Term Paper on "Telecom Industry"

Term Paper 5 pages (2045 words) Sources: 1+

[EXCERPT] . . . .

Telecom Industry

The total business of telecommunication in the current era is radically different from the past when corporations were allocated franchise territories decades ago. At that time customers were satisfied with the basic utility of just voice services, but at present hope for a basket of services consisting of communications and information management utilities. In that era, technologies used to be tailored for voice services, however at the moment function as platforms on which the companies who innovate create novel capabilities and applications. At & T. was a dominant market leader in the United States twenty years back like other telecom giants in their respective countries. (Antitrust Scrutiny of Telecommunications Mergers, Joint Ventures and Strategic Alliances - a Shift from Regulation to Enforcement)

Presently the market is overcrowded with a hundred of players. The factors that were responsible can be attributed two fold (i) Data, voice and telecom infrastructure markets were liberalized (ii) the globalization of the customer. It can be argued as to which of these two preceded the other; the thing that is emerging is obviously the fact that consumers of telecommunication providers were emerging as transnational themselves and the floodgates of the markets were being opened to competition. During the initial part of 1990s, amalgamations, JVs and strategic tie-ups were effected such that providers were able to satisfy the demand of the market. The effectiveness and forcefulness of these initiatives were to a certain extent restricted, taking into account the fact that European markets were yet to be liberalized. (Antitrust Scrutiny of Telecommunications Mergers, Joint Ventures and Strategic Alliances - a Shift from Regulation to Enforcement)

This led to the antitrust enforcement agencies believing that a "legal enactment" in the shape of behavioral restrictions was required to guarantee a competitive market. During the middle part till the late 1990s, European as also other markets of the world experienced liberalization. This liberalization led to speedier formation of mergers and JVs. At the present with the end of 1990s and being the new millennium, antitrust enforcement agencies are encountering the issue of whether enactments in the nature of behavioral restrictions continue to be necessary taking into account the stage of rivalry in the telecommunication markets. (Antitrust Scrutiny of Telecommunications Mergers, Joint Ventures and Strategic Alliances - a Shift from Regulation to Enforcement)

Background of at&T and Cingular:

AT&T Wireless is the second-largest wireless carrier in the U.S. taking into account the revenue proceeds. Boasting of a total subscriber base of 21,737 million till end of June 2004, along with revenue income in excess of $16.8 million since the earlier four quarters, at&T wireless gives advanced high quality mobile wireless communication services, voice and data, to business and consumers, in the United States and also spanning across the globe. In its legacy of more than 125 years since it was founded, at&T has been widely popular for unmatched excellence in quality and dependability in telecommunications. Supported by the research and developmental abilities of at&T Labs, the company is the undisputed global leader in local, long distance, Internet and transaction-based voice and data services.

Cingular on the other hand is a joint venture between SBC Communications and BellSouth, caters to excess of 25 million customers for voice and data throughout the U.S. The company commands a leadership position in mobile voice and data communications and is the sole U.S. wireless carrier to give Rollover (SM)-the wireless scheme which allows customers to store their unutilized monthly airtime. It is the biggest provider of GSM services in the whole of U.S. And its reach across its service area comprises of a 100% digital GSM/GPRS infrastructure.

Cingular also introduced the planet's inaugural commercial deployment of wireless services utilizing Enhanced Date rates meant for GSM Evolution (EDGE) technology. Extending the services of giving corporate e-mail and superior data services through its GPRS, EDGE and Mobitex packet data networks are the other areas in which the company's presence is marked. Currently, the company's mobile-to-mobile subscriber base has in excess of 46 million customers that are the biggest in America. 2

Benefit of at&T and Cingular for business and for customers after emerged (how they help each other)

The merger deal of USD 41 billion between Cingular Wireless Corp and at&T Wireless was through following the ultimate clearance from the U.S. regulators. This takeover by Cingular makes the largest wireless carrier in the United States with a combined strength of 46 million customers and a wide network footprint. Cingular President and Chief Executive Officer termed the takeover as dawning of a new day for wireless customers in America. The commitment will be total in bettering the wireless experience and providing customer the area of coverage, the phone, the infrastructures and the voice clarity which the customer deserves. On the financial front as per the terms of the agreement, Cingular will pay the shareholders of at&T Wireless 15 dollars for every ordinary shares, or nearly 41 billion dollars in total. (Cingular, att Wireless merge after clearing last hurdle)

Post-merger, through blending the optimum features of at&T and Cingular, the new Cingular will unleash high-end services at a rapid speed. The customers will be getting the benefits of advanced, bandwidth hungry facilities like high-speed data access meant for Laptop computers and PDAs, streaming video, video telephony, concurrent voice and data services and much more. Through the union a robust wireless company has been formed which is better geared to develop improved networks, ingenious new services and to give better reach and service quality. As both at&T and Cingular employ the same technologies, hence the synergies in the network are high, permitting speedier coverage expansion, better quality of service rendered and novel innovative services. (Customer Benefits)

Pros and Cons of at&T and Cingular for Business and for customer after emerged:

Through the approval of the $41 billion deal between the two companies, the Justice Department announced that Cingular and at&T should sell airwave licenses, customer contracts and other assets in 11 states to make sure that competitors can be able to give services that can compete with that of the offering made by this new merger. Assistant Attorney General of the Department's Antitrust division mentioned that in the absence of these divestitures, wireless consumers belonging to these markets might be faced with lesser alternatives for their wireless telephone services and encountered the risk of increased tariff structures and lower quality of services and lesser availability of choices as regards the latest high-speed mobile wireless data services. (Cingular Completes at&T Wireless Takeover)

There has been mixed views as what this deal has in store for the customers. It has been expected that reduction of major competitors will not incite any immediate price rises. It is being hoped that service will be better following the intricate procedure of amalgamating their networks was over. Consumers of at&T Wireless who have been experiencing shaky services must witness some more dependable services whereas customers of Cingular might hope enhanced high-speed wireless access to the Internet. Consumers of at&T Wireless who joins the Cingular's billing tariff structure could have the advantage of Cingular's rollover airtime that transfers the unspent airtime of a particular month to the following month. However, while at&T customers can continue to exist on their old tariff structure till they prefer to stay on, in case they wish to convert to the Cingular's tariff structure they have to purchase a new handset. (Cingular Completes at&T Wireless Takeover)

Following the merger, it is hoped that U.S. wireless prices will go up by about 8% on average and cost U.S. consumers nearly $5 billion per year while augmenting the dominance of the regional Bell companies in terrestrial and wireless as per a latest study. With the dominance in the mobile telephone market, increasing influence in long distance and 85% of regional services, the regional Bells are consolidating their influence in the telecom market according to J. Spiwak, President of the Phoenix Centre, the public policy research group that conducted the study. Following the merger, it will be reckoned as the biggest national wireless carrier in the United States with nearly 40% of the total country's wireless customer, wiping out Verizon Wireless as the biggest national carrier occupying close to 30% market share. at&T is shedding all its hindrances to smear its new wireless service with specifications that is likely to appeal to businesses and institutions. It is launching its "CallVantage" giving voice services through the customer's broadband connection which is VoIP that makes it simpler for people on the move to adjust their telephone services.

Consumers Will Pay Big for Cingular/at&T Merger, Study Warns)

Conclusion (own opinion about the topic):

Through the $41 billion deal with due approval of the Federal Communications Commission, teams up two enterprises whose customer service ratings and operating performances are most weak throughout the industry. Whereas the management of Cingular assumes the considerable disruption of amalgamating the two large companies, it might be hard to tackle those questions with any speed. A major question has been the speed at… READ MORE

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