Edited by Anastassios Gentzoglanis and Anders Henten
Chapter 7: The Transformation of Telecoms Industry Structure: An Event Study
7. The transformation of telecoms industry structure: an event study Olaf Rieck INTRODUCTION 7.1 The telecommunications industry is currently going through yet another phase of transformation. This transformation does not merely change the way a set of given services is offered. Rather, we observe that technological changes and service innovations are fundamentally altering peoples’ communication patterns. Examples include the shift of the telephone network from being a physical network to being a (potentially converged) Internet application, the shift from a focus on connectivity to a focus on content, and the shift from dyadic communication relationships to social networking. In this emerging new telecommunications paradigm, traditional business models are increasingly replaced by alternative models. Players that traditionally controlled the telecoms value chain are rapidly losing ground against new entrants, some of which entered from ‘outside’ the traditional telecommunications service industry or did not even exist at the time when the 1996 Telecommunications Act was drafted. For example, Google emerged as world market leader for online searches and has thereby established itself as a significant player in the telecoms value chain. Google is also – directly or through investments – involved in the roll-out of Internet access infrastructure and the provision of content. Not surprisingly, in September 2007 the combined market capitalization of Google and its close competitor, Yahoo!, surpassed the market capitalization of AT&T. While there exist a number of studies that analyze telecommunications carriers’ performance in their traditional line of business, only a few studies (Rieck and Doan, 2007) have attempted...
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