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Google - A Telecom Threat?

Abstract

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Overview

This report asks if Google is a threat to Telecom. By threat, of course, we mean competitive threat. The simple answer to this question is "YES!" As with many simple answers to complex questions, this leaves a lot unsaid. Some of what is unsaid would include questions as to the existence of a market to even be concerned about - surely Google doesn't want to compete for the traditional wireline market, which appears to be dying. Would Google like to compete in the broadband market? From their activities in Kansas City it certainly appears that there is some interest there. What about mobile? The recent (but still awaiting regulatory approvals) purchase of Motorola assets by Google, suggest that they may want to get into the handset and other devices business. That business certainly has worked out well for Apple. Finally, who besides Google may be a major threat to the RBOCs? What about Apple or Microsoft?

All of these questions and others are addressed in this report. In 2010 we published a report on about the same subject, "Google and the RBOC'S." This is an update of that report and a complete re-write of much of it. In terms of Google's activities, 2010 is like ancient history. So, in this report we will try to move from ancient history to current events.

This report, focuses on the perceived strategies of Google, the RBOCs, and other "super-competitors." The RBOCs that we will focus on are Verizon and AT&T. The report will use these companies' public announcements and private interviews and the author's years of experience in this area to develop a view of their strategies, comments on the strategies and likely outcomes. The report will provide forecasts on all the topics of interest.

We will start the report with a description underlying economic situation. Because of the overriding importance of the state of the US (and World) economy, we will provide a review of our forecasts for the nation's economy as well as its impact on telephony. That portion of the report will also provide our forecast for capital spending over the next five years. The report will then continue with a review of the current telecom market structure. With that background, we will look in detail at the activities of Google and the major RBOCs. From these activities and the market structure, we will develop and present our view of each company's strategy and comments on each. Forecasts will be provided for each of the areas addressed.

In addition to the strategies of Google and the RBOCs we will also look at some other major companies that may be in or coming to the telecommunications space in the US.

We also feel that the following are the major issues in today's competitive structure in telecommunications.

  • Telcos become wireless, rather than wireline companies.
  • The Advanced Access Architecture deployments being undertaken by the major RBOCs and many smaller telcos.
  • Overbuilding by major telcos.

In addition to the detailed discussion of the competitive environment and the companies' strategic response to that environment, his report will address each of these areas, and provide forecasts as to our expectations for each. For reference, our view of the planning environment is provided in an Appendix.

Table of Contents

Table of Contents

Table of Fig. s

The Lightwave Network Series of Reports

The Lightwave Network

The Lightwave Series of Reports

  • General Reports on the Network
  • General Market Reports
  • Specific Systems Reports

Introduction

The Telco Business Transformation and Next Generation Network Series of Reports

This report

US Telecommunications Economic Forecast

General Economic Background

Telecom Economic Background

  • Telecom Forecasts
  • Possible Positives for Telecom in 2012

Telecommunications Capital Forecast

Telecommunications Economic Forecasts Summary

  • Telecommunications Economic Forecasts - 2012

The Face of Network Competition - Market Structure Today

Google as a Major Player

  • Google Metrics
  • Google's FTTP Kansas City Project - "Google Fiber"
  • Google's Purchase of Motorola Assets
  • Google Voice
    • How do you compete with "Free?"
    • Google Voice Growth
    • Google Voice - Downside
    • Forecast for Google Voice
  • Google Phone

RBOCs - How Do They Compare?

  • RBOCs vs Google Metrics
    • Net Income
    • Market Capitalization
    • Cash on Hand
  • Market History
  • Post-merger Competition
  • RBOC Purchase of IXCs
  • RBOCs vs. Cable Companies

RBOCs Are Becoming Wireless Access Companies

  • RBOC Loss of Main Lines
  • It's a Wireless Access Industry!

The Wireless Access Landscape

Forecast for Wireline to Wireless

The Super Competitors

Update on the "Super-Competitors"

Strategies of the Major Players

Google Strategies

  • Management and Financial Items
  • Network Items
  • Summary and Forecast of Google Strategies

Verizon Strategies

  • Management and Financial Items
  • Network Items
  • Summary and Forecast of Verizon Strategies

AT&T Strategies

  • Management and Financial Items
  • Network Items
  • Summary and Forecast of AT&T Strategies

Comments on the Strategies of the Major Competitors

Summary of Forecasts

General Economic Background

Telecom Economic Background

  • Telecom Forecasts
  • Possible Positives for Telecom in 2012

Wireline to Wireless

Google Voice/Google Forecast

Overbuilding

Appendix I, The Planning Environment

Appendix II, Advanced Access Architecture Plans

AAA Deployment Forecast Summary

  • AT&T
  • Verizon

Forecast Size of Deployments

  • Forecast of Homes Passed
  • Penetration Rates

Appendix III, Overbuild

  • Overbuild - How?
  • Overbuild - Significance

A New Type of Competition

Summary of Overbuild Forecasts

Appendix IV - Vision Planning Primer

What Is Vision Planning?

Development of a Vision

Vision Planning - Examples

  • IBM Example
  • Lincoln Example from the Civil War

The Vision Planning Pyramid

The Vision Planning Process

  • Step 1. Vision statement
    • Service Vision Example
  • Step 2. Develop a view of the future environment and test.
  • Step 3. Restatement
  • Step 4. Backwards deployment (Implementation Plan)

Service Implementation Plan Example

Summary of Vision Planning

Table of Fig. s

  • Fig. 1, Liightwave Network
  • Fig. 2, Telecommunication Capital Expenditures Actual and Forecast
  • Fig. 3, Telecommunications Economic Forecasts
  • Fig. 4, Recent Google Acquisitions
  • Fig. 5, Forecast for Google Voice
  • Fig. 6, Google vs. RBOCs- Net Income
  • Fig. 7, Google vs. RBOCS - Market Capitalization
  • Fig. 8, Google vs. RBOCs - Cash on Hand
  • Fig. 9: Summary of Competitive Position, Pre-Mergers
  • Fig. 10: Revised Competitive Structure Due to IXC Purchases
  • Fig. 11: RBOCs Subsume IXCs and CLECs
  • Fig. 12: RBOCs vs. Cable Companies
  • Fig. 13, Telcos vs. Cable Companies - 2009
  • Fig. 14, Verizon Wireline vs. Wireless Revenues
  • Fig. 15, Verizon Loss of Main Lines vs. Wireline Revenue
  • Fig. 16, Wireline Customers vs. Wireline Total Revenue
  • Fig. 17, FiOS vs. Uverse Services
  • Fig. 18, FiOS vs. Uverse Quarterly Additions
  • Fig. 19, Wireless Competition
  • Fig. 20, Forecast for Wireline to Wireless Migration
  • Fig. 21, The Super Competitors
  • Fig. 22, Google as a Serious Threat
  • Fig. 23, Apple Financial Parameters
  • Fig. 24, Microsoft Financial Parameters
  • Fig. 25, Comparison of Net Income - Including Apple and Microsoft
  • Fig. 26, Comparison of Market Capitalization - Including Apple and Microsoft
  • Fig. 27, Comparison of Cash on Hand - Including Apple and Microsoft
  • Fig. 28, New Super Competitors Chart
  • Fig. 29, Google Strategies
  • Fig. 30, Verizon Strategies
  • Fig. 31, AT&T Strategies
  • Fig. 32, Planning Environment
  • Fig. 33: Forecast Homes Passed Cumulative - All Technologies
  • Fig. 34: Forecast Homes Passed Annually - By Company - All Technologies
  • Fig. 35: FTTX vs. High-speed Accesses vs. US Households
  • Fig. 36, FiOS vs. Uverse - 2012 Forecast
  • Fig. 37, Verizon's NOOF Arrangement
  • Fig. 38, Forecasted Overbuild Strategic Outcome
  • Fig. 39, IBM's Gerstner's Corollaries
  • Fig. 40, Vision Planning Pyramid
  • Fig. 41, Vision Planning Approach
  • Fig. 42, Traditional Planning Approach
  • Fig. 43, Tom Peter's List of Good Vision Attributes
  • Fig. 44, Davenports' Visioning Process
  • Fig. 45, Service Vision Statement Example
  • Fig. 46, Vision Statement Examples
  • Fig. 47, Example of Vision Statement and Implementation Plan for Service
  • Fig. 48, Summary of Points about Vision
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