Greg Cooper, managing director of Martrain, a Bristol-based telemarketing consultancy, specialises in showing businesses how to make better use of the phone. Hence his recent surprise to discover that his own staff were missing important incoming calls. The loophole came to light thanks to an innovative management reporting service from Energis, the new, long-distance telecoms operator owned by the regional electricity companies.
Energis customers receive colourful monthly charts and diagrams showing in detail how their phones have been used and how long callers have been kept waiting. `The reports highlighted the fact that we were making the majority of our outgoing calls at the time when most people were trying to call us,' says Cooper. `The times when we were least available were the times when people most wanted to get us.'
The reports also revealed a pattern in staff productivity, beginning slowly, reaching its peak around the middle of the morning, and tailing off again towards lunch time. This type of information is invaluable to medium-sized and smaller businesses which can't afford expensive call-logging equipment, says Cooper. He is now considering taking on extra staff.
The Energis network, which is based on cables hung from pylons, is one of a host of new telecoms services that have sprung up in the UK since BT was privatised in 1984 and its duopoly with Mercury ended in 1991. The UK is currently one of the world's most liberalised telecoms markets. There are some 17 licensed public telephone operators, four mobile network providers, 125 cable franchises and a number of other niche market specialists.
Meanwhile, competition has undoubtedly been good for BT. According to a recent report by Coopers & Lybrand, the company has handled more change more effectively than any other major European corporation. Since privatisation, it has shed 100,000 jobs, prices have roughly halved, and it has launched a raft of new business services. These include outsourcing, systems integration, volume-user discounts, charge cards, caller-line identification, portable numbers, and trials of video-on-demand.
UK telecoms users now have far more choice and lower costs than a decade ago. And the trend is set to continue. The price of transatlantic calls, for example, should tumble in the wake of a recent agreement between the UK and the US to open up lines between the two countries for direct resale. (Previously all transatlantic lines had to be paid for individually. Re-sale allows third parties to buy capacity, repackage it, and sell it on competitively.) Nick White, head of worldwide telecoms at Unilever, and European vice chairman of the International Telecoms User Group (INTUG), reckons phone bills for volume users could come down a further 30%.
This is clearly good for British business. It also persuades a large proportion of major corporations to choose the UK for their headquarters - some 14% of the world's multinationals are based in the UK, as are 40% of Europe's biggest companies. The liberalised telecoms market is a major factor in their thinking, says Merrill Tutton, UK president of AT&T. `The Continent is a decade behind in telecoms. AT&T's large multinational customers are making conscious business decisions to move their operating centres and customer care centres away from the Continent to the UK. '
But competition is hotting up round the globe. Sweden and New Zealand are rivals for the title of the world's most liberalised telecoms market, according to the Organisation for Economic Co-operation and Development (OECD). Other nations, such as India, Australia and Japan, are deregulating fast.
In India, where there are only eight lines per 1,000 people, privatisation is seen as the fastest route to new investment, while Australia now has competition in the cellular and long-distance markets, with more to come. In Sydney, almost 20% of subscribers have moved away from the government-owned Telstra, to Optus, a second telecom carrier licensed in 1992. Japan's partially privatised NTT, the world's largest operator, still controls the local market. But next year the regulatory authorities are due to decide how to deal with the remaining 65% of NTT still owned by the finance ministry. Further deregulation is expected to help Japan catch up with the US in paving the way for the information society of the 21st century.
In the US, local services remain a lucrative monopoly in the hands of regional Bell operating companies (RBOCs), formed when AT&T was broken up in 1984. But there are some 500 players in the long-distance US market, led by AT&T, MCI and Sprint. They offer a foretaste of what may be to come in the UK, suggests Tutton. Every two months, around two million of the US's 100 million households change their long-distance company. `The battleground is not so much price as features such as messaging, loyalty programmes, and telephone numbers for life.'
The emerging markets in the developing world and the countries of the former Eastern bloc are also a major target for the world's most ambitious telecoms operators. China, for example, expects to increase its 30 million phone lines to 110 million by the year 2000. US companies, such as AT&T and Nynex, have set up a number of consultancy contracts, and training programmes in Russia and China, as has Hong Kong Telecom, 57.5%-owned by the UK's Cable and Wireless. However, as Kevin Langford, telecoms analyst at Robert Fleming, points out: `There is a question mark over what sort of returns might be available. The Chinese are striking some pretty hard bargains.'
But while questions remain over the world's domestic markets, there is no doubt about the massive business to be had providing services to the international business market. According to the telecoms research organisation, CIT, by 2003 the world's top 1,000 companies will spend more than £25 billion a year on telecoms. They are also reckoned to be the least price-sensitive. Small wonder that every self-respecting telecoms player is scrambling to join a consortium with international clout. Three consortia have emerged so far. First to market was Concert, a joint venture between BT and MCI, of the US, in which BT bought a 20% stake for $4.3 billion. The two companies have pledged $1 billion for Concert, which provides a one-stop telecoms shop for international companies offering both voice and data services in what feels like a private network.
The overseas market, which accounted for around £1 billion of BT's £13 billion last year, is the company's single biggest opportunity, says Alfred Mockett, managing director of BT's Global Communications division. `Price is not the main issue for these large business customers. What matters to them is that networks should be sophisticated, robust, and capable of delivery in the countries where they are needed.'
Concert's partners include Tele Danmark, Telecom Finland, Norwegian Telecom and Banco Santander in Spain. In Japan it has signed a contract with Nippon Information and Communication (NI&C), a subsidiary of NTT, although it still lacks a major partner in the Far East. `We're significantly ahead of the pack, having done $150 million business by July of this year ,' says Mockett. Concert's goal is to be the number-one provider of pan-European services and to win a minimum of 10% of each market it enters within five years of going in.
Concert's closest rival is a hybrid combining two former competitors, AT&T's Worldsource, and Unisource, an alliance between telecoms operators in Sweden, Switzerland, the Netherlands and Spain. Unlike Concert, Worldsource/Unisource involves no equity but rather a series of loose partnerships. Its other members so far include KDD of Japan, Singapore Telecom, Australia's Telstra and New Zealand Telecom.
The third and most recent group, known as Atlas, has been formed by Deutsche Telekom and France Telecom in collaboration with Sprint of the US. However, Atlas has yet to get the official go-ahead from the US and European regulatory authorities, and faces tough US opposition because of the reluctance of the European players to open up their home markets. EU members agreed to liberalise data (5% to 10% of traffic) in 1989, and value-added services (another 5% to 10%) in 1992. But countries such as France and Germany have insisted on waiting until 1998 before opening their voice services to competition. Some members, such as Greece, Portugal and Ireland, have asked for extensions into the next century. The formation of Atlas has prompted US players to protest to the Federal Communications Commission (FCC) and Department of Justice about lack of reciprocity. They are arguing that the Atlas members would effectively use `monopoly' revenues to subsidise international activities while US players would remain banned from competing in France and Germany.
None of the groups has the world completely covered, but there will soon be no room for non-aligned players on the global stage, reckons Mockett. There could be additional regional consortia in Europe, Asia or the Americas, he points out. `But any PTT (public telephone company) that doesn't participate in one of the main groups will be forced to retreat in its own country and be subject to incursions by one of the others. You're either on the defensive or the offensive in this business.'
If the enthusiasm of France and Germany for Atlas does not persuade them to open their markets before 1998, they might find themselves forced into action by some of their multinational customers. Many of Europe's biggest telecoms spenders are becoming increasingly vociferous in their complaints about the `excessive' cost of national and trans-border traffic on the Continent. One of their main worries, according to INTUG's White, is the fact that France and Germany haven't even agreed to start commercialisation for another four years. It could be well into the next century before the new networks are in place to provide competition. `The effect is to burden Europe's businesses and impede the development of addition-al services,' says White. `Users are pressing for alternative infrastructures to be set up now so that the cost of leased lines in Europe can start coming down as soon as possible.'
To put the point more forcefully, some 40 multinationals have formed a pressure group, the European Virtual Private Network Users Association (EVUA), with the aim of pushing for enhanced functionality in pan-European networks and price cuts of at least 20%. `Our members are being invited, post single market, to operate with their customers on a pan-European basis and, frankly, telecoms is a hindrance not a help,' says John Sale, network services manager at EDS Rank Xerox, which founded the group in partnership with ICI/Zeneca. `The fact that we have to operate telecoms nationally with lots of different standards and ridiculously high costs is making telecoms less of an enabler in Europe at the moment than a disabler.'
The EVUA has received strong support from the mandarins in Brussels who feel constrained as to what they can dictate from the centre on competition, says Sale. `They recognise that when industry shouts for competition the message probably gets heard by more people.' Preliminary deals for pilot projects involving members have already been struck with Concert and AT&T. But these are only intended to establish what is feasible; they will not necessarily lead to permanent contracts with the same telecoms operators, says Sale.
Another spur to Europe's monopolistic laggards may be their fear of missing out on the much-vaunted information superhighway, expected to bring a host of multimedia information and entertainment services to homes and offices during the next few years. Despite reports questioning early uptake of applications for the highway, it is widely regarded as an essential vehicle for business in the future. Eurocrats at first thought the highway would be paid for with public funds, but the huge sums required - up to £20 billion for the UK alone - have forced them to re-cognise the need for commercial investment.
Even then it takes a long time. In the UK, cable companies began laying optic fibres with their virtually limitless data-carrying capacity in the early 1980s. So far they have passed some three million homes, but only around 600,000 have been lured by the prospect of multiple TV channels. There seems little chance that households would be prepared to pay the £500 to £1,000 price of an optic-fibre connection for the privilege of teleshopping, dial-up theatre booking, or access to on-line banking services.
So who will pay for the superhighways? In the UK, BT has undertaken to bring fibre to all businesses with five lines or more by the end of the decade. In addition, it has offered to foot the bill to take cable to the nation's sitting-rooms in exchange for being allowed to deliver entertainment services down the lines to help offset the cost. But this puts it at loggerheads with the cable TV industry. A House of Commons Select Committee agreed last summer that BT should be allowed to offer entertainment in areas where cable franchises had been awarded for seven years, of which there are already several. Since then, however, the Government has refused to lift the ban on the broadcasting of television by telephone until 2001 at the earliest, putting BT's investment in doubt.
Meanwhile, the increasing problem for business telecoms users is picking and choosing between the fast-growing range of services. `It is extremely difficult to compare the packages from different suppliers,' says Graham Marriner, manager of the telecoms services group at the Post Office, and chairman of the Telecoms Managers Association. `They combine so many services you've got to cut through several layers to make the comparison.' You need a team of specialist analysts working on the problem, he says, which defeats the object of trying to save money in the first place.
His view is shared by Martrain's Cooper. `The precise comparisons aren't always clear because each network provider presents its tariffs in a favourable light.' The problem is even worse for consumers wanting to buy a mobile phone, Cooper points out. With the launch of Mercury One-2-One and Hutchison's Orange, would-be mobile-phone users have dozens of options to compare and contrast from the four network providers.
BT's continued dominance of the UK market is a problem for users and telecoms operators. BT is still perceived as all pervasive, says Ron Bell, an independent telecoms consultant. `Even though prices have gone down, people still think of themselves as being at the mercy of a wicked monopoly, and have not yet realised there are a number of other service providers.'
Operators competing with BT argue that although much has been done to create a legal framework for competition, there is still considerably further to go in building a fairer commercial environment. Their main complaint is the price they have to pay BT to interconnect with its network to complete calls. `Hooking up to BT is cumbersome and time-consuming because each telcoms operator has to negotiate with BT independently,' says AT&T's Tutton. `It's not fair and it's not competitive. BT still has the economic benefits. Some 60% of the cost is managed by them.' The Government needs to go further on costing and ease of interconnection, Tutton says. `Prices are arbitrarily set. There's no mechanism for the invisible hand of Adam Smith.'
New operators can also run into problems competing with BT on functionality. For example, BT recently introduced number portability (you keep your number wherever you go) and caller-line identification (the caller's number is displayed on your phone). These innovations are not available to subscribers that move to other operators. Oftel, the telecoms watchdog, should insist that such services are based on common standards so that other operators can compete, says Marriner. `The more that they are unique to BT's network, the less competition there can be. Oftel should avoid concentrating exclusively on prices and should ensure that the national networks are transparent.'
Another problem in the increasingly competitive UK market is that new players are tending to attack the same lucrative corporate sector as Mercury, rather than competing for the vast majority of BT's domestic customers. Mercury is particularly vulnerable because it has always competed purely on price, whereas the newcomers and BT are focusing on service innovation. `BT will continue to lose market share,' says Robert Fleming's Langford. `But it gets some of that back through interconnection payments. Mercury is probably most at risk from the new entrants because it is relatively easy to set up competitive, long-distance and international services.'
Take Colt, for example, the London-based operator owned by Fidelity Investments, which began service in October 1993. Colt has dug up the streets to lay 70 kilometres of fibre from Docklands to Oxford Street. Like Mercury, its services are targeted at intensive telecoms users - Reuters, Bankers Trust and Midland Bank, for instance. It also competes on price. `We're 15% to 20% below our rivals,' says managing director Paul Chisholm.
But it doesn't make sense to go on laying cable where alternatives already exist. At present, some five telecoms operators are licensed to dig up the streets of London, in addition to the other utilities. Sharing ducts would help, but given the huge capacity of optic fibre it also makes sense to share lines. Chisholm, who has already signed an agreement with Energis, says he is keen to tie up more such deals with long-distance operators or straightforward re-sellers in the interests of enhancing the service to his London-based customers.
Tutton, too would like to be cutting deals, rather than waiting frustratedly for the licence AT&T first applied for in April 1993. He has lots of ideas as to how AT&T might increase the average four minutes spent on the phone by people in the UK. The potential is considerable - people in the US spend more than five times as long on the phone. `It's not because Americans are more chatty,' says Tutton. `It's because of entrepreneurial applications.' Toll-free 800 numbers, for example, account for 40% of the traffic, generating 175 million calls a day. Freephone numbers are publicised widely by US companies as a way to keep in touch with customers, but few UK companies have woken up to the possibilities.
In early November, however, Tutton was still waiting for his licence. `The only reason I can think of for the delay is that there must be some intricate legal queries,' he said. Not surprising really. Telecoms is a vital national asset. Even the UK is clearly nervous about the US giants. How far most countries will be prepared to go in relinquishing their precious telecoms networks to predatory foreign operators has yet to be seen.
Contenders get the call they've been waiting for.
The deregulation of the UK telecoms market began with the publication of the 1984 Telecommunications Act which enabled BT to be privatised and Mercury to be licensed as a direct competitor in fixed networks. The Government announced that the duopoly would remain for seven years and then be reviewed. The Office of Telecommunications (OFTEL) was set up to monitor the telecoms market and ensure that participants adhered to the conditions of their licences.
During the 1980s, further competition emerged in the form of mobile telephones. Licences were awarded on the basis of `beauty contests' - the Department of Trade and Industry (DTI) announced how many licences would be available for a particular type of service and selected winners from a number of contenders. The first two mobile operators were Vodafone and Cellnet, which received licences to build and run cellular phone networks for voice services.
Specialised satellite services for broadcasting information to closed user groups (a company, for example) became another area of competition. Of the 26 satellite applications submitted to the DTI, six were granted in 1988, on the basis of advice from the then director general of OFTEL, Sir Bryan Carsberg.
In January 1989 four licences for Telepoint mobile services (a restricted mobile telephone service) were awarded, none of which have survived. Later that year, Lord Young, then Secretary of State for Trade and Industry, announced three further mobile licences for so-called Personal Communications Networks - now available in the form of Mercury One-2-One and Hutchison's Orange. Since 1991, 14 additional licences for data-only mobile services have been awarded.
Third parties have always been allowed to lease lines from BT, repackage them and sell them to specific user groups, but, until 1989, they were not permitted to resell network capacity to the public. Following the duopoly review in 1991, the Government published a White Paper which effectively opened the fixed-wire phone market to all comers. Now any company or consortia, including overseas players, is free to apply for a licence to offer telecoms services in the UK. So far more than 40 companies have been given the go-ahead by the DTI.
From 1 January 1998, the EU telecomunications market will be further opened to competition with the ending of state monopolies on he telecoms infrastructure.
A spur to Europe's monopolistic laggards may be the fear of missing out on the much-vaunted superhighway.
Although much has been done to create a framework for competition, BT continues to dominate the UK market. Other telecoms operators complain about the price they have to pay to interconnect with its network to complete calls
BT estimated Market Shares, Year-End March (%)
Call Type 1991 1992 1993 1994
Residential calls c100 c100 97 95
Business calls & lines 94 91 85 83
Business & residential
international calls 85 79 75 72
Source: BT 1994.
COST OF A 3-MINUTE PHONE CALL (Over 100km)*
Country Cheap rate Weekend Business (day)
UK (BT) 16.8 8.4 25.2
UK (Mercury) 16.9 10.3 25.6
France 52.0 37.2 74.3
Netherlands 17.0 16.6 27.8
Germany 47.8 47.8 86.1
US (AT&T) 27.3 22.2 39.5
Canada 33.3 33.3 51.2
Australia 89.1 59.3 89.1
Japan (KDD) 52.9 39.7 92.5
* In pence. Prices excluding VAT and discounts @ 1 July 1994
Source: BT & Mercury
3-MINUTE PHONE CALL IN BUSINESS HOURS*
From To Bahrain To Switzerland To United States
UK (BT) 2.89 0.93 1.31
UK (Mercury) 3.23 0.93 1.30
France 5.27 1.13 2.06
Netherlands 6.38 1.01 1.90
Germany 3.82 1.44 2.47
US (AT&T) 3.87 2.75 -
Canada 3.16 1.27 -
Australia 3.11 2.64 2.00
Japan (KDD) 7.38 6.63 4.29
*Prices (in pounds) excluding VAT and discounts @ 7 October 1994
LEADING PLAYERS IN WORLD TELECOMS
Company 1993 sales ($bn)
Deutsche Telekom 38,057
France Telecom 26,226
Telecom Italia 17,481
Bell South 15,880
Nynex 13,408 Bell Atlantic 13,146