The Turnaround Telecosm Conference

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The Turnaround Telecosm Conference August 26,
2003
Doug Bulleit Chief Strategist, BellSouth Corp
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Disruptive Changes in Telecom Industry
Structure Will Be Driven by New Broadband
Architectures, Value Propositions and Business
Models
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The Looming Digital Broadband Era Promises
Could Be More Disruptive Than Previous Network
Transformations Due to the
Decoupling of the Network, Location and
Services
Digital Switching
Mechanical Switching
Primary Products
Analog/Narrowband Era

• Voice Calls
• Operator Services
• Pulse Dialing
• APL/Dial-Up Data

• Ditto /displaced by
• DTMF Dialing
• Custom Calling
• VoiceMail
• DCS/FR/ATM, etc

• Hierarchical Analog Switches
• Copper/Microwave
• In-Band Signaling

Network/ Architectural Characteristics

• ditto/displaced by
• Digital Switches
• OOB/SS7 Signaling
• AIN Platform Services e.g., 800,
• Custom Calling, etc

Primary Profit Centers

• Basic Local Service
• LD/Toll Charges
• Private Line Mileage
• Operator/Directory Services

• Ditto /displaced by
• LD Access charges
• Vertical Services
• Enhanced Services
• Data Services

Monolithic (Bell System/ITCs) with minimal
interconnection
Industry Structure Implications

• Technologically Enabled/Legally-
• Mandated Interconnection
• Carrier Proliferation
• Vertical Integration

Circa 1984
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As Industries Mature and Otherwise Grow More
Complex, Competitive and/or Commoditized, Their
Structures Tend Horizontally Stratify
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Different Scaling Phenomena Induce Different
Competitive Pressures at Different Levels of the
Value Chain That, Ultimately, Cause Industries to
Evolve In Horizontal Patterns
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Leading Carriers May Move Toward a 3-Layer Model
To Facilitate Scaling Objectives as well an
Assortment of New Business Initiatives

• Retail distribution of Services, both
• Direct
• Indirect via key Ally/Customers
• Consider Dual Branding and managed customer
  migration

Provide custom services which compliment Network
and content services leverage lower-level
strengths to fashion key alliances
Package Content and Application based services
with Value added Network Services
Package raw network with value added network
services and End-End management
Deliver end-end Network based on a combination
of On-Net capabilities and Off-net capabilities
Focus on Scale to reduce unit cost and improve
ROA Generate a large wholesale base to increase
scale efficiencies
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ODC-Like Mechanisms May Prove Instrumental To the
Effective Vertical Alignment of Key Industry
Alliances
Sales Marketing
Distribution Layer(s)
Professional Services Systems Integration
Wholesale or Agency Resale of End-End Services
Content/Application-Based Services
Complex Service Layer(s)
Network-Based Services
Wholesale Sourcing of Underlying Network(s)
Logical End-End Networks
Network Layer(s)
Physical Network Components
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Back Up
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Much of our Transformational Strategy
Formulation Has Been Driven By Perceived Problems
and Opportunities that Attend Growth in a
Changing Competitive Environment
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To Harness Convergence and Evolving Industry
Structure We need a Common Understanding of Them
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Digital Network Convergence Is Being Driven By
Three Sets of Accelerating Forces
Demand-Side Issues
Supply-Side Drivers

• Customer Expansion
• Demographic Shifts Economic Activity
• Application/Device Proliferation
• Emergence of Electronic Communities Of Interest
• etc

• Traffic Volume Character
• Speed/Bandwidth
• Quality Of Service/SLA
• Mobility Extensibility
• etc

• Scale
• Scope Reach of Offer
• Relative Price/Performance
• Ease-of-Use Manageability
• etc

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In Addition to Reducing the Complexities of
Monolithic Decision Making,Managing the Business
at Three Layers Presents New Strategic
Opportunities
Strategic Opportunity
Scaling Challenge
Distribution Layer
Complex Service Layer

Network Layer
Asset Utilization
In an evolving horizontally-stratified industry
structure, vertically-integrated players will be
less flexible and strategically disadvantaged to
more focused attackers