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Deutsches Institut für Japanstudien

Liberalization of Telecom markets in Western Europe and Japan: A Comparison of Business Strategies

June 4, 2001 / 6.30 P.M.

Prof. Dr. Jürgen Müller, Berlin School of Economics (FHW) and Global Information and Telecommunication Institute, Waseda University, Tokyo

The present paper has several objectives. We firstly present a survey of telecommunications reform in the EU and the results that telecommunications liberalization has had on domestic and European industry structure. This evolution from an artificial „regulated“ industry structure to a restructured „competitive“ industry structure is influenced on the one hand by the regulatory policies of national and EU regulators (both structural and behavioral) and on the other hand by the business policies pursued by the incumbent telephone companies and those competitors entering the sector. This evolution is first illustrated by developments in Germany, before we look at the wider EU and the subsequent internationalization policies that followed as a result of Foreign Direct Investment (FDI) in adjacent markets.

In this second part of the paper, which draws on work from Elixmann and Woerter (2001); we systematically investigate the quote;status quoquote; of internationalization in European telecommunications markets, before working out features of dominant restructuring strategies. On the basis of this analysis, one is then able to identify both typical quote;archetype strategiesquote;, and to derive drivers for the future internationalization. Ad the end, a short, speculative excursion is made to the Japanese market, to see if similar developments can be observed there.

The paper divides a given national telecommunications market into three big segments: the fixed network market, the cellular market and a so-called extended telecommunications market. The latter encompasses Internet service providers (ISP), backbone service providers, suppliers of local access (city carriers, operators of metropolitan area networks (MANs), operators of data centres), and suppliers of media and other content.

Taking account of the combined fixed network and the cellular market the empirical study of the quote;status quoquote; shows that essentially 15 enterprises are internationally active in Europe. Inclusion of the segments of the extended telecommunications market yields an increase of the number of the players in Europe to over 30.

The current international activities in the combined fixed network and cellular market can be structured according to six archetypes: (a) non-players, (b) lightweights, (c) hybrid-EU-15, (d) hybrid-Europe-wide, (e) mobile specialists. The number of companies varies substantially across the archetypes. It is a surprising result of the analysis by Elixmann and Woerter (2001) that no player can be assigned to the a-priory conceivable archetype (f) fixed network specialist. The positioning of the players with FDI activities in Europe in the extended telecommunications market varies significantly across the archetypes.

The following factors are key drivers for the future development of “today’s“ archetypes: (a) continuing liberalization of national telecommunications markets, (b) realization of economies of scale and scope, (c) strategic repositioning of already active players as well as (d) financial requirements and the impact of the capital market. This holds true both with respect to the defining features of a particular archetype and the assignment of a player to an archetype.

The number of players in the combined fixed network and cellular market as well as in the segments of the enlarged telecommunications markets is not going to change fundamentally in a medium term view. Our analysis shows that the archetypes non-players, hybrid-Europe-wide, and mobile specialists will survive in the future. However, the archetypes lightweights and hybrid-EU-15 are going to disappear. Instead two new hybrid modes of internationalization will emerge (hybrid-selective, hybrid-regional) in the future. Contrary to the current situation there will at least be one company the strategy of which can be characterized by the archetype fixed network specialist in the future.