Section 0, Investment Recommendation:

Through our study of the industry over the course of the semester we have selected to main areas to invest in: 4g technologies, and Internet TV. These two trends seem to hold the key to the future for the industry and we feel they would be the wisest areas to look to invest. In an industry troubled by new technology becoming quickly outdated, we looked to something that may become popular down the road rather than something that is a huge current profit generator. Although recommending any investment in this industry seems difficult, we are confident these are two segments that will prosper in the future.

First, many people recognize that 4g may be the future as far as the wireless segment goes, yet there seems to be one glaring problem, money. The rollout of 4g by major service providers will be extremely costly when they chose to expand. Announced last year, Sprint, who holds the claim for the nation’s first 4g network, spend 1.2 billion dollars to expand 4g operations(Seeking Alpha, 2009). The costliness for the major providers may pay off much further down the road, but we caution that that payoff may become threatened with the introduction of newer, more advanced technology. Thus, we recommend investing in Clearwire, a company that is used by Sprint to provide 4g to its customers. Both Sprint and Clearwire have faced a number of issues in the past, including mounting debt concerns. With this said, if Sprint wishes to expand services, they must go through Clearwire to do so. The decision, at least up front, would not depend on the success of Sprint or what they are doing to retain customers but simply the fact that they want to expand.

If we step back and look at Clearwire from a shareholder perspective, it is interesting to see who owns stake in the company. As of last year Sprint represented about 51% of its shareholders (Barrons, 2010). Other notable companies included Comcast, Google, and Time Warner (Barrons, 2010). In addition to our observation of the potential profitability to increase, we have several indications that lead us to believe this may be the case. In the third quarter of this year for example we saw a 402% increase from last year in terms of subscribers (Barrons, 2010). The report also goes on to say that they expect four million subscribers by years end, which was double their initial estimate. Other indications include the fact that their revenue is up 114% from last year in addition to their growth in customers. Their network is now available to 100 million people domestically (Barrons, 2010). With all of these figures available, it seems likely that Clearwire will improve vastly from its meager potential in the past and we are already beginning to see signs of it doing so.

Another secondary place in the market where we believe there is growth potential is in the Internet TV segment. The traditional method of watching television programming normally came from your local provider. This age old practice has the potential to become threatened. While we aren’t advocating that there will be no need for traditional providers, we see great opportunity for those involved in the Internet TV business to thrive. In recommending this segment we have broken it down into two main areas that we see potential in. One: the offering of shows online that would be available to anyone at any time. Secondly, we see the companies investing in televisions that contain Internet connectivity becoming increasingly popular. Google TV for example allows users to search content, set homepages, and stream media all to your television set since it is connected via the Internet.

In conclusion, the uncertainty of who will pull ahead in this area of the market is not clear. Google is competing with several manufacturers who have their own software that provide different services. While we don’t have a specific company recommendation, we feel the area contains a huge opportunity for growth. The ease of use and convenience should propel this segment into something we may take for granted as standard.

Sources:

"Clearwire Reports Record Subscriber and Revenue Growth in Third Quarter 2010." Barrons. N.p., 04 011 2010. Web. 21 Nov 2010. .

"Sprint Expands 4G Network, Reduces Deb." Seeking Alpha. N.p., 18 011 2009. Web. 21 Nov 2010. .

Verizon Considers Change in Data Plan Pricing

Verizon Communications Inc. executives are considering changing the prices of data plans if they decide to implement new 4G technologies. These packages would charge more for plans that ran on 4G service. "If you want to pay for less speed, you would pay for less speed and consume more, or you can pay for high speed and consume less," said Chief Financial Officer Fran Shammo. However, this new pricing strategy largely depends on whether or not Verizon decides to embrace 4G technologies. If it did, it would be following in the footsteps of Sprint Nextel Corp. and T-Mobile USA. Because Verizon has not previously offered tiered pricing for data plans, it is planning on testing the strategy during this years holiday season by offering a $15 plan with a capped amount of data as an option against their typical Unlimited data plan.

Verizon currently dominates the cell phone service industry, so when they decide to make a change it reflects a larger change that is occurring across the market. 4G is clearly the next move that all cell phone providers will need to take in order to remain competitive in the field, just as 3G was a few years ago. This will be a long and expensive process for most companies, as it requires building entirely new infrastructure across the US. Therefore, companies such as Clearwire Corp., that build 4G infrastructure will probably be the first to profit from the 4G switch in the next few years, with the cell phone provider companies seeing these profits once the new infrastructure has been established. The tiered pricing change reflects higher consumer demand for options in data as they have seen options for calling plans for years. More and more phones are being used as mini computers rather than simply as calling devices, and greater variety in data plans really reflects this switch in use.

section 9

In general the analysts of the telecommunications industry say that there are some sectors of it that are presinting signs og being declining but the its market as a whole seems to be very stable. The wired telecommunications sector is now giving more attention to the broadband services, since the demand for the land lines  is falling as the volume of calls reduces due to alternative technologies. Many users are now moving to the wireless sector since its prices are relatively rational and because of the internet utilities they have. Todd Rosenbluth, an Integrated Telecom Services Analyst, says, “With the proliferation of the Internet, data traffic is quickly becoming the voice of the future.” According to CTIA-The Wireless Association,  the number of wireless suscribers in United States, is now almost four times what it was ten years ago, rising from 86 million in December 1999 to 285.6 in December 2009.

During the recession of 2008 many companies within the industry experienced a downfall in their trend but as it ended in mid 2009 they started stabilizing. According to Standard & Poor’s, during 2009 “the industry experienced growing competition, lower prices, increased service availability, technological innovation, and a widening variety of product offerings.” Reports from the CTIA show that the average monthly bill of wireless carries drecreased from 50.07 in 2008 to 48.16 in 2010.

According to Casey Thormahlen, the wired telecom sector’s trend is going to decrease in the next five years. His prediction in based on the actual decreases in call volumes that the industry is facing do to services such as voice over ip and wireless technologies that are many times cheaper. He says that this sector’s life cycle “is all downhill from here”. In the other hand the wireless sector is predicted to expand rapidly. IBISWorld’s analysts, in the other hand, predict that the wireless sector is going to expand in a rapid way; since the new technologies that have been developed such as 3G and 4G data services, are creating a increasing demand for this sector of the industry.

Section 5

Many influential leaders have created what today you see as the telecommunications industry. The companies that constitute this industry employ from thousands to hundred of thousands employees, to be able to lead organizations of this magnitude you need very intelligent and visionary people. One of them is the chairman of Telefónica, César Alierta Izuel, one of the biggest mobile carriers in the world possessing a 169 millions customer base. Lowell McAdam, the president and CEO of another mobile carrier, Verizon Wireless, has brought his company to the top creating a 86 million customer base just in US. Scott Forstall, is another leader that has influenced the industry. He is the senior VP of the Iphone’s software, the platform of the device that has “changed they way people handle telecommunications”.

The organization of this industry is dived into four sectors: wired, wireless, satellite and other telecom establishments. The wired sector, that includes the phone landlines, DSL, cable TV and Internet services, is the biggest of the four sectors followed by the wireless and satellite.

According to the US Department of labor the telecommunications industry employed one million jobs in 2008. Twenty-six percent of those jobs were office and administrative support occupations, that included telephone operators, financial clerks and customer service representatives. Another twenty six percent were installation, maintenance and repair occupations. The remaining 48 percent represented sales, professional, management and business related occupations.

Even though the demand for the industry’s services is rising, a nine to ten percent decrease in jobs is expected from now to 2018. The reason of this is that as technology evolves the demand for the jobs in the industry decreases. Another cause for this decrease in jobs, in the US, is the outsourcing and offshoring plans that this industries have.

In the telecom industry the degree of competition between companies is very high and in order to remain competitive companies have to reduce their costs by using those two strategies, outsourcing and offshoring. A recent NSN APAC survey made to US telecom companies showed that 60 percent of the industry’s companies are going to implement outsourcing and offshoring in the next 12 to 18 months.

In the other hand, jobs such as installing, repairing, maintaining and customer service representatives, which tend to have the higher levels of turnovers in the industry, can not be outsourced. These jobs will be the ones with the higher demand in these upcoming years.

 In addition, the telecom industry, locally, is going to be investing in engineering mostly. According to The U.S. Bureau of Labor Statistics “Product design engineers or new product development engineers are in demand due to the changing demands for new technology”.

Telecom Corporative structures

The telecommunications industry in contrast to some other industries is wide spread. This characteristic of the industry makes it have a lot of cultural differences and different business ethics. So corporate structures in this industry need to be chosen very carefully and taking in consideration hundreds of external factors that vary if the companies are local, national or global.

The telecom companies can’t stick to a single structure because it is likely impossible that one strategy could work for the marketing, finance or implementing the correct prices for different countries. In Latin America for example the prices are lower than in the United States, if a telecom company would charge the US prices to Latin American countries the demand for the services would decrease since the majority of the people in those countries can’t pay the same prices as the people in US. In my interview with a global telecom company’s manager, I learned that mobile carriers in general tend to use a hybrid structure, a combination of vertical and horizontal structure to manage their foreign part of the company. In this way companies that use this structure are able to have their foreign part of their company with their own marketing, finance or management sectors, as horizontal structured companies do. But in this case each sector those foreign parts of those global companies(finance, marketing, management) have to report to those same sectors of the main company. As I said before not every company can use the same structure so there are also companies within this industry that use vertical or horizontal structures too.

No Cash Necessary

According to the Wall Street Journal, AT&T, Verizon, and T-Mobile are embarking on a venture that will allow mobile phone users to pay for goods and services using their cell phones. The project has been called Isis and will allow a person to wave their phone in front of a scanner in order to pay for an item. All three major wireless companies will be working together.

The venture will utilize near-field communications technology, also called NFC. NFC is already found in cards used at drugstore chains and gas stations to get discounts. The NFC chips transmit signals short distances and will enable customers to make these payments via cell phone. Currently, companies use NFC stickers or chips that are inserted into the phone but beginning next year, for example, RIM will begin integrating the technology directly into their BlackBerry phones. Other companies plan to use this technology as well. The Chief Executive of Google Inc. recently showed off a prototype of a phone utilizing both an Android operating system and an integrated NFC chip. The Isis will use Discover Financial Services' payment network and came about as major credit card companies such as Visa Inc. and MasterCard Inc. began to push their mobile payment initiatives.

The link between wireless companies and credit payments will be very interesting. The amount of competition that credit card companies will see is going to be immense because cell phone payments will be so convenient for many consumers. As of 2009, 91.3% of the population had wireless subscriptions. People are becoming so dependent on cell phones that this will simply add one more reason to always carry a cell phone. It's arguable whether this is a good thing. Yes, it will be more convenient, but it is just a way for these big cell phone companies to create growth increase revenue.

Ethics and CSR Section

In today’s market, the telecommunications industry revolves around the storage of personal information. From using PayPal to buy a book on Amazon.com, to sharing information between an iPhone, MacBook, and iPad via MobileMe, to Google compiling a database of all Wi-Fi networks for use on Google Earth, to Bing tapping into people’s preferences on Facebook to personalize search results, it seems that there is no end to the amount of information that users are willing to give companies in the telecommunications industry. Because of this, most ethical issues arising in the telecommunications industry revolve around the security of this personal information. Many have started to question how much information is too much, how these companies will protect consumer’s private, secure information, and why these companies would be interested in protecting this information.

Generally, companies care because that is how they will maintain a positive CSR. As mentioned earlier, Google, Inc. is a giant in the telecommunications industry. Recently, Engineer David Barksdale was fired for breaking Google’s strict internal privacy policies. Mr. Barksdale was an engineer in Google’s Seattle office who allegedly accessed information of several users who were minors. This breach occurred while Google was already responding to probes in the U.S. and overseas for privacy matters, including inadvertently collecting personal data on unsecured WiFi Internet networks as well as a privacy flap in February over the release of a social networking site called Buzz (Efrati, 2010). Google’s reaction proves to their consumer base, and to potential consumers, that they take the security of this private information extremely seriously. Although there have been concerns raised recently about whether Google’s amassing of personal data is ethical or not, the quick dismissal of this employee will undoubtedly help Google’s reputation regarding ethics and privacy considerations. However, Google is planning on launching a new social networking site, GoogleMe, and this venture will certainly test their ethics regarding security and privacy as they attempt to connect GoogleMe to Gmail, YouTube, and other information-sharing sites (Efrati, 2010).

Another telecommunications giant previously mentioned is Apple Inc. Apple has maintained a loyal customer base while sustaining continual growth, largely because of their exceptional CSR. Apple is focused on being seen as a “green” company, and this goal is discussed on their website so consumers can understand their efforts: “That’s why we design them to use less material, ship with smaller packaging, be free of many toxic substances, and be as energy efficient and recyclable as possible. With every new product, we continue our progress toward minimizing our environmental impact.” (“Apple and the environment,” 2010). On the same page, Apple offers links to read “Environmental FAQs” or to learn more about the “Apple Recycling Company” as well as to “Supplier Responsibility,” which discusses another pillar of CSR, ensuring that “our suppliers provide safe working conditions, treat workers with dignity and respect, and use environmentally responsible manufacturing processes.” (“Supplier responsibility,” 2010).

Aside from being environmentally concerned and socially responsible, both especially important aspects of CSR for telecommunication companies, Apple’s CSR also concentrates on the main ethical issue facing the telecommunications industry: security. Found in Apple’s Ethics Policy: “The company’s continued success and growth depends on our ability to preserve the confidentiality of our confidential, proprietary and trade secret information, as well as that of others in our possession.” (Apple, Inc., 2010).
Sources:

Apple and the environment. (2010). Retrieved from http://www.apple.com/environment/

Apple, Inc., (2010). Ethics: the way we do business worldwide California, USA: Retrieved from http://media.corporate-ir.net/media_files/irol//10/107357/corpGov/AppleEthicsPolicy.pdf

Efrati, A. (2010). Google fired worker after customer breach. Wall Street Journal, Retrieved from http://online.wsj.com/article/SB10001424052748704285104575492440245394392.html?mod=WSJ_newsreel_technology

Supplier responsibility. (2010). Retrieved from http://www.apple.com/supplierresponsibility/

van Dijk, Michiel, & Schipper, Irene. Stichting Onderzoek Multinationale Ondernemingen (SOMO) Centre for Research on Multinational Corporations , (2007). Apple csr company profile Amsterdam: Retrieved from somo.nl/publications-nl/Publication_1963-nl/at_download/fullfile