic calls (7.4%).
Spain’s Telefonica has not invested in its major trading partners nor in countries of high traffic destinations. Rather, Telefonica has invested in some of its natural markets—Spanish-speaking countries in Latin America. (See Table 15.) The communications needs of Telefonica’s international business customers are taken care of by its participation in the Concert alliance, which is active in all five of Telefonica’s top outgoing traffic destinations.
Spain in 1995 opened its cellular market to competition, and is scheduled to open to competition its fixed-link markets in 1999. Yet, despite the lateness of opening its home market to competition, Spain has seen an increase of 4.9% a year of new lines activated (1986-1995). The number of calls increased slightly more than the number of lines installed, reaching a 5.2% increase per year. During this same period, telecommunication services revenues jumped 12.8% per year, more than 2 ½ times the number of new lines or calls.
Portugal Telecom has invested little outside of Portugal and what little it has invested has remained mostly in the Portuguese-speaking world. (See Table 16.) The high traffic destinations from Portugal will be served by the Concert alliance, which Portugal Telecom recently joined. Portugal Telecom has also forged closer ties with Spain’s Telefonica.
Portugal has seen a huge increase in the number of new lines activated from 1986-1995, roughly 10.1% each year. Telecommunications services revenue likewise have climbed an average of 17.7% each year.
2.1 Reliance on international settlements
International telecommunications settlement flows are determined by the accounting rates agreed to by correspondent carriers and the traffic volumes (and, especially, any imbalances). These flows influence the revenues, profits, and strategies of all telecommunications carriers.
The United States has experienced a steady increase in the number of outgoing calls in relation to incoming calls. There has been a corresponding growth in the balance of payments US carriers have made to overseas carriers. As a result, the Federal Communications Commission (FCC) has endorsed changing the accounting rates among nations so as to more accurately track actual costs. This is discussed more fully in Braunstein’s Section 3.1.
Japan and Italy have also experienced an increase in outgoing calls over incoming calls, but overall revenues did not decline. Countries such as France, Denmark, Germany and the Netherlands have had the ratio of incoming and outgoing international calls remain fairly constant for the time period 1986-1995. Spain, which has also seen its international call ratio remain constant, has seen a constant erosion in revenue gains, from an increase of 18.3% in 1991 over 1990 revenues, to only a 6.9% gain in 1995. Increases in revenues in Denmark, though, remained fairly constant for the same time period. Portugal, which has balked at opening up its domestic markets to competition, has experienced a much larger number of incoming international calls than outgoing calls (as much as 229% more in 1986, and still 175% more in 1995). Portugal would seem to be relying on the favorable international settlements and is not in a hurry to open its domestic markets.
2.2 Summary of findings—U.S and Europe
Differences in industry structure, history, and regulatory approaches make it difficult to directly compare the globalization strategies of carriers based in the United States, the countries of the European Union, and Japan. Nevertheless, the large numbers of U.S.- and EU-based carriers makes it worthwhile to attempt such a comparison, at least for these two regions.
We have looked at seven different areas in which we find useful comparisons that can be drawn. (See Table 17 for a summary.) First, the nature of international traffic varies across the two regions. Most international traffic from the EU countries is to other countries within Europe. On the other hand, while Canada is the highest-ranking destination from the U.S., the remaining top countries are located throughout the world (Mexico, U.K., Germany, and Japan, in order). This is clearly related to the second difference—accounting rate issues appear to be more important in the U.S. as the imbalance in international traffic leads to massive recurring cash outflows.
The patterns of foreign direct investments by carriers in each region can also be compared. It appears as though FDI by EU-based carriers depends, to a degree, on commonalities of interest—common language or culture, close distances, trading relationships, etc. By comparison, the foreign investments by U.S. carriers seem to be more motivated by perceived market opportunities and less by any "natural" affinities. However, both the EU and U.S. carriers have made major investments in cellular systems in other countries, as this has been one of the earliest areas of liberalization and openness to foreign investments.
Equipment manufacturers still have close ties to national carriers in several European countries. These relationships play a role in investment strategies, both domestic and foreign. The only large firm with a similar link in the U.S. is Motorola. (Smaller firms such as Qualcomm also combine technology, manufacturing, and carrier divisions; AT&T was another example before the spin-off of Lucent Corporation.)
Major carriers form and join international alliances for several reasons. It appears as though carriers in both regions view these alliances as efficient ways of providing high-margin value-added and vertical services to large multi-national corporations. In addition, the European carriers may consider the alliances as a useful substitute for direct investments while the U.S. carriers may focus on the possibility of controlling foreign operators in countries that are major recipients of U.S. calls, thus recapturing some of the settlements outflow.
Finally, while we realize any summary statements risk being too simplistic, we believe investment strategies by EU firms are more likely to have a technology-driven component. The most obvious example is the promotion of the G.S.M. digital mobile standard. It promotes a pan-European technology, provides added-value for the customers of European carriers when they travel, and generally contributes to the image of a united Europe. On the other hand, the investments of the U.S. carriers are more driven by expected market return. Using the same example, U.S. firms appear willing to propose any cellular standard, whether based on specific regulatory requirements or likely marketing and cost advantages.
PART II: TRENDS, LESSONS, AND OPTIONS
1. Changing Industry Structure
1.1 Benefits from telecommunication trade liberalization
We now discuss the benefits of telecommunications trade liberalization. Freer trade in telecommunications promises to deliver at least three economic gains: new and improved products and services, lower prices, and additional investment. Open trade in telecommunication services should result in more competition, lowering prices for most businesses and for many consumers and providing both with a choice of different service providers.
Probably the clearest evidence comes from the market segment where competition is currently the most keen: in international telephone services. Those markets where direct competition is permitted have achieved higher rates of growth than in countries that have retained a monopoly. For developed economies, this difference is significant; competition has raised the growth rate of traffic per subscriber from 5.6 per cent to 9.3 per cent per year since 1990. However, for emerging markets the difference is much more striking: over the same period competitive markets grew their international traffic per subscriber by 11.7 per cent per year compared with just 5.2 per cent per year in monopoly markets. This suggests that the potential benefits of trade liberalization might actually be greater for emerging markets than for developed ones.
Why should this be so? One part of the answer is because of unmet demand. Some 43 million people are on registered waiting lists for telephone connections in emerging markets and the average waiting time is more than a year. By introducing new investment in the market, waiting lists can be sharply reduced, as has been the case in developing markets that have privatized their public telecommunication operators at the start of the 1990s.
What about the potential costs of trade liberalization? Some governments are afraid that they will lose the ability to control entry and ownership in their domestic markets. The truth is that, at the international level, governments have practically lost the power to dictate who can provide services. For example, the development of alternative calling procedures such as call-back has occurred at a much faster rate than had been expected over the past few years. As a result, almost all markets are now open to some degree of competition.
By making commitments to open their market, governments are merely acknowledging what is already happening. In particular, it is necessary to reflect on the changing role of government, from being a direct player in telecommunications to a policy maker and regulator. Even though their direct operational influence may be greatly diminished, there will be more work for governments to do under a competitive market environment than was the case under monopoly service provision. That is because existing market players as well as potential new entrants will be looking for clear guidance on what sort of regime will be established for issues such as interconnection, numbering, universal service obligations and tariff policy.
1.2 Towards a multilateral trade framework
A new paradigm is emerging for international trade in telecommunications. The old paradigm, which might be loosely described as "inter-national" telecommunications, was based on bilateral relations between countries. The monopoly operators in those countries collaborated in the joint provision of international services. This model is now breaking down, not so much because the system is not working, but rather because it now fails to capture the full picture. A new pattern based on global competition is emerging. It recognizes that trade in telecommunication equipment and services now takes place in a multilateral environment in which the majority of trade relationships include multiple intermediaries between buyer and seller. We are moving from a world of one-to-one relations to a world of many-to-many. It is not nations that trade with other nations, but companies and individuals that conduct trade with each other.
What will be the impact of the market opening moves agreed at the World Trade Organization? The agreements are significant for two main reasons. First, because the countries which have made offers or commitments account for such a large part of the total world market. The 69 governments that made offers under the negotiations on basic telecommunications services (Geneva, 15 February 1997) constitute some 94 per cent of the global market for telecommunication services. Similarly, the 28 governments that signed the Ministerial Declaration on Information Technology products (Singapore, December 13 1996) account for 84 per cent of global telecommunication equipment exports. Second, because the agreements have been negotiated as part of a multilateral treaty, the offers and commitments are binding on governments and practically irreversible.
For many telecommunication users, the transition to a multilateral trading system will bring benefits in terms of greater choice and lower prices. For the majority of carriers, there will be significant benefits in terms of creating new market opportunities and a more level playing field. The goal is to extend the multilateral solution in which all countries move forward together and in which all benefit, not just those carriers with market power. Only then will the benefits of global competition be extended to all the world's inhabitants.
To better understand possible strategic options for smaller carriers, it would be instructive to review strategies of telecommunications carriers in the United States and Europe. Whether one looks at North America or Western Europe, one is struck by the diversity of approaches to international and global operations. This is the case whether one looks at carrier agreements, foreign direct investments, or alliances.
As Braunstein states:
There is no one single strategy behind the globalization of the diverse firms that are the major U.S. telecommunications carriers. The "Baby Bells" have been constrained by the terms of the AT&T divestiture, in the past, and currently by the Telecommunications Reform Act of 1996 from expanding into long distance and international carriage. As a result, many of them have sought to expand into growing markets overseas. But even in this case, they have followed different strategies.
Similar he finds different approaches for the integrated carriers, AT&T (formerly) and GTE (currently):
GTE has majority interests in two of Canada’s provincial carriers and has recently expanded into Latin America. …AT&T has used World Partners to affiliate with other carriers and with Unisource without making direct equity investments and—at the same time—has continued to be a major investor in carriers including, most recently, Telecom Italia.
2.1 Difficulties for smaller corporations
Smaller corporations are at a disadvantage in the move to globalization for several reasons. The existing international telecommunications alliances have been created by some of the world’s largest carriers, and they have exhibited a preference for dealing with others of a similar nature. There is a "learning curve" when it comes to entering new markets internationally, and often the investments needed are quite large.
The current international carrier alliances can be viewed as an attempt to replace the former club of national monopoly carriers with a cartel of alliances made up of mixes of former monopoly carriers and the largest "new" entrants. Regardless of whether the goal of these alliances is primarily to provide service for the largest multi-national corporations, their effect is to enable end-to-end control of key international links, providing their members with market and cost advantages.
The alliances differ in their structure, especially in the mix of equity participation and looser affiliations on other-than-equity bases. Nevertheless, in all three of the major alliances the members are either very large telephone carriers with considerable international presence (e.g., MCI, Sprint), or carriers who are dominant in their home countries (e.g., KPN, Telia), or carriers who are both (e.g., AT&T, BT, etc.). With few exceptions, smaller, non-dominant carriers appear to be effectively excluded so far.
Fortunately, there are compensating factors. First, regulatory intervention has reduced the potential payoff from controlling both ends of an international link. Regulations such as parallel accounting rate requirements and proportionate return have been effective. Second, although the pressure to lower accounting rates to more closely reflect costs will negatively affect many carriers from smaller countries, this change will go a long way toward "leveling the playing field" for new entrants by reducing the financial cushion of many incumbent carriers. And third, the existence of multiple alliances means smaller firms may be able to play one large entity off against another to find the best "partners." This last point may have been illustrated by Telefonica’s move from Unisource to Concert in 1997.
As additional countries liberalize various parts of their telecommunications sector, there are many opportunities for international partnerships and consortia to team with local partners and seek to enter these markets. However, preparing and submitting a competitive bid, or seeking to enter in any creditable manner, generally requires significant resources and knowledge. While firms can acquire the resources and knowledge in a number of ways, there are significant advantages that accrue to those with experience. Thus the process of competitive entry often presents barriers to the smaller organization. On the other hand, it should be noted that many smaller firms have proven to be quite good at entering new markets, and the large number of local consortia provides many opportunities. Furthermore, many countries are lowering their barriers to foreign ownership or partial ownership by foreign interests, partially in response to the recent WTO agreement.
The investments needed for new satellite technologies are massive, and very large, financially stable firms have a competitive advantage in becoming lead partners in satellite consortia. Although the technological and financial hurdles are significant, each satellite carrier needs "landing rights" in countries (or at least regions) throughout the world. As a result, there are many opportunities for smaller firms, especially if they have domestic interconnection rights, in the satellite consortia. The fact that each satellite system will use one or more of technologies such as CDMA or TDMA for their digital links to user handsets provides opportunities for firms with experience or expertise in these technologies.
2.2 Lessons learned from the U.S. and European carriers
The most obvious conclusion about the process of globalization one can draw from the activities of U.S. and European telecommunications firms is that globalization efforts are not always as logical or as profitable as one might wish. For example, whether one looks at Ameritech in Poland or U S West in the United Kingdom, it has been difficult at times to directly apply U.S. experience to operations in other countries. Nevertheless, many of the U.S. carriers’ foreign investments have been quite successful. The U.S. firms seem to be particularly able to work with complex consortia of investment groups and flexible enough to structure such groups to meet both the requirements of the host country and the needs of the others in the consortia. However, the U.S. carriers seem to choose opportunities where they have a controlling role. Similarly, European carriers have had varying results with international investments. The most obvious recent case has been BT's problems with its investment in MCI.
The second conclusion is that the U.S. firms appear to be settling for longer pay-back periods for their international investments than one might expect from all the focus on short-term corporate earnings. The reasons for this are probably complex, and this conclusion should be viewed as tentative and in need of confirmation. But if this is true, the reasons possibly include:
The third conclusion is that many telecommunications firms seem either to have a "portfolio" approach to international investments or a focus on investments that capitalize on their proprietary technologies and complementary lines of business. Although it takes significant time and resources to develop and manage interests in a number of countries, such an approach can markedly reduce the risks of international investments. Similarly, having experience with a specific technology can help offset the risks from not having country-specific experience. To cite one obvious example, Motorola has developed supplier relationships with entities in which it has invested in both the cellular and satellite industries. The practical effect of this dual relationship is that lower profits from the partnership can be balanced against additional sales by the parent company. (This is, of course, similar to Korean firms entering international markets that use CDMA technology.)
It is likely the implementation of the WTO telecommunications agreements will lead to further lowering of barriers and, therefore, a higher level of international activities by many firms. A countervailing factor, however, might be the possible entry of the Baby Bells into the U.S. domestic long distance market, from which they are now effectively barred by regulation. If such domestic expansion occurs, this might reduce both their interest in foreign markets and the funds available for foreign investment. Nevertheless, if increased foreign activity by U.S. firms were to occur, it need not be at the expense of foreign firms as the opportunities for international partnering and risk-sharing will also increase.
Policy makers in many countries protect the incumbent monopoly carrier. For a variety of reasons, including technological, bureaucratic, and political arguments, competition is restricted. Multi-national corporate customers are demanding that regulators in many countries allow competition in the provision of business services in the belief that competition will lead to lower prices and a wider range of services. Historically, multi-national corporations will move operations out of countries where access to adequate and reasonably priced telecommunication services are lacking. Often, agreements are reached where competition is allowed in the provision of value added services while the incumbent monopoly provides basic services and keeps the infrastructure intact. As a result there is a hybrid structure where global, integrated services are provided for multi-national companies by a variety of firms while some of the monopolistic services of the incumbent carrier are maintained. In the Asia-Pacific region, one finds a similar situation in Korea. Korea began its domestic market restructuring in 1990. Since 1994, there has been no restrictions on investment in value added service providers, and there has been a steady introduction of competition into each telecommunication service.
PART III. FUTURE SCENARIOS AND STRATEGIC OPTIONS
1. Telecommunications Services
We now turn to the future and the strategic options for smaller carriers and countries. There is no doubt that the business and economic model underlying both domestic and international telecommunications has been changing. Countries around the globe are witnessing the introduction of new services, the entry and growth of new carriers, and the changing economics of international traffic. There is pressure for tariff re-balancing in many countries as the system of subsidizing local service with super-normal profits in long-distance (trunk) and international services comes under attack from several directions. This is a time of transition, and there is no one clear strategy that is guaranteed to be the best for any particular carrier.
The pressure for prices in all aspects of telecommunications to more closely track costs will continue. Governments and carriers in all parts of the world recognize this fact; it is one of the key reasons that the adoption of the WTO telecommunications agreement may not be the major cause of drastic change. The result of this more open, more competitive future is that a firm will have to seek opportunities as they present themselves or risk becoming a slow growth, low margin operation.
We believe that there are five options that emerge from the analyses in this paper and the other recent studies cited above. They cover domestic, regional, and international opportunities and should not be viewed as mutually exclusive. In fact, as times and conditions change, the preferred mix and exact details will need to be adjusted to reflect the new environment. Starting with the more domestically oriented ones first, the options are:
We now cover each of these options in turn.
Lead the domestic market in an era of phased liberalization.
The deliberate, phased introduction of domestic competition planned by many countries has the problem that, while monopoly telecommunications revenues are protected, it is at the risk of alienating both the business sector and the growing numbers of telecommunications subscribers.
Carriers need to develop and maintain a forward-looking plan to rebalance domestic tariffs and renegotiate international tariffs so that both become both more cost-based and more robust in the face of competitive and political threats. There are advantages to leading the transition rather than simply reacting to market and governmental pressures.
This domestic focus can either be the first step in a phased domestic-regional-international growth strategy or an integral part of realignment as telecommunications markets become more global.
Seek opportunities to integrate vertically.
At the same time that new carriers enter the domestic market, there will be opportunities for incumbent carriers to acquire firms in related markets or to form alliances with these firms. As the telecommunications business becomes more fragmented, many customers seek to simplify the nature of the choices they are forced to make. By developing new service offerings, if necessary with outside partners, the incumbent can continue to be the carrier of choice.
Promote regional opportunities.
As we have seen in Part I, carriers frequently expand into neighboring countries or into nations with which there is a pre-existing common factor such as language or trade. This is often seen as an intermediate stage between operating solely in the home market and a full range of international activities. Ideally, one should look for opportunities of high growth as well as some degree of natural advantage. Obvious examples are the investments by some of the Scandinavian carriers in the countries of the Baltic region. Although Estonia, Latvia, and Lithuania are relatively small and there are linguistic differences, there was a history of trade and there is the belief by many that their rates of growth will accelerate as their economies complete the transition from socialism.
A parallel opportunity may be found in the situation in Northeast Asia. There are obvious opportunities in the Tumen River Development Area, and existing carriers from the region are ideally situated to play a primary role in the development of that region's infrastructure. Any one carrier is likely to find itself both a partner and a competitor with other carriers as it becomes increasingly active regionally. The regional strategy likely to be most successful is one that both draws on a carrier's experience in its home market and enables it to work successfully with carefully chosen partners.
Capture a major share of a regional market.
Even though many countries are pursuing similar objectives in protecting their own markets—at least temporarily, developing strategies to penetrate those markets is important. The multi-national business customer wants a telecommunications service provider that can offer global services. Any one carrier may have to partner with others in global alliances in order to serve this important segment of the market.
One strategy could be to target companies that are either exclusively or primarily regional in their operations. Even though there is competition in providing services for these companies, a carrier might do well by targeting a limited number of vertical market segments for enhanced business services. Aggressive pricing, high quality of service, and an emphasis on doing business with regional companies might be an effective strategy against the larger global competitors.
Expand enhanced services internationally.
Areas that one should investigate are those markets where the margin between costs and prices is likely to remain at above-normal levels. Many believe that in the near future the greatest profits and profit margins are to be earned in international value added services for business customers. Enhanced vertical services will become increasingly profitable while the transmission of raw signals will become an increasingly low-margin business. Next in profitability to look at may be international gateways and international transmission via satellite.
One international trade strategy for telecommunications equipment is to use the knowledge of the workforce to maintain a competitive advantage. The employees continually build upon their knowledge and expertise, staying ahead of their competitors. Simply designing and building equipment that can be reverse engineered and copied will lead to only a short-term advantage in the marketplace.
Competitive advantage in telecommunications equipment manufacture is tied to liberalization in telecommunications services. As an example, Terry Curtis has described the result of Korea's moves toward liberalization in telecommunications services to be:
…an open network with multiple carriers and, therefore, equipment from multiple vendors. As the rest of the world’s telecom networks are opened to competition and interconnection, those manufacturers that have the greatest experience in providing equipment and software that functions well in multi-vendor, multi-carrier networks will have a distinct advantage. Having such a network in the Republic of Korea will ensure that Korean manufacturers are able to produce products suited to such an environment."
Carriers working closely with the manufacturers will be able to identify and quantify various aspects of the technology and improve upon it, a process that would normally be done by the developer of the technology.
There is no "magic bullet" that will guarantee that any carrier will continue to grow and thrive in the changing world of telecommunications. There continue to be major changes in technology, domestic policy, international relations, and the overall economy that present both great challenges and opportunities to the telecommunications carriers of the world.
Table 1: Domestic Telecommunications Markets in 12 Countries
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| USA | 122,203 | 164,624 | 3.4% | 1103 | 1511.5 | 5.6% | $102.93 | $178.16 | 6.3% | |||
| Japan | 46,772 | 61,106 | 3.0% | 185.16 | 233.28 | 3.4% | ¥5313 | ¥8806 | 5.8% | |||
| EU Countries: | ||||||||||||
| UK | 21,727 | 29,411 | 3.4% | 92.973 (1992) | 116.547 | 7.8% | £9.424 | £17.528 | 7.3% | |||
| Sweden | 5,373 | 5,967 | 1.2% | 23.945 (1988) | 30.711 | 2.8% | 18.366 Kronor | 33.205 Kronor | 7.0% | |||
| Finland | 2,272 | 2,801 | 2.4% | 2707 | 3735 | 3.8% |
5.489 Markka |
11.067 Markka | 8.2% | |||
| Denmark | 2,628 | 3,193 | 2.2% | 4141 | 4209 | 0.4% | 13.306 Kroner | 19 Kroner | 4.2% | |||
| Netherlands | 6,029 | 8,120 | 3.4% | 5879 | 9490 | 5.5% | 6.913 Guilder | 13.623 Guilder | 7.9% | |||
| Germany | 26,189 | 40,400 | 4.9% | 28520 | 52500 | 7.1% | 35.327 DM | 68.835 DM | 7.8% | |||
| France | 23,911 | 32,400 | 3.4% | 96.96 (1989) | 104.4 | 4.5% | 90.74 Franc | 135.58 Franc | 4.7% | |||
| Italy | 18,253 | 24,845 | 3.5% | 18.451 | 35 | 7.4% | 13950 Lira | 32598 Lira | 10.3% | |||
| Spain | 9,785 | 15,095 | 4.9% | 11175 | 17358 | 5.2% | 468 Peseta | 1372 Peseta | 12.8% | |||
| Portugal | 1,511 | 3,584 | 10.1% | 99.51 Escudo | 429.18 Escudo | 17.7% | ||||||
SOURCES: ITU Yearbook of Statistics, 1997. (Growth rates calculated by authors.)
Table 2: Gross Domestic Product per capita and Growth Rates
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in USD 1986 |
in USD 1995 |
(GDP per capita in USD) |
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| USA |
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| Japan |
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| UK |
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| Sweden |
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| Finland |
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| Denmark |
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| Netherlands |
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| Germany |
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| France |
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| Italy |
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NOTES: GDP converted from local currency to U.S. Dollars at year's average market exchange rate. Market opening in all countries has been a process and, therefore, difficult to assign to a single year. U.S. and Japan dates are for major policy changes.
SOURCES: GDP, population, and exchange rate data from ITU. Growth rates calculated by authors. Market opening years for European countries from Elixmann.
Table 3: Correlation Coefficients for Rankings
(Measured by Kendall's Tau b)
| 1986 GDP per capita | Growth in GDP per capita | |
| Growth in lines | -.485* (.014) | .333 (.065) |
| Growth in revenue | -.606* (.003) | .212 (.169) |
NOTES: Entry in each cell is correlation coefficient, followed by p-value in parentheses. An asterisk (*) indicates significant at 95% level or better.
SOURCE: Authors' calculations; see text.
Table 4: Regression Analysis of Telecommunications Growth Rates
| Dependent Variable |
Independent Variable(s) (all per capita in USD) |
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| Lines growth | Growth in GDP |
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| Lines growth | 1986 GDP |
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| Lines growth |
Growth in GDP 1986 GDP |
-.300* |
.041 |
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| Revenue growth | Growth in GDP |
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| Revenue growth | 1986 GDP |
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| Revenue growth |
Growth in GDP 1986 GDP |
-.780* |
.001 |
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NOTES: An asterisk (*) indicates significant at 95% level or better.
SOURCE: Authors' calculations; see text.
Table 5: United States—Natural Markets, Telecommunications Traffic & FDI
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| Canada | Canada | Canada |
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| Mexico | Japan | Mexico |
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| UK | Western Europe | UK |
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| Australia | Mexico | Germany |
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| Philippines | Japan |
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NOTE: See Braunstein for detailed lists of foreign holdings of U.S. carriers.
SOURCE: Braunstein, Table X.
Table 6: Japan—Natural Markets, Telecommunications Traffic & FDI
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| China | USA | USA |
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| South Korea | Southeast Asia | China |
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| Philippines | European Union | South Korea |
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| Taiwan | Philippines |
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| Taiwan |
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SOURCE: Oniki, Table 2-1
Table 7: United Kingdom—Natural Markets, Telecommunications Traffic & FDI
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| BT | |||||
| Ireland | Western Europe | USA | 15.3% | Sweden | 1991 |
| Western Europe | USA | Ireland | 9.2% | Japan | 1991 |
| Scandinavia | Germany | 9.0% | Australia | 1991 | |
| USA | France | 8.9% | Spain | 1995 | |
| Canada | Italy | 4.7% | Germany | 1995 | |
| Australia | Italy | 1995 | |||
| India | France | 1996 | |||
| Caribbean | Netherlands | 1996 | |||
| Hong Kong | Switzerland | 1996 | |||
| Singapore | New Zealand | 1996 | |||
| Portugal | 1997 | ||||
| Nigeria | 1997 | ||||
| C&W | |||||
| Philippines | 1800's | ||||
| Hong Kong | 1983 | ||||
| Japan | 1987/91 | ||||
| Australia | 1991 | ||||
| Sweden | 1991 | ||||
| Yemen | 1992 | ||||
| Latvia | 1993 | ||||
| Belarus | 1993 | ||||
| Indonesia | 1994 | ||||
| Vietnam | 1994 | ||||
| Russia | 1994 | ||||
| Columbia | 1994 | ||||
| Israel | 1995 | ||||
| Panama | 1997 | ||||
| China | |||||
| France | |||||
| Germany | |||||
| Pakistan | |||||
| South Africa | |||||
SOURCE: Elixmann, pages 62-68
Table 8: Sweden—Natural Markets, Telecommunications Traffic & FDI
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| Norway | Norway | Finland | 14.2% | Latvia | 1991 |
| Finland | Germany | Norway | 13.8% | Estonia | 1992/94 |
| Denmark | UK | Denmark | 10.7% | Italy | 1994 |
| Estonia | Denmark | Germany | 10.6% | Ecuador | 1994 |
| Latvia | USA | UK | 8.4% | Poland | 1995 |
| Lithuania | France | Philippines | 1995 | ||
| Germany | Finland | Ireland | 1996 | ||
| Poland | Netherlands | Finland | 1996 | ||
| Denmark | 1997 | ||||
| Sri Lanka | |||||
| UK | |||||
| Russia | |||||
| Namibia | |||||
| China | |||||
| Norway |
SOURCE: Elixmann, pages 54-59
Table 9: Finland—Natural Markets, Telecommunications Traffic & FDI
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| Norway | Germany | Sweden | 31.4% | Estonia | 1991/92 |
| Sweden | Sweden | Germany | 10.0% | Latvia | 1992/94 |
| Denmark | UK | Russia | 7.6% | Hungary | 1992/93/94 |
| Russia | US | UK | 6.7% | Russia | 1993 |
| Estonia | France | Estonia | 5.8% | Turkey | 1993 |
| Latvia | Russia | Netherlands | 1994 | ||
| Lithuania | Denmark | Lebanon | 1994 | ||
| Norway | Hong Kong | 1996 | |||
| Netherlands | UK | ||||
| Sweden |
SOURCE: Elixmann, pages 11-15
Table 10: Denmark—Natural Markets, Telecommunications Traffic & FDI
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| Sweden | Germany | Germany | 19.3% | Lithuania | 1991/92 |
| Norway | Sweden | Sweden | 16.6% | Ukraine | 1991 |
| Finland | France | UK | 10.7% | Hungary | 1993/94 |
| Germany | UK | Norway | 9.8% | Belgium | 1995 |
| Belgium | USA | USA | 5.0% | Sweden | 1995 |
| Norway | China | 1995 | |||
| Japan | Poland | 1996 | |||
| Switzerland | 1996/97 | ||||
| Germany | 1997 |
SOURCE: Elixmann, pages 710
Table 11: Netherlands—Natural Markets, Telecommunications Traffic & FDI
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| Belgium | Germany | Germany | 23.3% | Ukraine | 1992 |
| Germany | Belgium | Belgium | 16.4% | Hungary | 1993/94 |
| UK | France | UK | 12.3% | Indonesia | 1994/96 |
| Denmark | UK | France | 7.7% | Czech Rep. | |
| South Africa | USA | USA | 6.2% | Ireland | |
| Indonesia |
SOURCE: Elixmann, pages 38-41
Table 12: Germany—Natural Markets, Telecommunications Traffic & FDI
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| Denmark | France | Austria | 7.9% | Ukraine | 1992 |
| Belgium | Netherlands | France | 7.4% | Hungary | 1993 |
| France | Italy | Switzerland | 7.3% | Russia | 1993/94 |
| Italy | Belgium | Turkey | 7.2% | Netherlands | 1994 |
| Czech Republic | USA | Italy | 7.2% | Switzerland | 1994 |
| Poland | UK | Indonesia | 1995 | ||
| Austria | Austria | 1995 | |||
| Switzerland | Israel | 1996 | |||
| Czech Repub. | 1996 | ||||
| Poland | 1996 | ||||
| China | 1996 | ||||
| Malaysia | 1996 | ||||
| Philippines | 1996 | ||||
| USA | 1996 |
SOURCE: Elixmann, pages 24-30
Table 13: France—Natural Markets, Telecommunications Traffic & FDI
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| Spain | Germany | Germany | 11.6% | Argentina | 1990/92 |
| Italy | Italy | UK | 11.3% | Mexico | 1990 |
| Germany | USA | Italy | 8.6% | Poland | 1991 |
| Belgium | Belgium | Belgium | 8.1% | Greece | 1992 |
| UK | UK | Spain | 6.4% | Vanuatu | 1992 |
| Caribbean | Netherlands | Indonesia | 1994 | ||
| South Pacific | Spain | Vietnam | 1994 | ||
| Vietnam | Japan | Russia | 1994 | ||
| French Africa | India | 1994 | |||
| Lebanon | 1994 | ||||
| Italy | 1995 | ||||
| Belgium | 1995 | ||||
| Israel | 1996 | ||||
| Slovakia | 1996 | ||||
| Ivory Coast | 1996 | ||||
| Moldavia | 1997 | ||||
| Romania | 1997 | ||||
| Cent. Afri. Rep. | |||||
| Congo | |||||
| Chad | |||||
| Djibouti | |||||
| Equatorial Guinea | |||||
| Gabon | |||||
| Madagascar | |||||
| Mali | |||||
| Niger | |||||
| French Antilles | |||||
| Russia | |||||
| Japan |
SOURCE: Elixmann, pages 16-23
Table 14: Italy—Natural Markets, Telecommunications Traffic & FDI
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| France | USA | Germany | 15.7% | Argentina | 1990 |
| Switzerland | European Union | France | 12.5% | Greece | 1992 |
| Germany | Switzerland | 9.5% | China | 1994 | |
| Austria | USA | 8.1% | Bolivia | 1995 | |
| Slovenia | UK | 7.8% | India | 1995/96 | |
| Croatia | Chile | 1996 | |||
| Tunisia | France | 1996/97 | |||
| Czech Repub. | 1996 | ||||
| Cuba | 1997 | ||||
| Columbia | 1997 | ||||
| Austria | 1997 | ||||
| China | |||||
| Israel |
SOURCE: Elixmann, pages 31-36
Table 15: Spain—Natural Markets, Telecommunications Traffic & FDI
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| Portugal | Germany | Germany | 15.7% | Argentina | 1990 |
| France | Italy | France | 15.4% | Chile | 1990 |
| UK | France | UK | 14.3% | Puerto Rico | 1991 |
| Central America | USA | Italy | 6.7% | Venezuela | 1991 |
| South America | UK | USA | 4.7% | Peru | 1994 |
| Caribbean | Columbia | 1994 | |||
| Philippines | Romania | 1994 | |||
| Mexico | 1995 | ||||
| Portugal | 1997 |
SOURCE: Elixmann, pages 46-52
Table 16: Portugal—Natural Markets, Telecommunications Traffic & FDI
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| Spain | Western Europe | France | 21.7% | Sao Tome | 1990 |
| France | USA | Spain | 15.9% | Macao | 1993 |
| UK | Germany | 12.0% | Spain | 1997 | |
| Brazil | UK | 11.0% | Guinea-Bissau | ||
| Macao | Switzerland | 5.4% |
SOURCE: Elixmann, pages 42-45
Table 17: Summary of Findings—EU & U.S.
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| International traffic primarily within EU | U.S.'s top destination is Canada; remaining traffic highly fragmented |
| FDI depends on common interests (language, distance, etc.). | FDI depends more on market opportunities. |
| Heavy investor in cellular. | Heavy investor in cellular |
| Strong role for equipment manufacturers. | Manufacturing role only important for Motorola (and for AT&T in past). |
| Accounting rate issues not so important. | Accounting rate issues very important (due to large traffic imbalance). |
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Major reasons for alliances:
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Major reasons for alliances:
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| Strategies often technology-driven. | Strategies often market-driven. |