Term Paper: Telecommunication Equipment Industry Has Undergone

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[. . .] Regulations are instrumental in promoting optimized usage of scarce resources like radio frequency spectrum (Waden, 2009). Regulations in the domain of telecommunication equipment are made for issuing licenses for the provision of telecommunication services, allocation of spectrum, deciding upon the tariff rates, management of the telecommunication numbering system and registration of the Internet domain name. ITU-t and ITU-R are also international telecommunication regulation organizations which cater the issue pertaining to the investment made for the development of the telecommunication equipment industry (Terault, 2000).

The industry of telecommunication and communication equipment is governed rapid technological changes. Telecom regulations in most countries are centered on maintaining a balance between competition and the level of regulation. The large sunk and fixed costs involved in building telecommunication infrastructure imply the regulators to form laws regarding sharing of the infrastructure and reducing the prices of alternative infrastructure (Little, 2008). Regulatory measures pertaining to telecommunication industry have direct impact on cross-border trade flows and foreign direct investment. Economy wide regulations actually deter cross-border trade, while sector-specific regulations and restrictions on foreign ownership have significant impact on FDI (Molnar, 2008).The major issue confronting telecom service providers is the fact that they need to meet customer requirement keeping in view security, auditing and archiving.

Telecommunication regulators in many countries resort to techniques like revenue sharing, profit sharing and price caps for effective cost reduction and excessive investment in the telecom sector. Price regulation involves freezing of the prices of telecom services which cannot be changed by firms (Cambini & Jiang, 2009).The breakup of AT&T in 1983 brought about drastic changes in USA after 30-year of battle between USA government and AT&T on antitrust legislation. The paradigm regulation thus shifted from regulation of the incumbent monopoly towards the regulation aimed at breaking the monopoly of the incumbent. This served as a symbolic milestone in the domain of regulations pertaining to the highly competitive telecom marketplace where technology changes tend to be the core drivers of the competition (Brown, 2011). The trend of deregulation was then followed by UK which aimed at liberalization of the telecom market. The principle of liberalization and globalization further lead to the adoption of telecom liberalization wave by majority of the European countries as well. Apart from majority of the European countries, many Arab states also followed the same trend of deregulation in the 1990s. Another drastic phase of regulation occurred with formulation of appropriate rules for tackling the monopolistic situation of a single organization which operated the Public Switching Telephone Network. Technical, legal, and controversial objectives of different players present in the telecommunication equipment industry make it quite difficult to form standardized regulations.

The access regulation policy does promote short-term competition yet it results in the reduction of infrastructure investment by both new entrants and incumbents present in the telecom industry. Thus regulations on access actually depressed the investment incentives of the incumbent and consequent investments aimed at fiber platforms (Molnar, 2008).

Voice communication is ranked amongst the "killer" inventions of the telecom industry which has revolutionized it to a great extent. The conflicting nature of VoIP has actually resulted in serious issues in the domain of telecommunication equipment. The socio-economic progress and productivity gains catered by VoIP encourages its adoption by majority of the service provide worldwide. However, VoIP poses severe threats to PSTN networks and is thus subjected to several restrictions in many countries. At times VoIP also advocates complete bypassing of the PSTN. Due to this telecommunication equipment regulations in many countries either prohibit the VoIP technology or it is permitted under restrictive conditions. Skype is a successful application of VoIP support which has alarmed European regulators to intervene and carefully inspect that the mobile users aren't blocked from using their cell phones for calls. The Swedish government has actually ruled that Skype needs to pay to the government for its revenue generating services. UAE countries like Oman have blocked Skype for protecting the profit of the telecos (Mitwally, 2009).

As the telecom sector is approaching towards the trend of convergence which involves merging up of networks, firms, services and devices, complex regulatory challenges are emerging at a rapid pace. As convergence involves multiple layers, it becomes unclear as to which entity will bear the responsibility for complying with the national laws and regulations and which government entity is entrusted with the responsibility of enforcing the regulation. Mergers and acquisition in each country are regulated by telecommunication rules and regulations which aim at restricting the new entrants from upsetting the service-specific competition policy (Mitwally, 2009). This policy regulation has also limited U.S. telecom firms from reselling their domestic or international telecommunication services in China as U.S. firms are reluctant in paying the high capitalization requirement.

The require of high capitalization imposed by China for telecommunication companies for executing their operation in China has made market entry for U.S. based telecom firms to be difficult. U.S. actually wants these high capitalization requirements to be removed or reduced so that it gets easier for the new entrants to make some place within the telecom market. Another Chinese regulation affecting greatly the business and revenue of U.S. based telecommunication firms is the fact that U.S. firms are required to have a joint venture with a Chinese firm to offer its services in China. This regulation has limited opportunities of success for foreign firms in China, as the foreign partner of the joint venture tends to be completely dependent on the Chinese operator as the Chinese have not licensed any other operator alone and thus no one possesses the relevant requisite experience (Terault, 2000).

The telecommunication regulation framework in any country needs to keep in view the frequently occurring technological changes and must keep on updating the policies accordingly for safeguarding the interest of all the telecom equipment players in the market.

The telecommunication industry has encountered drastic changes in terms of technological advancements and development during the past two decades. The use of communication services has emerged very rapid all over the world which has necessitated the need for manufacturing latest and efficient telecommunication equipment. Due to this, several telecommunication equipment manufacturers have emerged in the market, each one catering the service providers with a variety of communication devices. These communication devices range from transmission lines to fiber optic cables, networking devices and huge transceivers and switching centers required for the establishment of a complete telecommunication network. Telecommunication equipment comprises of hardware and software products which are integrated well for catering communication services to the clients. Customer premises equipment, switching equipment and transmission lines are the three categories in which different types of telecommunication equipment is divided. Provision of optical fibers, local loops, routers, switches, modems, and communication satellites all tend to lay under one head of telecommunication equipment.

Ericsson, Huawei, Alcatel-Lucent, Motorola, Nokia Siemens, Nortel and several other Chinese firms tend to be the core players of the telecommunication equipment manufacturing industry. These companies exist globally and cater end-to-end solutions comprising of hardware, software and services to enterprise customers. Juniper networks and Cisco Systems also tend to be two cores U.S. based firms renowned worldwide for manufacturing routers and switches for exchanging user information and transmitting voice signal over a communication network. Ericsson tends to be a major global player of the telecommunication industry as it captures a market share of 38%. It specializes in catering equipment for Base Switching Systems and core networks and is also privileged as the pioneer of Bluetooth technology. Huawei is a Chinese firm which has captured the recent telecommunication equipment marketby presenting low cost equipment worldwide. Alcatel Lucent is another telecom equipment industry giant which is the owner of Bell Labs and caters the market with fixed broadband access and radio frequency systems. Nokia Siemens serves the telecommunication equipment industry with GSM and UTRAN services particularly specializing in the domain of next generation networks and IPTV.

Regulations in the domain of telecommunication equipment are required for managing allocation of radio spectrum, provision of telecom services and deciding about the tariff rates. However, the formulation of regulation policies in telecommunication industry requires keeping pace with the rapid technological advancements and changes which occur on a frequent basis. So, telecoms regulations in countries revolve around maintain a balance between competition and level of regulation. Cross-border trade flows and foreign direct investments are largely affected by telecom regulation prevalent within a country. The break of AT&T in 1983 in U.S. serves as an important regulation which manifested the need for breaking the monopoly of the incumbent. This was then followed by UK, Europe and the Arab states. The emerging trend of VoIP has generated serious policy regulation concern in the telecommunication industry. Convergence of multiple networks further puts constraints on the formulation of regulation pertaining to this industry. High capitalization regulation in China has limited the growth of U.S. based firms there. Not only this, policy regulation of China in terms of mergers and joint ventures has prevented the U.S. firms from gaining relevant experience in the industry. Thus,… [END OF PREVIEW]

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