Scope of the study
The telecommunications industry as defined for the study’s focus covers business activities subsumed as “Telecommunications” under NACE Rev. 1.1 DL 64.2.
Adoption of ICT and e-business in 2006: The statistical picture
Telco companies have a forerunner position as intensive users of ICT and e-business in almost all application areas. Moreover, the wide diffusion of e-business technologies also among smaller enterprises distinguishes the sector from most other industries studied.
- The internet is an integral part of daily work routines in the telco sector. A large majority of employees in telco companies (on average about 90%) have access to the internet and are well connected via sophisticated ICT infrastructure. In fact, all statistical indicators reflecting the adoption of ICT infrastructure components are clearly above the average of all sectors covered by the e-Business W@tch in 2006.
- Telco companies spend every fifth Euro of their investments for ICT and e-business technologies. Survey results on ICT investments underline the relevance of ICT in this sector. In fact, ICT and e-business technologies are the basis for service provision, the sectors’ output and are also needed for process support. Furthermore, ICT budgets of telco companies are likely to increase in the future.
- Proprietary solutions and XML-based standards are most widespread as basis for e-business transactions. In general, the use of e-business standards, particularly XML-based, is more widespread in the telco industry than on average in other sectors surveyed. However, a large share of telco companies reported using proprietary solutions for e-business transactions (based on agreements between several business partners).
- Telco companies of all sizes make wide use of e-business tools in almost all application areas. While complex ICT systems (e.g. Customer Relationship Management systems) are more widely diffused among large enterprises, telco companies of all sizes said that they use intensively rather simple e-business applications (e.g. e-ordering).
- Most product and process innovations in the telco industry are ICT-enabled. Overall, the share of telco companies that pursued product or process innovations during the past 12 months is higher than in all other sectors polled. About three quarters of all product innovations and almost 90% of process innovations were enabled by ICT.
- According to surveyed companies, customers’ expectations and fierce competition are the main drivers of e-business activities in the telco sector. Limited company size and security concerns were identified as the main barriers. Overall, only a marginal share of telco companies (mainly micro companies) reported that e-business does not play any role for the way their company operates.
Analysis of e-business key issues
The telco industry has a dual role as user and supplier of ICT and e-business technologies. The analysis of e-business key issues in this report reflects both perspectives: Convergence-driving technology developments have been identified as key issue related to the supply of telco services. Marketing, sales and customer care are core business areas supported by ICT tools in this sector.
Convergence in the telecommunications sector
Although there is no single definition of convergence, this term is frequently used to describe technology trends that lead to blurring lines between different industries and their offerings. Convergence-driving technology trends include the increasing relevance of new broadband access technologies, Voice over IP (VoIP), IPTV and mobile telco services. The relevance of these trends for European businesses in different industries is reflected in the survey results.
- Broadband connections are already widespread among businesses in Europe with DSL being the main driver of broadband penetration today. Two of three companies in Europe (on average over all 10 sectors studied) reported having broadband access, according to the survey findings. Significant usage shares are observed for all size bands and sectors. DSL turned out as the most popular broadband access technology. But there is a large variety of other broadband technologies, which may serve as complements or alternatives to DSL.
- A significant share of European businesses across different industries said that they already use VoIP. While usage shares are quite high in all size bands, this technology seems to be particularly attractive for large companies – one out of five firms with 250 or more employees in this sector reported using VoIP.
- An increasing relevance of mobile services among businesses in Europe, however, is only partly reflected by the survey findings. Only a marginal share of companies across the 10 sectors studied in 2006 (4%) reported using wireless broadband connections. In addtion, mobile technologies for remote access are primarily used by companies in high-tech industries and among larger firms in Europe.
Further case-study-based analysis illustrates impacts of convergence-driving technology developments (including IPTV) on industry structure and competition in the telco industry.
ICT to support marketing, sales, and customer care
ICT and e-business technologies to support marketing, sales, and customer care are of high relevance in the telco industry as revealed by the 2006 survey results. Customer Relationship Management (CRM) is a complex task in this sector. Marketing and sales departments have to deal with mass-market issues, heterogeneous needs of different target groups, and an increasing range of products and services. ICT and e-business tools play a central role as a basis for the provision of customer services and to support marketing management in this sector. Insights into the practical use of ICT to support such activities are provided by numerous business examples and case studies.
- Telco companies are forerunners in using ICT to support marketing and sales processes. According to this year’s survey results, the diffusion of customer-facing e-business applications in the telco sector is significantly above the use of such tools across all sectors studied by the e-Business W@tch in 2006.
- ICT and e-business technologies also show a strong impact on activities of smaller companies in this sector. The relatively high diffusion of customer-facing e-business tools among smaller companies is what distinguishes the telco sector from most other sectors studied. A case study presented in the full report illustrate that even simple e-business tools (e.g. product websites) may have significant impact on the business activities of smaller telco companies.
- The use of ICT to support customer-related activities goes beyond the adoption of core applications like CRM systems. Use of Supply Chain Management (SCM) software and e-marketplace services to optimise supply chain processes also impacts the sales success of telco companies.
Implications for enterprises
According to the 2006 survey results, three out of four telco enterprises perceive e-business as important for their company operations. Due to the dual role of telco companies as suppliers and users of e-business technologies, these technologies affect all business fields. According to the analysis in this report, main implications by ICT and e-business are relevant for the following areas:
- Marketing, sales and customer care: As shown by the survey results and confirmed by the analysis, marketing and sales is a key e-business application area in this sector. In fact, there are many opportunities provided by customer-facing e-business technologies to support sell-side activities of telco companies. However, not only large companies can profit from ICT usage. Basic e-business tools, such as product websites, when applied in an innovative way may also help small companies to establish a visible brand and build an extensive customer base.
- Products and services offered: More than 50% of telco companies reported a positive impact of ICT on the quality of products and services. In fact, new technologies based on the internet (e.g. VoIP and IPTV) are likely to substitute traditional telco services and enhance the range of products and services offered.
- Automation and streamlining of business processes: More than 60% of telco companies reported a positive impact of ICT on the efficiency of business processes, according to the survey findings. Competition and saturation in traditional telco market segments have led to increased cost pressure in this sector. As shown by the survey findings and confirmed by the analysis, particularly larger telco companies are concerned with streamlining and automating internal processes in order to save on costs.
ICT impacts on competition
About two thirds of companies in this sector, irrespective of their size, perceive increased competition due to ICT. In fact, fierce competition and saturation of traditional telco markets are driving product innovations which are based on new ICT and e-business developments. Telco companies are forced to adopt new technologies for services like IPTV in order to remain competitive and to initiate growth in an increasingly converging environment.
However, entering new market segments places additional challenges for internal process organisation. New processes, e.g. for billing and marketing new service offerings, have to be defined and implemented. Thus, innovative use of ICT both as an input for new products and to support the transformation process is of increasing importance in this sector.
Based on the analysis of the use of e-business technologies by telco companies in this report and discussions with industry representatives, neither a need for promoting ICT adoption in this sector nor for counteracting ICT-induced market failure were identified. Rather, the telco sector appeared as a forerunner in almost all e-business application areas with adoption rates strongly above those of other sectors surveyed. In addition, the relatively high usage rates of e-business technologies by micro and small companies distinguish the telco sector from other sectors surveyed.
E-business practices in the telco industry may rather serve as role model for a successful combination of market liberalisation efforts and the use of e-business technologies. The experiences of the telco sector might be a helpful input for the discussion of liberalisation efforts in other sectors. In addition, examples for the innovative use of e-business technologies by telco companies like Budget Telecom might serve as input for promoting e-business technologies to SME in less e-business-intensive sectors.
Reference to earlier sector studies
The sector was covered as part of the "ICT
services sector" in sector studies of 2002-2004.
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