Restructuring The Telecommunications Industry Commerce Essay

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The aim of this project is to come up with ways to better improve the telecommunication industry and to show that a telecommunication firm restructure its hierarchy in countries where there are issues as regards to regulations and economic slowdowns. It also looks at how telecommunications support economic development and how such development will be affected by its restructuring.

OBJECTIVES

The main objectives of this project aim at helping telecommunications firm, with operations in various parts of the world adjust to the current economic slowdown and possible changes in regulatory fiats. Specifically, the project aims at: modifying the hierarchy of a telecommunications firm in a developing country; trying to find out whether vertical separation is more helpful for the company as compared to vertical integration.

To find out whether vertical separation is more useful in an industry as compared to vertical integration.

To ascertain hierarchy of a telecommunications industry in developing countries.

To also know how telecommunication firms with operations in various part of the world adjust to economic slowdown and possibly changes in regulatory fiats.

PROJECT DESCRIPTION

This project proposal entails a telecommunications business, facing challenges in this time of economic slowdown and issues in investing in other countries, and needs to modify some aspects of its hierarchy.

While restructuring a company is a major enterprise, requiring time, money and resources for it to be considerably implemented, this may be necessary if it will survive the changes caused by economic slowdown, improvements in technology, and varying regulations in various countries.

Companies involved in this kind of business should invest much money in planning and operating the facilities needed for such kind of enterprise. Given today's theory toward a connected society, a global village so to speak, telecommunications industries are much needed in facilitating the faster and more accurate transmission of information and data across physical and even cultural borders.

However, changes in the global operating environment have also affected the way telecommunications businesses are being run. For one, economic slowdowns, whether occurring at the global setting or at the levels of specific nations, can affect the profitability of these companies. If left unresolved, economic declines can eventually force telecommunications businesses to reduce costs, streamline positions, cut down on extra personnel, combine existing services, and do other related measures. This paper intends to show how telecommunications industries, in the light of such developments, can adjust to such events through restructuring, given past experiences by many countries. However, these entities should not be constrained by such measure; other means can be thought of just to ensure the survivability of these companies.

INTRODUCTION

Given the nature of today's telecommunication industries, there is a need to adjust the structure of such businesses in order to more effectively reply to the needs of such group. No industry is stable overtime. Industries will always experience changes as they progress, some with shorter time frames, others with longer time frames, but eventually change will affect every industry. For one, many telecommunications firms follow the vertical integration scheme, wherein they share some substructure with other entities, according to Eisenach et al (2010) to quote the authors' explanations:

"In telecommunications markets, it is a commonplace for network infrastructures to be owned and operated by the same firms that provide retail services directly to subscribers. Economic theory suggests that vertical integration is most likely to be economically efficient in industries where there are significant sunk costs (i.e., "asset specificity") and where there are high levels of complexity or uncertainty--all characteristics associated with the modern telecommunications industry" (Eisenach et.al, 2010).

However, authorities' claim that the scheme, if left unimpeded may lead to issues arising to the performance of mandatory access regimes, or compelling these forms to let competitors use their infrastructure at regulated terms (Eisenach et.al 2010). The authors cite the cases of Australia, Italy, New Zealand, Sweden, and the United Kingdom and how they mandatorily require telecommunications firms to follow the vertical separation rule. In effect, it is a regulation directed at preventing a few companies from dominating the telecommunications infrastructure. In turn, many experts claim that vertical integration rule is beneficial in the telecommunications business in that its facilities, which are expensive to build and maintain, are best used if these are also shared with other entities (Eisenach et al. 2010). In addition, operating in the telecommunications industry involves high levels of risk and uncertainty, aspects which may be mitigated if facilities are shared across entities (Eisenach et.al 2010). Finally, services related to telecommunication will be further attached to the business, through vertical integration. (Eisenach et.al, 2010).

In summary, Eisenach et.al (2010) believed that if it is not done compulsorily vertical separation is best; the evidence he had gathered from the sample nations buttressed earlier findings as regards the unfavourable effects of vertical separation on the development of appropriate technologies. For example, broadband growth decelerated, to varying degrees, in U.K, Sweden, Italy and New Zealand after vertical separation was introduced (Eisenach et.al, 2010). In addition, the fact that governments in the United Kingdom, Australia and New Zealand planned to subsidize the costs of setting up an NGN infrastructure in their countries suggest the policy discouraged private investors from coming into the project (Eisenach et.al, 2010).

In the case of the United States, which was not among the focus of Eisenach et.al (2010) study, it has been shown that the country's relatively policy toward permitting telecommunications firms to run their way in the building and operation of telecommunication's facilities. In particular, the United States' policy of allowing intermodal competition had encouraged telecommunications facilities to innovate in their products and services (Eisenach et.al, 2010).

As Crandall et.al's (2010) studies has shown that, there is a tug-of-war conflict between the laissez-fare attitude of the people pushing for vertical integration and a more hands-on regulatory approach for those in favour of vertical separation. It can therefore be advised that telecommunications firms should consider these issues so that they can better operate and without considerable hitches in countries, whose regulations may significantly affect the way telecommunications are being provided for.

REGULATION AND COMPETITION

Although the cases cited above shows that many countries allow relatively free rein to telecommunications facilities, still these are subject to certain statutory limitations. The case below, shows how a relatively newcomer in the privatized telecommunications business, Malaysia, adjusted its previously state ownership-oriented regulations just to encourage private entities to invest in the said enterprise. It is hoped that through this case, investors can get an idea of how nations wanting to have a privatized telecoms sector can implement policies needed to set a friendly investment environment in place.

According to Kazmi (2006), in the study "State of Competition in the Malaysian Mobile Telecommunications Industry:"

Malaysia has been reforming and restructuring the telecommunications industry very actively since 1987. The private sector now participates in the change and development of the country's telecommunication infrastructure. Many optical fibres cable network projects have been implemented and trunk fibre networks have been laid across Peninsular Malaysia and stretching across the South China Sea to enter the eastern part of the country. Malaysia's own satellite enables it to develop infrastructure superhighways for the nation's needs.

In addition, Malaysia's privatization program for telecommunications industry aims at many objectives, the most salient points of which were:

Development of a world class communications infrastructure "based on the latest technology mix" as part of efforts to develop a Multimedia Super Corridor

Encouragement of reducing prices for the access of privately run mobile telecommunications services and the enhancement of quality of such services.

Encouragement of technical advancement in such services

Developing a working investment environment conducive to the entry and stay of privatized mobile telecommunications services (Kazmi, 2006)

According to Kazmi (2006), between 1987, when the privatization policy was started, until the early 2000s, Malaysia's telecommunications industry in general grew dramatically. For instance, Malaysia had a high service penetration level for fixed lines compared to other Association of Southeast Asian Nations countries; from 1987's figure of 7.4 lines per 100, this had jumped to 22 in 1999. In addition, access for mobile communications amounted to 44.2 per 100 in 2003. For the same year, seven out of ten telephone users had been using cellular phones (Kazmi,2006,n.p.).

Kazmi also attributed the growth of the telecommunications industry in Malaysia to that nation's encouraging policy toward privatization and the growing demand for telecommunications-related services. According to Kazmi (2006) the Malaysian government had implemented such friendly policy, although with corresponding limitations by establishing some government offices specifically dedicated to telecommunications; conversion of Telekom Malaysia into a corporate entity, the formulation of guidelines governing the fair competition of entities involved in the telecommunications sector (i.e. prohibition of collusion); and the formulation of a 1994-2020 National Telecommunications Plan, which envisions that the development of the country's telecommunications' sector will "support national development, in line with national aspirations. (Kazmi, 2006

NEW FIELDS

Aside from Malaysia, new opportunities in the telecoms business are to be found in Africa. In the article, "The Telecommunications Sector," (2009) the author revealed how foreign and African firms have been investing more in launching mobile phone services in various parts of the continent. For instance foreign operators such as Vodafone, MTN, Zain, Orascom and France Telecom has been investing in the continent's mobile telecommunications services. In addition, governments in such countries as Tanzania, Rwanda and Mali had encouraged the entry of private mobile telecoms operators via privatization and licensing. Related developments also included the construction of five undersea cables and the development of an open software platform, in the same vein as Linux (N.A. 2009).

This came as Africa had registered 300 million mobile phone users in 2008 and that its growth rate had been estimated to increase by 50% (NA 2009). In turn, the need to further improve the continent's telecommunications' opportunities came as many African nations were still reeling from the ramifications of the two year global financial crisis.

CONCLUSION

Based from the above mentioned discussions and points, we can determine that there indeed is a restructuring needed for telecommunications businesses to thrive in the current economic downturn. For instance, vertical separation and / or integration may be carefully considered as a crucial core in operations among mobile telecommunications firms. This depends on the regulatory environment of the countries where the firms are operating, or would be operating in. Secondly, while many countries may still opt for a more liberal policy in telecommunications, one should factor in the fact that the global economic crisis may impel them to lean toward their own firms or services. Finally, as shown by the experiences of Malaysia and Africa, telecommunications can boom in one nation if;

a.) The regulatory policies are contributing to to such growth and

b.) There is a growing need for telecommunications services.

PROJECT PLAN

Given the objectives of the project, I intend to implement the project within the proposed or given time frame given by the university. The first part will be primarily involved in the gathering of data, contacting the company, and ascertaining its feedback. Meanwhile, the second phase of the project involves data analysis, formulation of findings and conclusion, and contextualization of results within the over-all situation of the global telecommunications industry.

ETHICAL AND LEGAL CONSIDERATIONS

Ethics is a complex subject, but in professional contexts the four major concerns are; to treat people fairly, to respect the autonomy of individuals, to act with integrity and to seek the best results by avoiding or reducing damage and by using resources as beneficially as possible (University of Glamorgan, 2008). In doing this project, I need to consider some aspects. For instance, I ought to put in mind the welfare of employees who may be affected by the restructuring method. Second, the move should be in line with the prevailing legal and economic structures in place in the countries where the telecommunications firm is working in. Finally, I have to consider also the fact that the firm which will be the recipient of this study should be amenable to the recommendations being proposed; in fact, it should be willing to participate in the study in the first place. I have to consider the fact that any changes in the company's structure may affect its operations and ability to earn profits. I would also make regular consultations with my supervision team, in line with rules set in place by the university as regards adviser-research student relationships (University of Glamorgan, 2010). Also according to the Code of Practice for Research Students (2010), any researcher who wishes to process personal data as part of their research must check that their work is covered under the Data Protection Act 1998 prior to any processing being carried out.

RISK MANAGEMENT

It should be noted that the formation of the sector is never in final stability, so it is difficult to assess how long it will take for the benefits for economic growth to show through. At the same time, I also need to consider mitigating the possibilities that the project may fail or at least face tremendous challenges. For example, regulations may change drastically to the point that operations may become unfeasible. In this regard, it is best for the company to draft a contingency plan. It may transfer its operations to other countries, or it would just adjust its structures in line with the regulations so as not to compromise its footing in that specific nation.

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