An Overview Of The Telecom Industry For MBA Students


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The U.S. telecom industry has undergone a number of significant changes over the past few years.

In this presentation that Dr. Jim Anderson created for MBA students, he explains where the industry has been and where it is going.

Dr. Anderson takes the time to explain the changes that have occurred in the industry in terms of the classes that MBA students have already had. He brings home how the changes have dramatically reshaped the telecom industry.

For more information on Dr. Jim Anderson and his company, Blue Elephant Consulting, find out more on the web at

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An Overview Of The Telecom Industry For MBA Students

  1. 1. Sex, Lies, and Phone Calls:How The North American Telecom IndustryRelates To Your MBA Degree Dr. Jim Anderson Page 1 - PLM
  2. 2. The Future Is Now: Verizon’s Fios Project What Is Fios? Verizon’s Fios uses fiber optics to transmit information to and from your home, and that makes all the difference. The service provides unlimited high-speed data access with• High-speed Internet access • A 4-Port Broadband Router speeds of up to• A choice of packages with • • MSN Premium Internet Software 30Mbps downstream maximum connection speeds: Up to 9 e-mail accounts 5 Mbps / 2 Mbps, = $40 / month • Access to newsgroups / 5Mbps upstream. 15 Mbps / 2 Mbps, = $50 / month • Personal Web space of 10MB 30 Mbps / 5 Mbps. = $200 / month • 24/7 live technical support © 2012 By Blue Elephant Consulting / Page 2 - JMA
  3. 3. So What Has Your MBA Taught You? 1. Ethics 2. Accounting 3. Economics 4. Finance 5. Marketing 6. Human Behavior in Organizations 7. Operations Research 8. Management Information Systems 9. Global Business 10. Strategy © 2012 By Blue Elephant Consulting / Page 3 - JMA
  4. 4. Ethics! (Lawsuits! Regrets! Jail Time!)q 01/09/01: Lucent: Lawsuit charges Lucent and two of its top officers with inflating the companys stock price by issuing financial statements that misrepresented the companys revenues and earnings. Lucent improperly recognized an estimated $679 million in revenue and announced that it would restate its fiscal fourth quarter financial statements.q 03/01/02: Worldcom: Executives perpetrated accounting fraud that led to the largest bankruptcy in history. The fraud was revealed to the public in June 2002 and WorldCom filed for bankruptcy in July 2002. Evidence shows that the accounting fraud was discovered as early as June 2001, when several former employees gave statements alleging instances of hiding bad debt, understating costs, and backdating contracts.q 03/24/04: Nortel: Lawsuit alleges that Nortel officers and directors caused Nortel’s shares to trade at artificially inflated levels through the issuance of false and misleading financial statements. It is further alleged that by posting the false, positive fourth quarter results, defendants and the Company’s top executives were rewarded with $30 million in bonuses. © 2012 By Blue Elephant Consulting / Page 4 - JMA
  5. 5. Accounting!q What Are The Cost Elements of With more than $71 billion in annual revenues, the Network? Verizon Communications Inc. is one of the worlds leading providers of communicationsq Assets services. Verizon has four business units: – Plant and Other Equipment Domestic Telecom serves customers based in 29 states with wireline telecommunications – Total Plant services, including broadband, nationwide long- – Current Assets distance and other services. Verizon Wireless – Total Current Assets owns and operates the nations most reliable wireless network, serving 43.8 million voice andq Liabilities and Owners Equity data customers across the United States. Information Services operates directoryq Operating Revenues publishing businesses and provides electronic – Line Erosion Due To Mobile commerce services. International includes Switching wireline and wireless operations and investments, primarily in the Americas andq Operating Expenses Europe. – 200,000+ employeesq Incomeq After Income: Earnings and Profit / © 2012 By Blue Elephant Consulting Page 5 - JMA
  6. 6. Economics! Inefficient Competition? q Local exchange companies q When LECs used usage-sensitive (LECs) charge interexchange fees to recover the largely usage- carriers (IXCs) for access to the insensitive costs of access provision, local telephone network . the highest volume users were required to contribute a greater share q In the 1990s, competing of the local exchange companys companies, called Competitive costs. Access Providers (CAPs), entered this market. CAPs q For such customers, total revenues provided transport services from recovered from access were higher LEC offices and the premises of than the costs of stand-alone access larger individual customers to the services, leading LECs to claim that IXCs networks. the pricing structure created an artificial incentive for CAPs to enter the market. AT&T Long Distance Network MCI Long Distance Network Local Local Phone Co. Phone Co. © 2012 By Blue Elephant Consulting / Page 6 - JMA
  7. 7. Finance! q Telecom Financing Includes: – Structuring infrastructureFor Fios: projects – Advising credit agencies and“Verizon expects to make an $800 multilaterals/developmentmillion capital investment in FTTP in finance institutions in connection with the financing of2004. For, even if a full one third telecommunications projects.of the residents in Keller subscribe – Advising borrowers and lendersto Verizons FTTP network, the on the structural issues involvedcarriers network will have cost it with raising debt at a number of levels.about $1,360 per customer served. – Advising lenders on achievingSupposing one third of [Verizon’s inter-creditor arrangementscustomers] do subscribe to FTTP satisfactory to all at the $45 monthly rate, – Structuring complex shareholderVerizon would take about two-and- support packages.a-half years to make its money – Structuring complex multi-back.” jurisdictional security packages. –Carrying out legal due diligence, dealing with the relevant governmental and regulatory authorities and the taking of © 2012 By Blue Elephant Consulting / local security. Page 7 - JMA
  8. 8. Marketing! (How To Become A Cable Company)q Allure of the “Triple Play”q Packaging, Pricingq Bundling & “sticky” product offerings.q Single Communications Billq Internet is a key channel! © 2012 By Blue Elephant Consulting / Page 8 - JMA
  9. 9. Human Behavior in Organizations! q My Part Of The Fios Project: – 90 Engineers spread across 5 separate projects – 70% of engineers were contractors (outsourcing) – 10% of engineers were located in India (offshoring) q 3 Major Milestones: June, September, and November – High stress for a full 12 months. © 2012 By Blue Elephant Consulting / Page 9 - JMA
  10. 10. Operations Research! q Service Order Fallout – Key to success is touchless order processing. – Eliminating fallout is key before 1000’s of orders start arriving later in 2005. q Truck Rolls – Companies today pay anywhere from $100 to $400 per truck- roll for local and regional service calls and more than $1,000 for national service calls. – How to combine voice, video, and data service requests into a single technician visit. © 2012 By Blue Elephant Consulting / Page 10 - JMA
  11. 11. Management Information Systems! q Mergers q Legacy Systems + + = q GPS Asset Tracking q Automation q Single Billing Systems q Data Retention © 2012 By Blue Elephant Consulting / Page 11 - JMA
  12. 12. Global Business! q International standards – Optical – Wireless q Low(er) Cost Of Entry q T-Mobile q Foreign Ownership of Firms © 2012 By Blue Elephant Consulting / Page 12 - JMA
  13. 13. Strategy! Verizon vs. The World q AT&T Broadband (now Comcast) 24.4M subscribers q Time Warner Cable 12.7M q Charter Communications 6.4M q Cox Communications 6.2M q Adelphia Communications 6.0M Internet Cable Cable Regional Internet Modem Router Data Access Center Point © 2012 By Blue Elephant Consulting / Page 13 - JMA
  14. 14. The Internet q The Key Value Of The Internet Is That It Provides The Missing Content That Providers have Been Looking For. q 204M Americans (75% of the population) Have Internet Access. q Broadband Is The Future. q Next Wave Of Services: – Phone Calls – Cross-Platform Instant Messaging – Video © 2012 By Blue Elephant Consulting / Page 14 - JMA
  15. 15. The Next Big Question... + + = + = + = + = ? + + = q Verizon bid $6.7B q Qwest bid $8B q Market value is $14B larger q Claims regulators could approve than Qwest. deal 6 months faster. q Deal includes stock, $488M in q MCI shareholders not happy. cash and $1.5B in dividends q Qwest has higher debt load, lower by MCI cash flow and less attractive q $200 million breakup fee for business profile. Verizon if the deal falls q Qwest has lingering legal troubles through © 2012 By Blue Elephant Consulting / Page 15 - JMA