- Published in: Cinco Días
- Date: 09/21/93 (Part 1)
- Authors: Clifford Bean, Malcolm Ross, Pedro Tellería
Before the end of the century, new communication networks and the services associated with them will make possible a radically new form of communication, with service delivery centered on each user rather than on fixed terminals.
The advantages for users and operators will be enormous. Around the year 2000, personal wireless communications will change the way individuals, companies, and other institutions in Europe and North America manage their affairs.
The services enabling this connectivity will have a major impact on both end users and operators or providers. At Arthur D. Little, we estimate that these services will reach an annual turnover of between 3.5 and 4 trillion pesetas in the year 2010 in the United States alone, and at least a similar amount in the rest of the world. However, before they become a reality, several problems must be solved and a series of technical and legislative barriers must be overcome.
Personal wireless communication networks, together with lightweight portable terminals, will allow conversations and two way message and data transmissions at any time and from any location, easily and instantly. They will also enable a wide range of activities such as:
- Making and receiving calls without interruption, anytime and anywhere.
- Knowing the caller’s name and call characteristics.
- Sending and receiving short messages when a conversation cannot be established.
- Using special functions such as call forwarding, call location, and voice messaging.
- Archiving low priority calls and messages to handle them later.
Personal wireless communication networks will also provide subscribers with detailed billing separating professional and personal calls, and a user location system independent of where the user is physically located. Deploying these networks will require substantial improvements to the current telecommunications infrastructure, including new numbering, location and call routing systems, transmission, storage, and coverage expansion.
A significant innovation will be that phone numbers will be assigned to users rather than to telephone terminals. As users move from one area to another, the network will register their position and route calls accordingly.
Provided the right infrastructure and technology are in place, personal communication networks will allow users to access a rich set of complementary communication services designed to satisfy the needs of multiple market niches in Europe, North America, and beyond. The most likely services include:
- Next generation digital cellular telephone services.
- Telepoints, terminals from which calls can be made in one direction only (CT2 second generation cordless telephony).
- Enhanced telepoint, enabling two way communication from coverage islands, though still with limitations for users in motion.
- Advanced cordless telephony for both business and personal use.
- Private PBX cordless systems inside buildings or facilities.
- Personal communication network services similar to cellular services.
- Voice messaging with message alerts and reply capability.
- Data transmission services, standalone or integrated in portable computers.
- Satellite based services.
It is noteworthy that the difference between the services offered by the next generation of digital microcellular telephones and those offered by personal communication networks may disappear over time. In fact, the cellular industry argues that personal communication networks will be a natural evolution of cellular telephone service.
At Arthur D. Little, we estimate that within approximately 10 years of availability, demand for personal communication network services will approach 50–60 million users in North America and a similar number in Europe.
Wireless communication services are widely accepted in major European countries and North America. Differences between countries reflect the timing of authorization for mobile cellular services (Scandinavia being first) and decisions to allow market competition. France and Germany have recently authorized new cellular operators competing directly with national companies, while the two British operators (Vodafone, Cellnet) have operated since 1985.
Japan is not among the leaders in mobile telephony, although forecasts point to rapid growth that could reach eight million subscribers by the year 2000. NTT began mobile operations in 1979, but as in the U.S. and the U.K., competition triggered major market growth.
For the past 40 years, most wireless communication users were professionals and businesspeople who needed mobility for work. Today’s users rely on these services for both business and private communications.
This evolution has been driven by smaller portable terminals, the near ubiquity of mobile services in Europe and North America, and lower equipment and tariff costs.
The institutions most affected by these new services will be cable based telephone companies. The question is whether these new services will enrich them or overwhelm them. We consider the first option more likely: the new wireless services are extensions or improvements of current fixed networks, whose large infrastructure investments will provide the required links. However, established cable networks may only capture a much smaller share of the new services market compared to their dominant share today.
Although some revenue cannibalization may occur, losses will be small relative to new opportunities. Telephone companies should retain part of the revenue from the new business and find new sources of income by supporting operators and service providers. These support services include:
- Local and long distance circuits.
- User location and tracking.
- Billing for service providers.
- Multiple levels of personalized service provisioning based on subscriber profiles.
- Network management and maintenance.
To perform these functions, traditional cable operators must accelerate infrastructure upgrades beyond what is currently planned. Wireless operations will drive investment in advanced intelligent networks, reaching maturity five years earlier than if investments were directed solely toward fixed network modernization.
The processing power and software complexity required for these services are difficult to achieve and likely only feasible in organizations with large facilities, experience managing complex system deployments, and access to substantial capital.
We estimate that supporting future wireless operations will require telecommunications network investments between 1 and 15 trillion pesetas over the next 10 years in the U.S. alone. This projection is based on industry estimates of an average investment of 20,000–30,000 pesetas per subscriber and network capacity for 60 million subscribers. In return, by 2010 these services may generate annual net revenues of 3.5–4 trillion pesetas.
The wireless communications market will attract new competitors beyond traditional telephone companies, cellular providers, and paging companies.
- Clifford Bean, Director, Arthur D. Little USA
- Malcolm Ross, Senior Consultant, Telecom-Group at Arthur D. Little (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.