Introduction to Telecommunications Industries

Introduction

Telecommunications is one of the most important sectors of the American economy. [Query: are we U.S. focused? Or global?] [insert: stats on 15% of US economy, growth] [insert: starts if you just focus on residential networks]

Our study of telecommunications industries focuses on the ongoing revolution in residential broadband. The industries that we profile historically provided four distinct consumer-facing products -- home telephony, mobile telephony, television, and internet access. But these historical divisions are disappearing. Cable and telephone companies have each refashioned their network to provide general-purpose high speed data transmission capacity. Using these ever-growing and improving networks, both now compete directly to provide the dominant "triple play": vertically-integrated voice and video services, along with data transmission to the public internet. Municipalities and other new actors are building their own residential broadband networks, offering the same basic services.

Cell phone companies are also racing to become broadband providers, with data rapidly overtaking voice as the dominant source of revenue in the industry. While mobile services offer lower bandwidth than residential service, it compensates with ubiquitous access. Most analysts therefore assume that mobile and residential broadband will remain distinct and complementary industry segments, because users will want both ubiquity and speed. Still, even the boundaries between mobile and home service are beginning to blur as wireless devices increasingly roam freely between cellular wireless networks and home WiFi networks, at the same time as WiFi and cellular technology themselves evolve closer together: WiFi is constantly becoming more prevalent, and cellular is constantly pushing bandwidth limitations.

The charts below demonstrate these pervasive, revolutionary transformations ongoing in telecommunications.

• [insert: market share for voice]
• [insert: market share for video]
• [insert: market share for broadband internet]
• [insert: revenue by service over time for Comcast]
• [insert: revenue by service over time for Verizon]
• [insert: mobile ARPU for voice and data]

The Basic Areas of Innovation

For our purposes, the study of innovation in telecommunications is the study of the transformation described above. How has the technology behind residential and mobile broadband been developed and deployed? To what extent has the underlying innovation relied on proprietary models, and to what extent has innovation been available through commons-based approaches?

Technically, the various providers of new broadband services all offer some variation on the same very general network design. Fiber optic lines--by far the dominant telecommunications technology--form the high bandwidth core of any modern network. These lines may run all the way to the end-user's access device, or their reach may be extended by other wired and wireless technologies. In particular many residential broadband networks make use of legacy telephone or cable wires to carry the "last mile" communications. These networks are often extended with the home with WiFi routers: low power customer-owned wireless equipment operating on open frequencies. Commercial wireless networks are not all that different in principle, except that they operate at much high power, and on frequencies where the operator has purchased an exclusive license to broadcast from the federal government. The figures below illustrate both this general network design, and its variations in various network implementations.

• [insert: basic network design schematic]
• [insert: FTTN VDSL Network (e.g. AT&T U-Verse) diagram]
• [insert: Cable Network (e.g. Comcast) diagram]
• [insert: FTTH Network (e.g. Verizon FiOS) diagram]
• [insert: Cellular Network diagram]

Following this network design, the three broad areas of innovation necessary for the deployment of residential and mobile broadband have been the development of fiber optic technology, the development of new network electronics to coax greater speeds and two way capacity from legacy cable and telephony systems, and the development of new high speed wireless communication systems.

Research Questions From Methodology

This section corresponds to the following Research Questions from the Methodology:

2. Give an overall picture of the field

• Addressed / To-be Addressed in This Section
  • How was this field born and how is it evolving?
  • How much money do they make or how much money do they “move” in the American economy?
  • Added: What are the basic loci of innovation (i.e. knowledge goods) that we are studying when we look at this industry?
  • What are the innovation dynamics in this field? (inputs/outputs, timing of innovation/ disruptive or incremental innovation?)
  • Are there any specific public policies (from agencies, federal or state policies) that give incentives for openness or enclosure?

• Not Addressed
  • Is this field replicating models from other fields?
  • How important is public funding in this field?
  • How important is private funding / venture capital in this field?
  • What is the cost structure of the field?

• Addressed in Other Sections
  • What are the main business models? See Value Chain in Telecommunications.
  • How does knowledge flow in this field? See Value Chain in Telecommunications.
  • Who are the producers, the buyers, and the users? See Value Chain in Telecommunications.
  • What is the structure of power from the production side and what is the structure of power in the demand side? E.g., who has the power to control production and demand? How is the control distributed? See Value Chain in Telecommunications.
  • How many companies? See For-Profit Companies in Telecommunications.
  • How important is research from universities in this specific field? See Universities in Telecommunications