Industry Analysis of Telecommunications

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The telecommunication wireless industry is defined by its ability to operate and maintain switching and transmission facilities to provide direct communication through radio-based cellular networks. Services found in this industry include cellular mobile phone services, paging services, broad and personal communication services, and wireless public safety services. According to (IBIS World database), 52.2 percent of the products and services are segmented in cellular voice services. The telecommunication wireless is a 210.2 billion dollar revenue generating industry, with 43.7 billion in total profits. Over the past five years, this industry has experienced an annual growth rate of 2.6 percent and is forecasted to grow at 4.8 percent during the next five years (IBIS World database). The major players in this industry include the following: Verizon Wireless, AT&T Inc., Sprint Nextel Corporation, and Deutsche Telekom AG (see Appendix ? for graphical breakdown of percentage market share). During the past five years, this industry has fared well in a weak economic environment. Their economic prosperity has been helped by the increasing demand for wireless mobile device products and services. (Find statistic about households switching from landlines to wireless). In the next five year(s), the industry projects to grow 4.8 percent from the transition of providing voice services to focusing on the delivery of wireless data services. The Federal Communication Commission (FCC) is the main regulator of industry activities. One of the main controls the FCC holds over the wireless communication carriers is their ability to regulate the amount of spectrum licenses available to the industry. The two major consumers in the wireless communication market can be segmented into the corporate buyers or the individual consumer. Both sets of buyers tend to be semi-price sensitive. Corporations tend to be semi-price sensitive due to a majority of their products or services not being affected by the industries product. The corporate buyer segment also, tends to have a little greater bargaining power to negotiate prices than the individual consumer because many times the industries products can be carried by other vendors or seen as standardized or undifferentiated. Individual consumers tend to be more price sensitive than corporations, however, remain semi-price sensitive. Since the downturn in the economy, buyers in this group tend to view purchasing wireless telecommunication devices as a significant cost relative to their earned income. Most carriers require a multi-year service contract for consumers, which cause consumers to shop around for the best prices between carriers. The multi-year contract also help carriers maintain consumers for longer periods and increases the switching cost to consumers, thus weakening purchasing power. Lastly, four major carriers who receive approximately 86.9 percent of the annual revenue combined, predominantly control the market. Thus, consumer brand loyalty plays a large role to future value earned for wireless telecommunication carriers allowing consumers to gain some power, due to companies wishing to retain business. The threats of substitutes in this industry are moderate to mild. Currently the major direct substitutes to the wireless industry include Voice over Internet Protocol (VoIP) and wire line communications. However any form of communication could potentiall be viewed as an indirect substitute to the wireless industry and would include other technologies such as email, skype and social websites. Wire line communications is viewed as older technology and the switching cost from wire line to mobile is inexpensive. While mobile technology is considered superior technology over wire line, it also offers the consumer greater benefits than wire line technology, for example, it allows communication on the go or while traveling. VoIP technology tends to be cheaper than mobile communication plans and...
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