| Abstract |
The telecommunications industry is in transition, but to exactly where
remains an unanswerable question. The character of the transition is clear
enough. Revenues from voice traffic across both fixed and wireless
networks are in steady decline. Natural barriers to entry provide some
commercial cushion to operators of the local loop customer access network,
but no such barriers exist in the long haul sectors unless protected by
regulation, which is becoming less common.
But close substitutes to voice over the pubic switched telecommunications
network (PSTN) and mobile cellular networks are now widespread. For
example, Voice over Internet Protocol (VoIP) allows network resellers to
route traffic from the PSTN over the Internet avoiding many of the PSTN's
international tariffing arrangements. The latest Next Generation Networks
(NGNs) using IP packet switched routing technologies offer Internet
Telephony that provides end-to-end traffic over IP, so for example the
home or office telephone becomes an extension of a data line where the
data in question just happens to originate and terminate as voice audio.
In the mobile cellular markets the shift to packet switched networks is
already well under way with 2.5G and coming soon 3G, but here the close
substitute is Short Message Service (SMS). Where the cost of a voice call
is relatively high, for example in the Philippines, the much cheaper SMS
has grown rapidly. The advantage of SMS to network operators is that it
requires no significant additional network resources. On the contrary SMS
can be used night and day making use of unused network capacity. The
economics of the substitution relies upon the price elasticity of demand,
so the loss of revenues from voice calls foregone is more than compensated
by exponential growth in SMS.
The SMS phenomenon requires examination, first because it is growing so
remarkably fast and is becoming a crucially important source of revenue,
and second because it is seen by many in the industry as part of the
transition towards more media rich content over wireless networks, and
Multimedia Messaging Service (MMS) is seen as the evidence of that. Other
papers in this panel will examine the growth of SMS, and of MMS and make
regional comparisons. This paper will act as an introduction to these
other panel papers by 'setting the scene' of telecommunications in
transition. It will examine is more detail the nature of the transition
from what may be termed 'narrowband economics' to 'broadband economics'
and the nature of the options and directions available to the industry and
the policy and regulatory implications involved.
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