Page 497 - Handbook of Modern Telecommunications

4-28 CRC Handbook of Modern Telecommunications, Second Edition

4.3.1 The 4 Cs of the Telecommunications Industry

There are four key challenges faced by the telecommunications industry today, described as the 4Cs. As
with financial services, deregulation is driving many of these currents as a metadynamic that influences
all of these trends:
• Consolidation
• Competition
• Commoditization
• Customer service

Since deregulation, the ability to compete in a much wider array of markets has opened established
telecommunications companies, and prospects of new entrants gaining market share have also become a
reality. This has resulted in existing telecommunications companies buying the capabilities to enter new
markets and new players gaining substantial market shares. This has resulted in tremendous merger and
acquisition activity along with increased competition. As a result of these trends and regulatory pres-
sure, there is a significant emphasis on customer service that did not exist before.
In competitive telecommunications environments, customers choose their service providers. Today,
this is a reality for all sizes of telecommunications companies as well as all types of telecommunications
companies, whether long distance, Internet Service Provider (ISP), wireless, or local plain old telephone
service (POTS).
Under competitive conditions, the customer becomes the central focus of the carrier’s activities.
Customer requirements not only determine service offerings, but also shape the network and affect the
organizational structure of the carrier’s focus on particular types of customers. With the customer at
the center of the telecom enterprise strategy, the key to survival for these providers and operators today
is to focus on the very basics of business such as retaining and servicing existing customers as well as
reducing the cost of operations. Nearly all telecommunications companies today are responding to a
mission-critical need to compete more effectively as a result of:
• Rapidly changing, increasingly competitive, and global markets
• Increasingly volatile consumer and market behavior
• Rapidly shortening product life cycles

To do so, it is necessary to analyze accurate and timely information about operations, customers,
and products using familiar business terms, in order to gain analytical insight into business problems
and opportunities.
The business landscape of the telecommunications industry is quickly evolving. The previous model,
shaped by a handful of competitors in each country, is being replaced by a model shaped by hundreds
of competitors vying for a global presence. To survive in this environment, telecommunications com-
panies can continue marketing their products to the masses. This market-share strategy has been very
popular in the telecommunications industry in the past. To compete, companies are driven to increase
advertising and marketing costs aggressively while discounting their products. Unfortunately, this
strategy has driven customer loyalty to an all-time low. For example, it is not unusual for a consumer to
switch service providers twice in the period of a single year.
This may be why companies can report a 40-percent disconnecting rate over the period of a year and
still show an increase in market share. Clearly, this model for doing business presents significant chal-
lenges and over time threatens to drive profit margins unacceptably low. The ultimate evolution may be
similar to what has been seen in the retail industry, where a good year produces profit margins in the
two- to three-percent range.
Companies can focus on tailoring products to the individual customer. In this “share of customer”
environment, customers are differentiated in addition to products. Corporate resources are efficiently