Study of Networks and Services
A Vision for the Portuguese
Telecommunications Industry in the
21st Century
Summary of Conclusions
Presentation to:
APDC
Arthur D. Little International, Inc.
Av. Liberdade 200
4° Andar
1250 Lisboa
March 16, 1999
Reference MPrSF01449
Study of Networks and Services
1 - Current Situation
2 - Future Directions
3 - Implications
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Current Situation
Main Lines Evolution
Telecommunications networks in Portugal have expanded
significantly in recent years...
Main Lines per 100 Inhabitants
70
Rest of Europe* Average of
Western Europe
60
France
Germany
50
U.K.
Italy
40
30
Portugal
Spain
20
10
0
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
*Rest of Europe includes Benelux, Denmark, Finland, Sweden, Norway, Greece, and Ireland.
Source: ITU Indicators Database, August 1998.
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Current Situation
Cellular Penetration vs. Growth
… although following distinct patterns for fixed, mobile and cable.
Example: Cellular Penetration vs. Growth
25
1997 Cellular Subscribers
per 100 Inhabitants
Rest of
Europe
Italy
20
Average
of WE
Portugal
UK
15
Spain
10
France
Germany
5
0
0
20
40
60
80
100
120
140
1990-1997 Cellular Subscribers
CAGR
*Rest of Europe includes Benelux, Denmark, Finland, Sweden, Norway, Greece, and Ireland.
Source: ITU Indicators Database, August 1998, Arthur D. Little analysis
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Current Situation
PC Penetration Evolution
Portugal has traditionally spent less than the average of Western Europe
on Information Technologies.
Personal Computers per 100 Inhabitants Evolution
30
U.K.
25
Rest of Europe*
20
Average of
Western Europe
15
France
Germany
Spain
10
5
Italy
Portugal
0
1990
1991
1992
1993
1994
1995
1996
1997
*Rest of Europe includes Benelux, Denmark, Finland, Sweden, Norway, Greece, and Ireland.
Source: ITU Indicators Database, August 1998.
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Current Situation
PC and Internet Penetration
Constrained by low PC penetration, Internet penetration in Portugal
remains low.
1997 Personal Computers and Internet Users Penetration
per 100 Inhabitants
26%
Germany
5%
24%
United Kingdom
France
7%
17%
2%
11%
Italy
Spain
Portugal
Personal Computer
2%
12%
2%
7%
2%
26%
Rest of Europe*
Average of
Western Europe
Internet users
8%
22%
6%
*Rest of Europe includes Benelux, Denmark, Finland, Sweden, Norway, Greece, and Ireland.
Source: ITU Indicators Database, August 1998; IDC - The European Internet Access Market 1998
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Current Situation
Software Market
Software development is an important piece of the content industry, yet
to be further developed in Portugal.
Software Market Growth
Software Market as % of GDP
21000
0.9%
Germany
7100
0.6%
12700
1.1%
United Kingdom
6300
14100
0.9%
0.9%
France
6500
0.7%
1995
7400
1987
3700
2800
1300
Italy
0.5%
0.4%
0.3%
0.3%
Portugal
1800
698
10000
0.9%
Average of
Western Europe
8600
5000
0.6%
Rest of Europe*
3700
15000
20000
Million dollars
1987
0.5%
Spain
300
100
0
1995
0.7%
0.9%
0.7%
0
0.3
0.6
0.9
1.2
1.5
Percentage
*Rest of Europe includes Benelux, Denmark, Finland, Sweden, Norway, Greece, and Ireland.
Source: OECD, The Software Sector: A statistical profile for selected OECD countries, January 1998.
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Current Situation
Telecom and IT Expenditures Balance
There is an unbalanced distribution of IT versus telecom investments
in Portugal, resulting in the deployment of networks that have not
fully realized their potential.
4
Greece
Portugal
3
Preponderance
of Telecom
Telecom
Expenditures
2
IT Expenditures
Spain
Ireland
Italy
Equilibrium
IT = Telecom
Germany
U.K.
1
France
Belgium
Netherlands
Preponderance
of IT
Luxembourg
Denmark
U.S.
• Increased
penetration of
Telecom cannot
compensate for
lower IT investments
• Balanced Telecom
and IT penetration is
pathway to
development of
information society
0
3
4
5
6
Telecom and IT Expenditures
(% GDP)
Sources: EITO, 1997, ITU Indicators Database, August 1998, Arthur D. Little analysis.
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Study of Networks and Services
1 - Current Situation
2 - Future Directions
3 - Implications
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Future Directions
Complexity
With the advent of convergence, the telecom environment has become
highly complex.
Internet
Backbone
NSPs/NAPs
AT&T
Network
Controls
WorldCom
(ISP)
@Home
(high-speed
Internet)
Controls
Twisted
pair
Coax
TCI
America
Online
(cable
operator)
Regional
Bell Co.
(phone
operator)
TV
PC
Example:
AT&T - TCI
buyout
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Current Situation
Local Loop Technologies
A rich local loop environment will prevail in the future, and no single
technology will prevail.
Local Loop Technologies
LMDS
Wideband
WLL
D: downstream U: upstream
Source: Contactica
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Future Directions
Industry Opportunities
Digitization has enabled vertical disintegration of hardware, software
and services industry layers and created opportunities for new and
unexpected players to participate in these markets.
New Player
Strategies
(examples)
A
Satellite
Cable
Terrestrial
Terminal
Consumer
Transport
Hardware and Software
Vendors
Advertising and
Transactions
Back-End
Services
Traditional broadcasters and
new entrants
Production
Multimedia
Industry
Value Chain
Aggregation and
branding
Content Provision
A
• Repositioning (e.g. ISP)
A
A
• Straddling (e.g. Cable MSO)
A
B
C
• Alliance (e.g.: BIB BSkyB, Matsushita,
BT)
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Future Directions
New Application Services
Arthur D. Little used its vision of the future to articulate over 90 new
applications and associated tangible products and services.
Conceptual
The Global Information Society
2010 VISION
Digital
Economy
THEMES
APPLICATION
CONCEPTS
E-Commerce
Online Banking
Cyber
Collaboration
APPLICATIONS
Online Grocery Shopping
...
...
...
...
PRODUCTS
Concrete
Data
Mining
Delivery
Service
Cyber
Community
Smart
Home
Multimedia
Entertainment
Telegovernment
Virtual
Hospital
Remote
Education
Infomated
Individual
Home
Automation
Information
Appliances
Life
Management
Integrated
Communications
Personal
Safety
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
Home
Terminal
Electronic
Bodyguard
Sensors
Alarm
...
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Base
Station
Future Directions
Promising New Applications
Also in Portugal, market forces will tend to promote applications such
as e-commerce and online gaming first.
Exercise Results - Application Ranking
4
Applications
A Online shopping mall
Application Attractiveness
(Value to Stakeholders)
B Online financial advisor
C Online interactive game-play
3
2
E Online grocer
–Remote Education
Health care-at-home
1
2
3
4
•Other
H Entertainment planning
–Online Interactive Game
Play
I
Home control system
–Online Financial Advisor
J
Personal information management
–Telework
K Contact assistance
0
•Public Interest
–Telemedicine
G Virtual classes
0
•Electronic Commerce
D Universal mailbox
F
1
Selected Applications
L
Electronic guardian angel
Application Feasibility
(Infrastructure, regulatory and socio-economic condition)
Other application services such as remote education and telemedicine
may bring significant value to society, but not necessarily be
commercially attractive, thus requiring Government action.
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Future Directions
Application Roadmaps
The birth of new applications depends on advancements of content,
transport, back-end services and terminal industries, and also on
regulatory, socio-economic and value to stakeholder conditions.
Milestone 1
Milestone 2
Content
2000
2004
Transport
2005
2001
2010
Application X
2003
2008
2001
2005
...
2004
Regulatory
and socioeconomic
Milestone N
Milestone N
Milestone N
Technology Roadmap for Each Application
It is very important to recognize that all value chain elements must now
be analyzed together as a whole.
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Study of Networks and Services
1 - Current Situation
2 - Future Directions
3 - Implications
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Implications
Supply and Demand Drivers
Focus should be maintained on providing the conditions to promoting
the best environment for application development in Portugal.
Demand Drivers
Supply Drivers
Competitiveness
Macro Economic Environment
Established Industry
Understanding and
Acceptance of Society
Compelling Applications at
Competitive Prices
Strong
Application
Demand
Strong
Application
Supply
Willingness and Ability to
Invest
Access to Skills
Access to Skills
Access to advanced
infrastructure
Role of Government
Effective Regulatory and Legislative Environment
Effective Government Initiatives
Source: Spectrum, adapted.
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Implications
Infrastructure Investment
The cumulative investment between 1998 and 2010 for narrowband and
broadband infrastructure development will probably exceed U.S. $12.7
billion(1).
Total Cumulative Infrastructure Investment
$ 14
Total
$12.7 billion
12
Narrowband
$11.6 billion
U.S. $ Billions
10
8
6
4
2
Broadband
$1.1 billion
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
1
According to the assumptions of the Gradual Evolution scenario
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Implications
Job Creation
As a consequence of telecoms liberalization, new jobs will be created.
Effects on Portuguese Employment of the
Liberalization of the Telecom Sector
Number of Jobs (thousands)
50,000
40,000
Breakdown of Total Jobs Created
50,000
Rapid liberalization,
rapid introduction of
new technologies
30,000
41,900
41,900
40,000
Total Jobs
Created 35,100
35,100
30,000
28,300
28,300
27,930
20,000
23,639
25,900
23,870
20,000
Slow liberalization,
slow introduction of
new technologies
21,200
Within the
Telecom Sector
10,000
10,000
0
0
1993
2000
2005
25,000
23,639
2010
7,100
23,100
16,900
12,000
Outside the
Telecom Sector
0
1993
2000
2005
2010
Sources: Effects on Employment of the Liberalization of the Telecommunications Sector; EC; BIPE Counseil, January 1997; Arthur D. Little analysis.
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Implications
Reinforcing Circle
The goal is to promote in Portugal a reinforcing circle that links new
investments, the development of skills and infrastructure, increased
adoption rates for new services and the achievement of practical
results.
Skills
generates
promotes
Infrastructure
Adoption of
new services
Investment
Reinforcing
Circle
promotes
Results
generates
Promoting consistent Government programs and fostering smaller,
entrepreneurial experiences is key to promote the reinforcing circle.
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