- Published: Cinco Días
- Date: 09/28/93 (Part 2)
- Authors: Clifford Bean, Malcolm Ross, Pedro Tellería
In the previous article, the first in the telecommunications series, we pointed out how, according to Arthur D. Little’s research in this field, future personal communication networks and the services associated with them will change the current conception of telecommunications, both in the professional and private spheres, by centering communications and the provision of related services on the user instead of on traditional fixed terminals.
We also explained how this entire variety of services — ranging from the possibility of locating users at any time and place, to detailed and separate billing of private and business calls, to the ability to send and receive messages when it is not possible to establish a conversation — will require a series of investments and overcoming a set of technical, legislative, and financial barriers that we are going to analyze in detail.
For personal communication networks and the wide range of associated services to become a reality, equipment must be developed within a suitable timeframe to allow the introduction of these new services.
The necessary advances can be grouped into three categories:
- Intelligent-network hardware and software.
- Radiotransmission standards.
- Multimode portable terminals.
Of the three categories mentioned, improvements in communication networks that allow all functional requirements described so far to be met represent the greatest challenge. The functionality of so-called advanced intelligent networks will require thousands of person-years of hardware and software development to enable North American, European, Japanese, and other countries’ networks to meet the needs of the wireless communication market.
Many network manufacturers are already working on designs that provide the desired results, but a much larger amount of development and many more tests will still be needed before all the capabilities mentioned above are widely available from a commercial standpoint.
The need for multimode terminals poses a series of challenging design problems for global equipment manufacturers in North America, Europe, and Asia. We refer to small portable terminals that must meet certain requirements:
- Ability to operate with voice, data, and text messages (and possibly even video mode in the future).
- Ability to operate in different frequency bands when necessary, through services belonging to different licenses or concessions.
- Ability to operate with different frequency-modulation schemes to allow operability in systems from different regions.
From our point of view, there is no doubt that the U.S., European, and Japanese markets will eventually have a wide range of personal wireless communication services, but it will still take several years to resolve the technological and legislative issues that make them fully possible. Although European, North American, and Japanese governments favor competition in wireless communication services, some practical issues will still need to be solved for real progress to take place. For example:
1. Where will the appropriate radio frequencies come from?
Many governments are beginning to identify underutilized radio frequency bands that could be reassigned to these personal communication services. However, the reallocation of licenses for channel use from current users to future service providers for personal communication networks may still take several years.
2. What technical standards will apply?
The processes described in this article will entail long and difficult negotiations by the industry. Future services may be delayed by decisions regarding which radio frequencies they will operate on and what technical specifications must be implemented.
3. What types of operations will be authorized to obtain a license?
Deciding who will be eligible to hold a license and who will be excluded will represent a thorny political problem for government agencies responsible for granting licenses. Candidates for obtaining them will include:
- Cellular telephone operators.
- Electronic messaging and paging companies.
- Local telephone companies.
- Long-distance telephone companies.
- New radio service providers.
- Satellite-system operators.
- Cable-television companies.
4. Should key decisions be tested before they are implemented?
In the United States, in early 1992, more than 100 marketing and engineering tests were conducted on a wide variety of possible new service concepts for personal communication networks. It will still be a couple of years before significant results from these tests are known. Should key decisions regarding license assignment, frequencies, and technical standards wait for the results of these tests? From our point of view, the answer is yes, in order to make legislative and regulatory decisions in a pragmatic and implementable way.
Another significant barrier to the deployment of new services intended for personal communication networks is financial. As we have already pointed out, building the networks required to offer these services will require significant investments. Only organizations with abundant cash or large investment capacity will be able to compete in this game. Alternatively, partners from outside the telecommunications industry may be invited to join in exchange for significant equity packages.
Participation by partners outside the industry may have financial and political benefits, but it also involves certain risks: external partners lack knowledge and experience in the operational field, which could lead them to unrealistic expectations regarding the investments they plan to make.
At Arthur D. Little we are convinced that wireless communication services will develop rapidly once legislative, financial, and network-infrastructure barriers are overcome, and they will serve millions of people in Europe, North America, Japan, and anywhere else on the planet in the next century. There is significant and growing demand for this type of service, and therefore there should be ample space for a wide range of complementary services that meet the varied needs of users around the world.
The potential benefits, not only economic but also social, resulting from the proper development of wireless communication systems are so important that they deserve every effort necessary for their materialization. Without a doubt, supplying companies will benefit from the expansion of the market.
Licensed operators of cellular networks and paging systems will see their business volume increase, but so will suppliers of telecommunications and electronics equipment, as well as providers of value-added voice, data, and image services in their various forms: transnational information suppliers, communication facilitators, entertainment providers, education providers, and others.
Some argue that cable-network operators are the losers in the development of wireless networks; however, the reality is not so. Instead of cannibalizing their market, the increased connectivity levels resulting from wireless systems will increase the use of communication systems, and much of this traffic will be routed through cable networks. Certainly, these companies’ ability to develop the necessary infrastructure and provide adequate service will determine how this traffic is managed and whether it ultimately translates into profit.
Individual and corporate users will also benefit from this process, since improved communication capabilities will increase both their quality of life and their productive efficiency. Moreover, the existence of a greater number and quality of communication channels will lead to lower unit costs for users, even independently of whether service providers’ profitability increases.
For these benefits to be achieved as quickly as possible, the different stakeholders must join efforts where necessary and possible, without undermining the maintenance or even the development of competition among companies. Collaboration between telecommunications-equipment manufacturers and national and supranational administrations can materialize in establishing standards and jointly developing research projects.
Finally, proper coordination between wired and wireless-network managers will make it possible to deploy balanced infrastructure for routing generated traffic. Additionally, the development of companies that provide value-added services—whose existence will benefit network operators by promoting traffic—requires the creation of specific infrastructure by operators for their planning and establishment.
- Clifford Bean is Director of Arthur D. Little in the USA.
- Malcolm Ross is Senior Consultant of the Telecommunications Group in Europe.
- Pedro Tellería is a Senior Consultant, responsible for the "Telecommunications & Information Industry" Practice for Spain and Portugal at the management consulting firm Arthur D. Little.