Telecommunications in Business

This article discusses the role of telecommunications companies and the related communications services they provide to the business sector. Additionally, the historical role of telecom companies in providing communications infrastructure and services to commercial and private (residential) markets will provide a context in which to examine the current role of telecom in the US economy. Traditional telecommunications companies and their core services are facing increasing competition in the marketplace from cable companies and from the pervasive presence of the Internet. The implications of providing secure, reliable, and cost-effective communications options in the global economy present many challenges and opportunities. Today's business communication customers rely on mobile technology to keep them virtually connected to their data, colleagues, and markets, and their expectations are high. Agility and innovation will be required of telecommunications providers as the business sector market for communication evolves.

Keywords 3-G Mobile (Mobile Broadband Network); Average Revenue per User (ARPU); Bluetooth; Business Communications; Business Sector Telecommunications; Cable Communications; CDMA (Code Division Multiple Access); Cellular Network; Communications Managed Services; Communications Security; DOS (Denial of Service); Dual Mode Phone; Emerging Telecommunications Technology; GSM (Global System for Mobile Communications); Malware; Mobility Strategy; Multiple System Operators (MSO); PBX Exchange (Private Branch Exchange); Smart Phone; Transport Layer Security (TLS); Wi-Fi; Wi-Max (Worldwide Interoperability for Microwave Access); Wireline

Business Information Systems > Telecommunications in Business

Overview

The Telecommunications Act of 1996 broke up monopolies and served as a catalyst for the growth that became the telecom "boom." Mergers and consolidations were common as the industry adjusted to the new marketplace rules. Telecom, while always a capital-intensive industry, carried high rates of debt at 60 percent. Huge capital outflows of money that were needed for improved infrastructure and equipment typically didn't yield profits for two to three years and resulted in negative cash flow (Ryan, 2000). Consequently, breakout spending forced many telecommunications companies into Chapter 11 bankruptcy. By the year 2000, the telecom industry had hit the doldrums. The telecom industry as a whole suffered greatly at the start of the new millennium; some of its more persistent woes were:

• Boom-and-bust operating policies of the industry as a whole
• Recovering from Y2K or the “millennium bug”
• Increased federal regulations

Even though growth in the telecom sector was flat after 2000, many still saw telecommunications as a "catalyst for growth in the greater IT industry." The migration of voice telephony to internet protocol (IP) was just one example (Carlson, 2004).

The blending of old service and new technology was a great opportunity within the telecommunications sector; but the highly regulated nature of this industry left many worried that policy makers would impose burdens that would stifle emerging services and innovation.

In 2003, things started to look up for the telecommunications industry as a whole. “The ordeal of the past three years has transformed the telecom industry,” according to Steven Rosenbush. “During the downturn, chief execs realized they had poor insight into many aspects of their operations, from customer demand to inventory and the supply chain. Now they have better information on all those fronts, thanks to improvements in the software tools and data links used to plan supplies and forecast sales; all which allows them to react more quickly than in the past. ‘We’re going to be operating in an environment where cycle times are dramatically compressed,’ says Scott Kriens, CEO of communications-equipment-maker Juniper Networks Inc. ‘and that will change everything, from the business model to [raising funds]’” (Rosenbush, 2003, ¶5).

Fast forward a few years, and one is reminded that only some of the telecom optimism was translated into reality. There's a "telecom mindset" that focuses too much on communication and connecting A to B. This type of thinking will inevitably create a collision course between media, telecom, and Internet. The Internet is about open access and distribution of content and applications, while telecom is afraid of such a model. After all, telecom companies have made huge profits by driving users to their networks and charging for use. "Access is not their [telecom] model" (Clark, 2007).

Traditional telecommunications providers (phone) dominated the communications markets for many years, but a further discussion in this essay will reveal that government regulation, lack of foresight and innovative competitors have challenged telecom companies in their dominance of the business communications market.

Applications

Telecom Marketplace Presence

Without question, telecommunications companies are the leading provider of communications services to the business sector. Current estimates of the annual expenditure by the US business sector for telecommunications services is at no less than $100 billion and could be as high as $131 billion.

“Mark Palazzo, VP and general manager of Scientific-Atlanta’s Metro Access Business Unit, says the telcos are scooping up about 97% of that $131 billion. ‘The commercial(business) customer is a cash cow for the telcos,’ he says. ‘There is effectively no competition in that space today.... We see it, as do the financial community and the MSOs (multiple system operators), as a great opportunity [for cable] in the future.’ To achieve that growth, cable needs to grab market share from the telcos” (Caranicas, 2006, ¶2).

From the perspective of the telecommunications industry, one business customer is equivalent (in revenue) to ten residential customers. With numbers like these, and hundreds of billions of dollars at stake in the marketplace, it is no wonder that telecommunications companies are working so hard to stay ahead of their fast-approaching competitors.

Telecom Offerings to Business

Telecommunications providers are supporting the explosion of smartphones, which have become standard equipment for all mobile employees. Smartphones have become the staple of mobility and wireless; they function as communication tools, handheld computers, and offer ways to access multimedia offerings.

Smartphone developers focused on two types of critical data for mobile users: email and access to corporate data. A smartphone with mobile broadband is a virtual "office to go." The device was designed to interface well with other enterprise solutions such as Oracle, Sun, and Lotus databases. The hardware components of a smartphone are obviously smaller than for a laptop or tablet, but many vendors are offering a lean version of their projects to insure that performance for mobile users doesn't suffer.

Even with smartphones and tablets at their disposal, many mobile workers will continue to see limitations to services. "Today, mobile business users navigate a patchwork of wireless networks. Most connections must be set up, torn down and reinitiated when users cross Wi-Fi and cellular network boundaries. Work is afoot, however, to stitch together multi-radio devices, Wi-Fi LANs and cellular networks into one big mobile sphere" (Wexler, 2006, p.34).

The technology needed to support this convergence is literally a bridge between cell and Internet. Wi-Fi and cellular boundaries are currently separate and don't allow users to move seamlessly and reliably across the networks. Mobile VPNs are coming into use and must be able to connect to multiple networks, but voice is not part of the mobile VPN. Cellular carriers do worry about cannibalizing their revenues by taking away their bread-and-butter cell offerings and bundling voice into Wi-Fi.

Optimizing Wireless

Even within the physical confines of organizations, a mix of communications offerings is being used. Many companies installed wireless LANs (local area networks) but failed to anticipate that users would quickly grow accustomed to on-demand wireless that runs across multiple applications. These same companies have not optimized their LANs for voice coverage.

“‘Our Wi-Fi network is built for conference rooms and guests, not blanket coverage,’ acknowledges the global network architect of a worldwide consumer products company who asked not to be identified. ‘We’d need to pop $400,000 to $500,000 [in infrastructure] to use Wi-Fi instead of cellular for voice just within the company’s U.S. headquarters,’ he says” (Wexler, 2006, p. 34).

As with nearly every enterprise technology, there needs to be a “consistent security scheme that will work transparently with Wi-Fi and cellular networks. Users will want to move between the Wi-Fi and cellular networks,” (Wexler, 2006, p. 35) and the security issues surrounding this have not been widely addressed to date. From an IT standpoint, it is difficult to manage multiple protocols, services, and security initiatives. As one telecom manager stated, “There is a compelling business case for dual mode in getting our clinicians to a single device and avoiding a tool belt of communications equipment” (Wexler, 2006).

Managed Desktop Services

With competition heavy for business telecommunications, telecom providers are expanding services — particularly to support the needs of the mobile workforce. End-to-end service is now a competitive differentiator for telecommunications providers. Managed service can support telecommuters and road warriors — those who don't have convenient access to internal IT staff.

Offerings include:

• Hardware repair
• Lifecycle maintenance
• Software patches
• Security upgrades

Verizon is one company that sees a future in managed services offerings and is developing a road map for new products and services to add to its portfolio.

Issues

Mobility Strategies

To date, most organizations have introduced mobile technology using what some term a "hodgepodge" approach. Mobile devices that were once only deployed to high-level employees have become mandatory tools for keeping a mobile workforce connected to their home office and colleagues. Many organizations have also found that mobile technology offers more than just connectivity to data: it can significantly raise output and productivity if deployed strategically to the right users.

Safelite Autoglass stores decided to deploy mobile technology to its 1,800 field technicians who operate out of more than 700 sites across the United States. The $200 cost of a smartphone was significantly less than a laptop and yielded the following benefits in productivity:

• Field techs could access turn-by-turn directions to appointments
• Field tech locations could be monitored for easy access and deployment
• Electronic timecards (service call length) were integrated into invoicing and payroll
• Technicians were able to save 60-90 minutes per 8-hour shift due to productivity gains.

Organizations today need to create and roll out comprehensive mobility plans to recognize the real strategic benefits that mobile technology can offer. A mobility strategy as part of an overall strategic plan for the organization would continuously evolve to drive business objectives. Really forward-thinking companies have even developed "mobility centers of excellence." A mobile strategy is not merely the piecing together two or three mobility projects; companies must “prioritize tiers of users to assure the right equipment and applications go to the right workers” (Dunn, 2007, ¶7).

Analysis of worker tasks and work requirements can identify tiers at which mobile technology may be deployed effectively. Organizations need to look at the deployment of mobile technology from the standpoint of which employee’s work can benefit the most of these technologies. “Once completed, the tiering of workers and their requirements will allow a company to develop a strategy for support levels ranging from 9 to 5 to round-the-clock. The tiers can also serve as a prioritized blueprint for a multiphase rollout of the mobility strategy” (Dunn, 2007, ¶14).

Mobile devices are no longer just perks for C-level and director level employees; line workers and field workers (along with their companies) are now benefiting from mobile technology as much as knowledge workers.

Global Phones — Dual Mode Phones

Similar to the design variation found in personal computers, cell phones are different from one another in terms of mobile standards or technologies and transmission frequencies (Lin & Brown, 2007).

The standard for mobile phones in the United States is CDMA (code division multiple access) mobile technology. This standard has been championed in the US by Verizon and Sprint. However, CDMA accounts for only about 14 percent of the mobile technology in worldwide mobile market; the standard for mobile technology in the rest of the world is GSM (Global System for Mobile communications). Most US cellular phones don't work in Europe and Asia, and this poses a problem for employees who routinely travel out of the United States and need to connect back to their US office bases.

Skype was the first company to have IP telephony client software installed on dual mode handsets. Many smartphones now accommodate voiceover IP (VoIP) service, thus allowing for dual (cellular and Wi-Fi) connections.

As mobile service providers implement new technology in pursuit of the growing mobile communications markets, the challenges for securing data transmission will also increase. Currently, security is handled differently for Wi-Fi and cellular transmission; once technology allows users to switch more fluidly between cellular and Wi-Fi, the handoffs will need to be both secure and seamless (invisible) to the user.

Cable as an Alternative to Telecom

Cable companies have invested their resources and relationships primarily in residential markets, and as a result have nearly saturated the market. Now they are moving into the $130 billion business communications market offering voice, data, and media services to business. According to Jerry Bennington, executive consultant at CableLabs, " A voice/data bundle from a cable operator is at least as good in quality, usually better, than a telco offering" (Caranicas, 2006).

Great opportunity in the market resides in the ability of cable companies to offer voice, data and media to business, and the return on investment is very easy to justify. As Steve Santamaria, SVP and general manager of commercial services at Xtend Networks stated bluntly, "Do you want to keep fighting for the $50 and $60 residential customer, or do you want to go after business customers that are going to pay you $400 at 82% margins, and the average contract runs for three years?" Cable offers a high-margin market with significantly higher average revenue per user at the business level.

Cable companies are willing to offer bundled services (internet, phone) as are many telcos, but cable is counting on their presence in the marketplace; there's a feeling that cable companies are less "anonymous" than telcos. In many cases, executives and managers at companies are familiar with cable companies because they are using the cable services at their homes.

Cable companies will plan to implement the following strategies as well:

Moving to an All-IP Scenario for Mobile Communications

Many telecommunications providers are viewed as lacking in innovation and response to new markets and changes in the marketplace. Low growth in the traditional telco industry is not exciting to investors who prefer emerging markets and solutions.

"The transformation of telecom spending continues unabated," said Bryan Van Dussen, In-Stat analyst. "The relentless march toward IP-based networks, the unequivocal adoption of mobile solutions, and the pervasiveness of broadband have changed the face of business networks forever"("Wireless will outpace wireline," 2006).

Telecommunications Security

Moving toward an open network creates security threats almost as quickly as the solutions themselves. The more you open up networks and applications, the less control you have. While this is so, “security specialists recognize the need to offer as many services as possible to meet end-user demands in an emerging all-IP world” (Alleven, 2007, p. 1).

Numerous safeguards, such as authentication and encryption, are already being implemented to protect mobile networks and end-users. Malware attacks are increasing and the threats have wireless operators squirming. Another emerging trend in mobile security that is emerging is an emphasis on protection at the network level rather than the end-user level. Increasingly, threats are aimed at mass markets rather than at individuals, which raises the stakes considerably when insuring network protection. “According to Jan Volzke, senior marketing manager, mobile security at McAfee, security at the network level gives you immediate protection for all subscribers” (Alleven, 2007, p. 2).

Safeguards at the network level can only go so far, and end-user behavior is universally recognized as an important piece of the security puzzle. One solution has been the introduction of a secure mobile internet pass. The technology, based on Secure Sockets Layers (SSL), encrypts messages to ensure private and secure communication channels (Alleven, 2007).

The next step to assuring wireless network security is likely the prevention of denial of service attacks (DoS attacks) at the base station level of the network. In other words, adding a layer of protection at the network base layer (the hub of the organization's wireless network) has the potential to stop malicious attacks long before they get to an end-user's desktop. Ironically, many devices have built-in security with the ability to safe-lock a device (laptop, pc, tablet, phone), but users seldom log out of their device, which leaves networks, hardware, and applications at risk. In the end, security will need to apply a two-pronged approach that builds securing measures into both networks and devices.

Conclusion

This essay has covered the legacy role that traditional telecommunications companies have held in providing communications services to the business sector. The business communication sector is large and growing quickly as opposed to the services for residential users. Cable companies are planning aggressive build-out of network infrastructure to compete with telco providers.

The business telecommunications landscape will evolve quickly over the next five years. Mobile technology growth will drive innovative new technology and tools. Open access technology and a move toward internet protocol delivery of communications appear inevitable as users demand more data faster and without network constraints.

Security issues will continue to demand much from IT staff and budgets. Security solutions will need to protect user devices, the networks that the deliver data, and, increasingly, the Internet sites (portals) that will become a primary means of delivering content to users in the open access model.

Terms & Concepts

Average Revenue Per User (ARPU): Defined as aggregate revenue divided by total # of users.

Bluetooth: Wireless technology that allows users to quickly and easily transfer files between devices (cellphone-desktop).

CDMA (Code Division Multiple Access): The US standard for mobile phones.

Cellular Network: A cellular network is comprised of a number of radio cells, each of which is supported by a fixed transmitter, referred to as the cell site or base station. These different cells cover different areas to extend radio coverage over a greater area than just one cell could support.

DoS (Denial of Service) Attack: A malevolent effort to make certain computer resources unavailable to their intended users.

Dual Mode Phone: A phone that allows connections with both cellular and Wi-Fi.

GSM (Global System for Mobile Communications): European standard for mobile phone technology.

Malware: Software created to infiltrate and damage a computer system without the owner’s awareness or agreement. The term comes from shortening “malicious” and “software,” to describe the hostile, intrusive, and annoying software.

Multiple System Operators (MSO): A cable industry term that describes a company that owns two or more cable TV systems.

PBX (Private Branch Exchange): A private telephone exchange that only serves a certain business or office, instead of one that a telephone company manages for a number of businesses or for the general public.

Smartphone: A device that provides access to communications, hand-held computing, and multimedia applications.

Transport Layer Security (TLS): A cryptographic protocol that provides secure communications over the Internet, including data transfer, web browsing, e-mail, and instant messaging.

Wi-Fi: Wireless technology of local area networks (WLAN) based on the IEEE 802.11 standard. As of 2007, the general use of the term Wi-Fi has expanded to include references to generic wireless interfaces of mobile computing devices such as laptops in LANs.

Wi-MAX (Worldwide Interoperability for Microwave Access): Telecommunications technology that can transmit wireless data over long distances in a number of different ways, including point-to-point links or complete mobile cellular access.

Wireline: Cabling technology that provides a pathway for electrical telemetry for communications between equipment.

Bibliography

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Suggested Reading

Brown, S. (2003). Does government belong to the telecom business? Lightwave, 20, 21. Retrieved August 6, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=9324113&site=ehost-live

Neighly, P. (2000). Voice is not dead. America's Network, 104, 38. Retrieved August 6, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=3869226&site=ehost-live

Sutherland, E. (2013). The enterprise and the digital single market: business telecommunications. Info, 15, 62–72. Retrieved November 21, 2013, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=85980043