1. Key Determinants of Environmental Change in UK Telecommunications: Empirical Evidence David Lal and Peter Strachan ABERDEEN BUSINESS SCHOOL THE ROBERT GORDON UNIVERSITY ABERDEEN

2. Main Aims of Article 1. Present empirical evidence on key determinants of environmental change from the perspective of the UK telecoms incumbent since deregulation that drove strategic change at the firm; 2. To consider the evolving and dynamic nature of the global telecoms market. THE ROBERT GORDON UNIVERSITY ABERDEEN

3. Methodology Research Content - Qualitative Data Research Content - Qualitative Data A series of face-to face interviews A series of face-to face interviews Senior Executives at BT (Purposive Sample) Senior Executives at BT (Purposive Sample) Semi-Structured Questionnaire Checklist Semi-Structured Questionnaire Checklist Content Analysis applied to Data-Set Content Analysis applied to Data-Set THE ROBERT GORDON UNIVERSITY ABERDEEN

4. Pre – Privatisation The introduction of the telecommunications act of 1981, separating telecommunications from postal services; The introduction of the telecommunications act of 1981, separating telecommunications from postal services; The breaking up of the network operator's monopoly of the supply of customer premises with equipment, which was one of the earliest measures in UK telecoms market liberalisation by the government; The breaking up of the network operator's monopoly of the supply of customer premises with equipment, which was one of the earliest measures in UK telecoms market liberalisation by the government;

5. Pre – Privatisation The companies of Cellnet and Vodaphone were licensed to compete in the provision of mobile communications services, opening up the UK mobile communications market; The companies of Cellnet and Vodaphone were licensed to compete in the provision of mobile communications services, opening up the UK mobile communications market; Liberalisation of "packaged solutions" thereby increasing the use of outside suppliers to provide these to the business market; Liberalisation of "packaged solutions" thereby increasing the use of outside suppliers to provide these to the business market;

6. Pre – Privatisation Limited competition was introduced into the UK fixed network services market, with Mercury Communications being elevated to the status of the 2nd national UK operator and the duopoly was created (duopoly guaranteed for seven years) Limited competition was introduced into the UK fixed network services market, with Mercury Communications being elevated to the status of the 2nd national UK operator and the duopoly was created (duopoly guaranteed for seven years)

7. Pre - Privatisation UK government creates a telecoms regulatory body - OFTEL - with the Office of Telecommunications; UK government creates a telecoms regulatory body - OFTEL - with the Office of Telecommunications; British Telecommunications plc was created with privatisation of the incumbent - 51% of the firm's shares being sold in the first of three tranches of the sell-off. British Telecommunications plc was created with privatisation of the incumbent - 51% of the firm's shares being sold in the first of three tranches of the sell-off.

8. Periods One and Two Competition was launched by mobile network operators Vodaphone and Cellnet via their respective cellular radio networks; Competition was launched by mobile network operators Vodaphone and Cellnet via their respective cellular radio networks; Market liberalisation allowed cable television operators to offer fixed link telephony services but only agents for the duopoly players (British Telecommunications and Mercury Communications). Thus, “resale of capacity” i.e. the leasing of lines from BT continued to be the “modus operandi”; Market liberalisation allowed cable television operators to offer fixed link telephony services but only agents for the duopoly players (British Telecommunications and Mercury Communications). Thus, “resale of capacity” i.e. the leasing of lines from BT continued to be the “modus operandi”;

9. Periods One and Two Technological advancements - both internally (within British Telecommunications) and externally (industry - wide) were evolving, with new digital technology overtaking existing analogue technology products; Technological advancements - both internally (within British Telecommunications) and externally (industry - wide) were evolving, with new digital technology overtaking existing analogue technology products; More demanding customers, requirements for an increasing range of products and services – plus falling prices/costs; More demanding customers, requirements for an increasing range of products and services – plus falling prices/costs; Hence – Limited impact on incumbent! Hence – Limited impact on incumbent!

10. Period Three Phase 1: There was a boom in 2nd lines and an increase in the requirement for bandwidth. Phase 1: There was a boom in 2nd lines and an increase in the requirement for bandwidth.

11. Period Three Phase 2: There would be a substitution of new Internet services for traditional services. Here, Internet Protocol Wide Area Network Services (IP WANS) would replace private circuits; Internet fax would replace phone; Web transactions would replace toll free services; and email would substitute for voice and fax; Phase 2: There would be a substitution of new Internet services for traditional services. Here, Internet Protocol Wide Area Network Services (IP WANS) would replace private circuits; Internet fax would replace phone; Web transactions would replace toll free services; and email would substitute for voice and fax;

12. Period Three Phase 3: The pre-emption of Internet technologies over telecommunications technologies was being seen as the primary platform for service innovation. This was evolving in the areas of E-Commerce, Multimedia, and Networking. Phase 3: The pre-emption of Internet technologies over telecommunications technologies was being seen as the primary platform for service innovation. This was evolving in the areas of E-Commerce, Multimedia, and Networking.

13. Period Four and Beyond Wireless technology, where it is increasingly becoming the primary access technology for voice; Wireless technology, where it is increasingly becoming the primary access technology for voice; Telecommunications becoming increasingly about carrying data, although voice will be the major money spinner for many years to come; Telecommunications becoming increasingly about carrying data, although voice will be the major money spinner for many years to come; Newcomers displacing the traditional telecommunications operators; Newcomers displacing the traditional telecommunications operators;

14. Period Four and Beyond Strategic alliancing and acquisitions playing a major role in the evolving structure of the UK, European and Global telecoms markets. Strategic alliancing and acquisitions playing a major role in the evolving structure of the UK, European and Global telecoms markets. Demand led by customised solutions; packaged solutions; wholesale bit transport and retail products/services (including through mobile products/services). Demand led by customised solutions; packaged solutions; wholesale bit transport and retail products/services (including through mobile products/services).

15. Period Four and Beyond Nine hundred firms were registered to compete within the UK telecoms market - primarily in the areas of: - Nine hundred firms were registered to compete within the UK telecoms market - primarily in the areas of: - –Provision of public access mobile radio services; –international simple voice resale services; –international facilities based services; –fixed link public telecom operator services;

16. Period Four and Beyond –value added services; –regional/national radio paging services; –mobile public telecoms operator services (cellular); –radio data services (including baggage tracking and reconciliation services); and –Broadband cable public telecommunications operator.

17. Conclusions From governmental perspectives, the main objectives in telecommunications liberalisation and deregulation were the offerings of greater competition, choice, and value for money services. From governmental perspectives, the main objectives in telecommunications liberalisation and deregulation were the offerings of greater competition, choice, and value for money services. What we can learn from the BT perspective of key determinants driving change in the evolving UK, European and indeed global telecommunications industries, is that there appears to have been a distinct failure in introducing real competition in fixed link voice telephony. What we can learn from the BT perspective of key determinants driving change in the evolving UK, European and indeed global telecommunications industries, is that there appears to have been a distinct failure in introducing real competition in fixed link voice telephony.

18. Conclusions (Continued) Accordingly, failure can be attributed to several factors: - 1. The inherent contradictions in BT’s role: it is both the owner and maintainer of the infrastructure - as well as - a competitor in the delivery of services. 2. Continuing reliance on BT as the “owner” of the infrastructure, and the difficulty of making BT competitive when its licence conditions include service “obligations”.

19. Conclusions (Continued) 3. The large capital investment and disruption to the environment required to lay new cables, and new technology in communications through computers is “by- passing” the regulatory problems of traditional telecommunications and proving to be cheaper. 4. The pursuit of the cable route and partial neglect of the potential of wireless technology, which would resolve the issue and by-pass, the infrastructure problems.

20. Conclusions (Continued) 5. The reliance which OFCOM is forced to make on the incumbent for its “information,” and therefore the regulatory difficulties placed in the path of potential entrants to the market, based on the fact that they are placed in direct competition to the huge clout of BT. 6. Tendency of new entrants to the market to concentrate on the provision of value-added services due to the difficulty and risk involved in entering the fixed link voice telephony market – setup costs being small and therefore attractive to potential market entrants.

21. Impact of deregulation on Global Market Structure. THE ROBERT GORDON UNIVERSITY ABERDEEN

22. Deregulation / Privatisation / Liberalisation Deregulation / Privatisation / Liberalisation Integration of : Integration of : –Information –Communication and –Entertainment THE ROBERT GORDON UNIVERSITY ABERDEEN

23. Shareholder Value Shareholder Value Globalisation Globalisation Technology Technology Consumer Demand Consumer Demand THE ROBERT GORDON UNIVERSITY ABERDEEN

24. Strategic Partners Strategic Partners Strategic Acquisitions Strategic Acquisitions Internationalisation Internationalisation THE ROBERT GORDON UNIVERSITY ABERDEEN

25. Providing a Basket of Services; Providing a Basket of Services; Globalising; Globalising; Restructuring; Restructuring; Development of a Customer Focus. Development of a Customer Focus. THE ROBERT GORDON UNIVERSITY ABERDEEN

26. Finally ….. Key Determinants impact on :- The Evolving Nature of the Market Structure AND Affect the Bases of Competition THE ROBERT GORDON UNIVERSITY ABERDEEN