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World Telecommunications Markets

The International Handbook of Telecommunications Economics, Volume III

Edited by Gary Madden

This major reference work provides a thorough and up-to-date survey and analysis of recent developments in the economics of telecommunications. The Handbook serves both as a source of reference and technical supplement for the field of telecommunications economics.
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Chapter 5: Formation and development of international alliances

Peter Curwen


Peter Curwen INTRODUCTION Although large telecommunications operators inevitably provide a wide range of services to a variety of customers, it is received wisdom that voice telephony for the residential market is evolving rapidly into a low-margin commodity business segment. Because entry is becoming much easier driven by factors such as the unbundling of the local loop, competition is increasingly driving down prices. In principle, there are greater profits to be made from providing services to the corporate sector, but large multinational businesses possess market power by virtue of the scale of their aggregated requirements and specify their requirements to operators. These companies want a high quality and reliable service provided on a global basis – a service increasingly based on broadband via both traditional networks and the Internet. Furthermore, for convenience the service should be provided via a ‘one-stop shop’, that is, access to the full range of telecommunications services, including international links, Internet access and a full multimedia capacity, through a single operator or alliance of operators using a common technical standard. Meeting such demands initially posed several problems for operators. In particular, service provision was mostly nationally based, as a consequence of government ownership and/or regulation, with trans-national links of inadequate capacity and quality. Further, while arrangements existed for connecting international calls, based on the accounting rate regime, this regime artificially raised the costs of making calls. Technical standards were also a stumbling block because data cannot easily pass between countries or trading blocs employing incompatible standards....

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