The Rise Of Fiber-optic Broadband
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The Future of the Telecom Fiber-optic Industry The rise of Telewest-NTl to prominence October 2007
Hector Chapa Sikazwe Keywords Competition, Fiber-optic, Broadband, ADSL, merger, Phone industry marketing strategy competitive advantage creative marketing.
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TABLE OF CONTENTS 1.0
Introduction ................................................................................... 4
1.1
Legislation restrictions ................................................................................................................ 5
1.2
Telewest products ....................................................................................................................... 7
Three tier services (Telewest.co.uk) ..................................................... 7 1.3
Competitors ................................................................................................................................. 8
1.4
Lay out of Report ........................................................................................................................ 8
2.0
The organisation............................................................................ 9
2.1
The Strategic business strategy ................................................................................................... 9
2.2
Telewest Core Competence Factors .......................................................................................... 10
2.2.1
Fiber Optic Network.......................................................................................................... 10
2.2.2
Self sufficient Network facilities ....................................................................................... 11
2.2.3
Service via Cables ............................................................................................................. 11
3.0
Company analysis ....................................................................... 12
3.1
Porters forces ............................................................................................................................ 12
3.1.1
Competitive Rivalry .......................................................................................................... 12
3.1.2
Power of supplier .............................................................................................................. 13
3.1.3
Power of buyer .................................................................................................................. 14
3.1.4
Threats of substitute .......................................................................................................... 14
3.1.5
Threat of new entrants. ...................................................................................................... 15
3.2
Swot analysis of the Company ................................................... 16
3.2.1
Strengths ............................................................................................................................... 16
3.2.2
Weaknesses ........................................................................................................................... 16
2
3.2.3
Opportunities......................................................................................................................... 17
3.2.4
Threats .................................................................................................................................. 17
3.2.4.1
4.0
Market risk ........................................................................................................................ 17
Where the Business is now ......................................................... 19
4.1
Market Penetration .................................................................................................................... 20
4.2
Market Development ................................................................................................................. 20
4.3
Product Development ................................................................................................................ 21
4.4
Diversification........................................................................................................................... 22
6.0
Recommendations ....................................................................... 23
6.1
E-commerce .............................................................................................................................. 23
6.2
Knowledge management ........................................................................................................... 24
6.3
Product and service Innovation ................................................................................................. 25
6.4
The value of next generation networks...................................................................................... 25
6.5
Training..................................................................................................................................... 26
7.0
References .................................................................................... 27
All copyrights reserved ............................. Error! Bookmark not defined.
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1.0
Introduction
Ntl:Telewest was created in March 2006 after a merger of Telewest Global Inc and Ntl incorporated creating ntl:Telewest Business. This report is an in-depth analysis of Telewest communication business strategy before the merger that formed the new corporation. Telewest, (formerly Telewest Broadband and Telewest Communications) is a trading name of NTL Incorporated, the dominant cable operator in the United Kingdom with more than 90% of the market. The merger of Telewest and NTL's UK businesses was completed on March 3, 2006. NTL trading as Telewest passes approximately 4.2 million homes. Corporately, now Ntl: Telewest boasts of a success that is based on a £13 billion investment in a state-of-the-art, fibrerich network provision of services. As documented in Broadcasting Committee (Nov 1998), the first official announcement about the creation of a new cable industry in the UK was made in a House of Commons debate on 2 December 1982, when the Government brought forward legislation to create a new statutory authority to award franchises to cable operators. The following year, 1983, the Government published a White Paper, “The Development of Cable Systems and Services” (the "White Paper"), which set out its policy proposals in more detail. In 1984, the Telewest story began in Croydon operating under the name of Croydon Cable. Murray (2000) observed that Telewest as a company has grown through marathon mergers and acquisitions, Telewest Broadband replaced regional company names such as Yorkshire Cable, Cable London and Birmingham Cable, which remained from a history of consolidation. See appendix A.
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1.1
Legislation restrictions
There were strict restrictions that accompanied the statutory instrument. The Telewest media centre1 reports that uunder the terms of the White Paper, cable operators were prohibited from providing voice telephony services in their own right over their networks, as the provision of these services remained the exclusive privilege of British Telecom and Mercury Communications. More significant restrictions were also imposed on the provision of data services. The White Paper also specified that cable operators were prohibited in their own right from linking individual franchise areas, and also ruled out the possibility of any company outside the EU owning a UK cable franchise. In 1990, the broadcasting ACT introduced the advent of competitive provision of services. The Broadcasting Act 1990 established a new regulatory authority, the Independent Television Commission (ITC) for the television sector and also created a new framework for the licensing of cable services. In 1991, the period of protected duopoly which had been granted to BT and Mercury Communications expired. This stimulated a period of several years of inward investment into the UK cable industry from US telephony companies. Telewest communication took advantage of the relaxing of the law and reinvented itself in the UK as a leading cable company Commenting on the growth of Telewest at the 2005 annual reporting party, Philip Jansen, managing director, consumer division stated that "As we move into the new era of broadband and put the legacy of consolidation behind us we decided to bring all our operations under one
1
http://mediacentre.telewest.co.uk/phoenix.zhtml?c=76808&p=IROL-MediaHome
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unifying name. This undertaking reinforces our commitment to building lasting and meaningful customer relationships." Below is the TIMELINE of the organization reflecting performance since its inception in Croydon. The graph needs to be interpreted in conjunction with appendix A.
Time line of growth
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1.2
Telewest products
The organization provides the following products and services: (a)
Broadband Internet services: This is a national product portfolio of voice, data, internet and IP solutions for all UK businesses from developing businesses right up to large corporates, public sector organizations and service providers
(b)
A network built to the office, enabling the delivery of high bandwidth IP and voice services to UK businesses
(c)
Residential Cable TV: The majority of Telewest's television is digital. However, there are still areas that receive an analogue
(d)
Residential and business telephone services: Telewest was the first UK landline company to offer 'unlimited' calls to landlines for a fixed monthly fee.
Telewest is the only unique organization in the UK that provides a three tier residential services of Telephone, internet and television to residential consumers. (see picture below) This automatically gives the organization undue competitive advantage.
Three tier services (Telewest.co.uk)
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1.3
Competitors
The main competitors in the Industry are British telecommunication (BT) and Sky British broadcasting company. These two main competitors are closely followed by several small organisations who supply similar services to households on the back of networks already setup by the main competitors. 1.4
Lay out of Report
As mentioned, this report dwells on the ex Telewest communication component of the new organization because the “Ntl:Telewest” emerging strategic structure of the new organization is still fluidic and unstructured to be used for purposes and objectives of this report. The report is divided into 4 parts. (a) The organization and its products (b) The organization’s operational competitive advantages and value creating activities, strategic position and its business model (c) The factors behind the organization’s success in the industry (d) The organization’s current strategy to remain a player in the telecommunication market Each part listed above will be treated as a separate section in the report and will embody complete information that can be utilized to support the section in question. The concluding section will consist of a summary of the report and recommendations.
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2.0
The organisation
According to Murray (2000), supported by information on the official Telewest website, 2 Telewest Communications is one of Britain’s most diversified communications companies, with activities spanning two of the fastest growing sectors in the UK economy: telecommunications and media. The organization provides multiple broadband services including cable television, telephone and Internet access services to more than 1.7 million homes and delivers business communications solutions to over 70,000 public and private sector accounts. 2.1
The Strategic business strategy
According to the Telewest (2002) annual report, different strategic decisions by Telewest were made to remain competitive in the business environment this was not far from the ability to cope with the changes in the market place. Over the years, the business competitive strength of Telewest was based on but not limited to. (a) Investment in technology that built service strength (b) Optimisation of logistics and supply chain system: (c) Development of strategic relationships with major players in the market (d) Mergers and acquisition: (see appendix A) (e) Human capital development: the improvement of employee and continuous upgrade of there capacity.
2
www.telewest.co.uk
9
As already observed, Telewest business model centres on the provision of “three tier services” of business and residential telecom (telephone and internet services) and interactive TV services to the UK business and residential consumers. As reported in Great Britain (1998) and Media & Sport Committee Culture (1999) the organization was formed with the initial objective of providing basic “cable services consisting of analogue and digital facilities” to businesses and residential consumers. Detailed in Bradley and Austin (2005), Telewest communications pl which is now the chosen provider of multiple broadband services to homes and businesses in the UK, was the first to launch unmetered internet access in the UK. 2.2
Telewest Core Competence Factors
The major impact that Telewest has had on the business stems from the company offering a one stop shop for broadband services with unbeatable value. Telewest has further strengthened broadband leadership by positioning brand values across the business, from providing excellent customer service to delivering exciting content via blueyonder high-speed internet." 2.2.1
Fiber Optic Network
Uniquely, according to Telewest (2000) Customers receive services over a highly advanced broadband communication network built entirely from scratch over the past decade. It combines high-bandwidth fibre optic technology with modern digital transmission and switching techniques. Agrawal (2002) explained that Fiber-optic communication is a method of transmitting information from one place to another by sending light through an optical fiber. The light forms an electromagnetic carrier wave that is modulated to carry information. Because of its advantages over electrical transmission, the use of optical fiber has largely overtaken copper wire communications. 10
Telewest’s Competitors still use old network infrastructure using Asymmetric Digital Subscriber Line (ADSL), a data communications technology that enables faster data transmission over copper telephone lines than a conventional modem can provide. ADSL can only be used over short distances; typically less than 5km. Fiber optic cables that Telewest uses has no distance restrictions. This has created competitive advantage over BT and SKY. 2.2.2
Self sufficient Network facilities
Telewest is self sufficient in network facilities and does not rely on external organization for its supply of services. Bradley and Austin (2005) described Telewest broadband expansion and success as being based on Telewest’s regional networks that is connected by a state-of-the-art digital backbone network that was completed in 1998. This national network enabled Telewest to expand its range of voice and data communications services for the business market. At the same time, Bradley and Austin (2005) observes, Telewest reduced its dependence on other operators for carrying calls between its regions and paved the way for Telewest to develop its own ‘wholesale’ business, providing capacity for other smaller telecommunications operators. 2.2.3
Service via Cables
Telewest provides services using cables buried in the ground, reducing vandalism and increment weather has little of no effects on the performance of service provision. This has given Telewest reduced outage and disruption of services. This is key to this industry that relies on the satisfaction of the end user for its existence and continued sustenance of business partnering with the buyer.
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3.0
Company analysis
3.1
Porters forces
Porters fives forces model is an excellent model to use to analyze a particular environment of an industry. The is essential to help understand the industry in depth before an organization decides to enter. Its dictates allows Telewest to be evaluated in the light of the following factors that can be represented graphically:
Porters five forces
3.1.1
Competitive Rivalry
The telecom industry provides opportunity for customers to move from one supplier to another. If it is easy for customers to move to substitute products for example from BT to Tiscali etc. Generally competitive rivalry is high in the industry due to: (i) little differentiation between the products sold between customers.
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(ii) Competitors are approximately the same size of each other. (iii)Competitors all have similar strategies. (iv) It is costly to leave the industry Telewest has direct competition from many organizations. Specifically, BT and Sky broadcasting are the major competitors that Telewest has to compete with. BT directly swoops on all telephone customers that defect from Telewest. There are several smaller competitors like Tiscali, Talk Talk, Onetel etc who operate in the periphery and receive many customers who are let down by either Telewest or BT. Sky is directly the main rival for the television service and recently has become a broadband provider as well. 3.1.2
Power of supplier
Suppliers are essential for the success of an organization. Raw materials are needed to complete the finish product of the organization. Suppliers do have power and it is significant: (i) If they are the only supplier or one of few suppliers who supply that particular raw material. (ii) If it costly for the organization to move from one supplier to another (known also as switching cost (iii)If there is no other substitute for their product. Telewest has direct control of most of its raw materials like the TV content through Flextech. The organization controls what is on offer on the TV content provided by Telewest. Telewest similarly has control on what it offers using the fibre optic services as it has absolute ownership of the service
13
3.1.3
Power of buyer
Buyers or customers can exert influence and control over an industry in certain circumstances. This happens when: i.
There is little differentiation over the product and substitutes can be found easily.
ii.
Customers are sensitive to price.
iii.
Switching to another product is not costly.
Buyers have power to determine what quality/type/price of services supplied. Service industry organizations that are embodied in competitive market scenarios are subject to fluctuating numbers of subscribers. Buyers tend to move with product pricing and only organizations that respond swiftly maintain a sizeable subscribership. Telewest regularly responds to the demands of the consumer by innovating and providing value for money services. Strategic regular repricing to respond to the market forces has been Telewest’s strategy that has seen it’s subscribership being maintained. 3.1.4
Threats of substitute
Telewest is under constant threat from cheaper substitutes coming from smaller organizations. The reason is that there are alternative products that customers can purchase other than the Telewest product at cheaper prices. The threat of substitute is higher due to the: (i) Price of that substitute product falling. (ii) easy of consumers to switch from one substitute product to another. (iii)Buyers willing to substitute.
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Due to this threat of substitutes, Telewest has kept innovating and rebranding its products so that the customer base is not adversely affected by the switching of subscribers due to cheaper substitutes. 3.1.5
Threat of new entrants.
The telecom industry has one of the lowest entry barriers. This creates a problem for the larger organizations that invest massively in the industry. The threat of a new organization entering the industry is high when it is easy for an organization to enter the industry. Smaller organization (i) will look at how loyal customers are to existing products, (ii) how quickly they can achieve economy of scales, (iii)access to suppliers, (iv) Government legislation prevents them or encourages them to enter the industry. The above five main factors are key factors that influence industry performance; hence it is common sense and practical to find out about these factors before entry into the industry. This is one area that Telewest has very little control over as the industry is a developing one and innovation and customer loyalty that Telewest has created over the years assists in maintaining a loyal customer following.
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3.2
Swot analysis of the Company
3.2.1
Strengths
The uniqueness of Telewest strength lies in the (a) Combination of its manageable size, (b) Ownership of content assets in TV programming using Flextech (c) Ownership of its own network structure (d) Ownership of fibre optic technology, thus providing faster internet speeds compared to BT and other competitors. (e) The trend of digitalization of TV content further strengthens its position in the Cable segment (f) Customer care unit that subsist on customer care satisfaction and employs and trains carefully selected individuals to become members of staff
3.2.2
Weaknesses
However, the company faces twin challenges of (a) Servicing its debt burden and (b) plugging the leakage in its telephone subscriber base, which declined in absolute terms, in the past two years (c) Getting external funding to maintain its infrastructure remains the most serious weakness the organization faces (d) Fear of the television products going full product life cycle and subscribers wanting better content of what is on the television service or defect to competitors.
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3.2.3
Opportunities
Telewest believe that the commercial benefits of the merger with NTL will include the following: (a)
accelerated development of new tailored service offerings to residential and business customers in form of digitalized content
(b)
increased momentum for online and interactive development initiatives
(c)
cross-promotion opportunities across services and platforms
(d)
increased bundling opportunities to maximize broadband network distribution
(e)
opportunity to leverage broadcasting skills and a wider range of content relationships
(f)
enhanced growth prospects for advertising and e-commerce revenues
(g)
investment into the organization from organizations that see the future of ntl:Telewest to be of strategic importance to the
(h)
Due to current size and organization strategic makeup, Telewest can now effectively compete with established competitors like BT and Sky
3.2.4
Threats
3.2.4.1 Market risk Telewest as an organization that identifiably has two areas that are regarded as potential threats to its strategic operations. The principal market risks stem from problems with servicing debts that accumulated in the earlier days of being launched. (a) Interest rate changes on variable-rate long-term bank debt;
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(b) Foreign exchange rate changes, generating translation and transaction gains and losses on non-sterling denominated debt instruments. Telewest uses derivative financial instruments solely to reduce exposure to these market risks and does not enter into these instruments for trading or speculative purposes.
3.2.4.2 Interest rate risk Telewest’s outstanding long-term debt is denominated in pounds sterling and bears interest at variable rates. The organization seeks to reduce exposure to adverse interest rate fluctuations on borrowings under current senior bank facilities principally through interest rate swaps. These interest rate swaps provide for payments by Telewest at a fixed rate of interest (ranging from 7.175% to 7.910%) and the receipt of payments based on a variable rate of interest.. The aggregate notional principal amount of these hedging arrangements is in the excesses of £1.2 billion..
3.2.5
Foreign currency exchange risk
As at 31 December 2000, Telewest fixed-rate debt instruments were denominated in US dollars. The organization entered into certain derivative instruments to reduce exposure to adverse changes in exchange rates. These derivative instruments comprised of (a) foreign currency options, (b) foreign currency swaps and a (c) Series of foreign exchange forward contracts. The results were materially influenced by future exchange rate movements, due to the requirement that certain hedging instruments be marked to their market value at the end of the 18
financial period whereas the underlying liabilities may be re-translated at the spot rate of exchange. Telewest had foreign currency swaps and contracts hedging the principal and interest exposures of the Group totaling in aggregate £2,732 million.
4.0
Where the Business is now
Ansoff (1979) stated that organizations needed to apply strategic measurements to their organizations to monitor growth and create a vision for the future. He proposed a matrix, (see below) which encapsulates the future vision of a company. It maps the status of each niche against status both of Product and of Market.
Source: Ansoff (1979)
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The official Telewest website 3 reports that Telewest organization prides to exercise profitable competitive advantage over it’s competitors, using a strategic operational motto that subsist on (a)
designing and launching its products and services at cost effective levels and on a
(b)
Researched and clearly determined market demand.
Bradley and Austin (2005) expanded in their book that Telewest believes in market research and delights in getting this information out to the right people at the right time. 4.1
Market Penetration
Using its research competitive advantage factor of researching before launching new products, Telewest has markets her existing products to her existing customers with vigor. Telewest (2002) reported that over the years, Telewest has increased exponentially the revenue generated from existing products. The Massive marketing ploys that were employed in repositioning cable television services to exiting customers resulted in the growth of the number of subscribers. According to Telewest (2004) this resulted in an increase in the number of channels subscribed to and the variety of phone features sought increased inexplicably. McKenna and Moore (1998) had predicted that such an act of marketing would result in revenue growth for any organization 4.2
Market Development
According to Murray (2000), Telewest realized the rise in popularity of the “cable based” services to be of significant market implications. From the various mergers around the Country
3
www.telewest.co.uk
20
(Appendix A), Telewest has been positioned strategically to market its products in new areas resulting in the introduction of the “cable products” in new areas of the country. For instance in 2000, after receiving professional advice from Schroder Salomon, Smith Barney and Deutsche Telekom working for Lehman Brothers, Telewest acquired Eurobell, a cable telecommunications service provider that supplied telephone, internet, data and cable television services to residential and business customers in the south of England. Eurobell held franchises in Crawley, west Kent and south Devon together with local access and a backbone network across the south east linking international landing points in Cornwall to London. 4.3
Product Development
Product innovation is a key Telewest marketing strategy. According to Telewest (2005), Telewest has strategically launched several strategic new products for its digital customers. The following are the products that are being used by the organization to compete: (a) Teleport is a new service, coupled with “video on demand” available to all Telewest Digital TV customers. This service does not require any extra equipment and allows customers to have access to the service and it is included with all Telewest digital packages. (b) TVDrive, the equivalent of “Sky Plus” service that is offered by Sky digital. TVDrive is a smart personal video recorder, designed to make TV fit around Telewest customer’s lives. (c) Telewest has also introduced “talk anywhere”, a revolutionary way of using the telephone service in the UK. Talk Anywhere phone services are the easiest and most revolutionary way to use and pay for the home phone. This service allows customers to call anyone, anywhere, any time, any phone for a fixed monthly fee just like mobile companies.
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4.4
Diversification
Telewest keeps rebranding its products and more services are being introduced as the organization has expanded. Telewest has applied “related diversification” by incorporation virgin mobile into its acquisition operations. The acquisition of virgin mobile by ntl: Telewest indicates the organization’s desire to expand. Virgin Mobile offers a broad range of mobile communications products and services, including mobile voice and non-voice services, including SMS, MMS and 3G, and entertainment services over the Virgin Mobile Bites portal including games, information and music services, and international roaming. 5.0
Conclusions
Telewest is a trading name of NTL Incorporated, the dominant cable operator in the United Kingdom with more than 90% of the market. This report has shown that Telewest is one of the largest broadband communications and media groups in the United Kingdom, providing multichannel television, telephone, and Internet services to 1.8 million residential customers in England and Scotland.
While Telewest Business supplies broadband services to consumer, business, and public-sector markets, its content division, Flextech, is the BBC’s partner in UKTV. Together they are the largest supplier of basic channels to the UK pay-TV market with a portfolio that combines wholly owned and managed channels, including ten joint venture channels with the BBC.
One of Telewest’s growth strategic goals was to launch Teleport, a TV-on-demand (TVoD) service for customers by 2006, and the TVDrive which would also include on-demand 22
programming from the BBC and other television content providers. Telewest undertook a reevaluation of its network in light of delivering future capabilities by building it’s own network facilities. The uniqueness of Telewest lies in the combination of its size and the ownership of content assets in TV programming. The trend of digitalization of TV content will further strengthen its position in the Cable segment.
6.0
Recommendations
6.1
E-commerce
Today’s communications networks have moved business further into the electronic world where speedy reactions and access to accurate and timely information are essential. Ecommerce should be the future for Telewest. The following are the reasons why Telewest can gain competitive advantage over other competitors. E-commerce (a) liberates companies; (b) makes their size irrelevant; (c) Opened up new markets and new ways of working. (d) It has also made it easier, more efficient and less costly to do business and compete. However, customers will have higher expectations and be less tolerant of delays and more willing to switch suppliers. Success depends on Telewest being able to meet those expectations efficiently, a need, which service Telewest understand and support. Telewest already has the state of the art information’s systems installed in the organization. The current new converged networks and technologies that already exist in Telewest will be behind the ability to 23
(a) move between and combine applications, (b) make information accessible to anyone in the organization regardless of location and (c) Integrate data from different systems. Convergence has increased flexibility and contributed to overall efficiency but it has also made it faster and easier to create the innovative products and services which differentiate Telewest from other companies like BT and Sky. 6.2
Knowledge management
To maintain this competitive advantage Telewest is obligated to invest heavily in the state of the art virtual computer information systems. Telewest current use of knowledge management creates competitive advantage. When applied efficiently, knowledge management incorporates: (a) The use of up to date software programs that allows both the employees and the client to quickly access information on products and services creates customer satisfaction. This is a vital competitive strategy contributing to business efficiency and high levels of customer service that lacks in this industry (b) Information about customers and products are stored in one place so all applications access the same database. Telewest easily segment customers and offer different service levels according to their value. (c) Advantageously, Telewest easily conducts
market research, design and launches
products and targeted campaigns to produce maximum effect since calculations are based on accurate information stored on the data base
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6.3
Product and service Innovation
As stated in Telewest (2002) annual report, the chairman predicted that by the turn of the decade strong strategic Companies will separate themselves from other competitors largely by (a) creating innovative products and services, (b) being price competitive and reacting fast to market demand. (c) Equally important to give customers the products and information they need when and how they need them. Telewest should continue on the path they already are treading on ie product and service innovation. Competitors are struggling along with outdated, expensive to run and want to maintain legacy systems which make it difficult to compete effectively. Some have neither the time nor expertise to thoroughly research or cost, upgrade or install the modern and efficient communications solutions which are important tools in differentiating one company from another. This remains Telewest strong marketing competitive advantage. 6.4
The value of next generation networks
Within Telewest, unlike legacy systems, the new installed networks are flexible. Telewest need to build on its High speed fixed and wireless networks; converged services; secure, flexible and cost effective systems that support the advantages of the new ways of working because they create (a) seamless connections between applications so people can collaborate efficiently regardless of their location all of which contribute to more efficient working practices and therefore competitive edge
25
(b) Supporting business agility, the networks make it easier for Telewest to adapt quickly to changing markets and customer demands. (c) Less expensive to manage and maintain as they are designed to grow with the business, can be future-proofed and, because they support the business needs better, make the return on investment faster. 6.5
Training
Telewest already invests extensively in the training of its members of staff. By relying on the expertise of professionals, even the smallest companies can reap the benefits of the latest technologies, together with all their updates, without having to employ teams of expert IT staff. Telewest should continue using the existing system of in-house training.
26
7.0
References
Annabelle Dodd (Jul 2005)The Essential Guide to Telecommunications (Paperback) ISBN: 0131487256Prentice Hall PTR Broadcasting Committee (Nov 1998) The Development of Parliamentary Broadcasting: Minutes of Evidence, Wednesday 15 July 1998 - Telewest, General Cable and Wireless; National Telecommunications Ltd; Flextech; BBC (House of Commons Papers) ISBN: 010555068X The Stationery Office Books, UK
Carl Stern and George Stalk (1998) Perspectives on Strategy: From the Boston Consulting Group (Hardcover) "what is strategy? ..." (more) John Wiley & Sons Inc Clayton M. Christensen (1 Jul 1997)The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail (Hardcover) ISBN: 0875845851 Harvard Business School Press Great Britain (1998) The Public Telecommunication System Designation (Telewest Communications Fylde and Wyre Limited) Order 1997: Telecommunications (Statutory Instruments: 1997: 315) (Paperback) ISBN: 0110639162 Stationery Office Books, UK Great Britain (April 1997) The Public Telecommunication System Designation (Telewest Telecommunications PLC) (No. 2 ) Order 1997: Telecommunications (Statutory Instruments: 1997: 923) (Paperback) Stationery Office Books, UK Icon Group Ltd. (April 2000) Telewest communications plc: International Competitive Benchmarks and Financial Gap Analysis (Financial Performance Series) (Unbound) ISBN: 059718769X Icon Group International Inc, UK Lillian Goleniewski (8 Jan 2002) Telecommunications Essentials: The Complete Global Source for Communications Fundamentals, Data Networking and the Internet, and Next-generation (Paperback) Addison Wesley
Media & Sport Committee Culture (Dec 1999) Funding of the BBC: Minutes of Evidence, Tuesday 2 December 1999 - BECTU; Ntl; Telewest; National Consumer Council (House of Commons) ISBN: 0102027005 The Stationery Office Books, UK Michael A. Cusumano (May 2004) The Business of Software: What Every Manager, programmer and Entrepreneur Must Know to Succeed in Good Times and Bad (Hardcover) ISBN: 074321580X Simon & Schuster Ltd Murray john (2000)
“Telewest extends cable network with Eurobell acquisition” 27
http://www.telewest.co.UK/ourcompany/pressreleases/pr281.html accessed 23/11/2006
Regis McKenna and Geoffrey A. Moore (1 Aug 1998) Crossing the Chasm: Marketing and Selling Technology Products to Mainstream Customers (Paperback) Capstone Publishing Ltd, UK Stephen P. Bradley and Robert D. Austin (Eds) (1 Sep 2005) Broadband Explosion: Leading Thinkers on the Promise of a Truly Interactive World (Hardcover) ISBN: 1591396700 Harvard Business School Press, NY, London. Telewest annual repots( 2000, 2002, 2004, 2005) http://mediacentre.telewest.co.uk/phoenix.zhtml?c=76808&p=IROL-reportsAnnualArch William H. Davidow (Jun 1986) Marketing High Technology (Hardcover) ISBN: 002907990X Macmillan USA
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Appendix A- TIME LINE
Year
Event
1984
The Telewest story begins in Croydon operating under the name of Croydon Cable.
1988
Croydon Cable is acquired by United Cable of Denver, US. Franchises in Edinburgh, Avon and south east are added. United Cable of Denver merges with United Artists Cable International.
1989 1991
United Artists merges with their largest shareholder TCI (now Liberty Media), to create the largest cable operator in the US. A joint venture between TCI and US West is announced.
1992
The joint venture company is renamed Telewest Communications.
1994
Telewest successfully completes a stock market flotation.
1995
Telewest merges with SBC Communications, adding franchises in the midlands and north west totaling 1.3 million homes.
1998
Telewest announces a merger with General Cable, and acquires an outstanding interest in Birmingham Cable, adding a further 1.7 million franchise homes in Yorkshire, west London and Birmingham.
1999
Telewest purchases the remaining 50% stake in Cable London from ntl, adding 0.4 million franchise homes in north London.
2000
In April, Telewest merges with Flextech. In November, Telewest extends its cable network with the acquisition of Eurobell taking the total number of homes passed to 4.9 million.
2002
Telewest Communications plc enters discussions on financial restructuring with its stakeholders.
2004
In July, Telewest emerges from its financial restructuring as Telewest Global Inc. Shares begin trading on NASDAQ National Market. In October, Telewest announces a merger with ntl, which will create the UK's second largest communications company and leading triple-play service provider. Telewest Business delivers a comprehensive range of solutions, across the UK, including broadband and internet services, networking solutions, voice and IP and multimedia services
2005
2006
The ntl and Telewest merger was completed in March, creating ntl:Telewest Business
29
Appendix B: BROADBAND AWARDS Awards won by blueyonder broadband Award
Award Title Best Sumo Consumer broadband finalist
Finalist Best portal finalist
Finalist Best ISP
Best ISP/Broadband company
Awarded
"Highest in Customer Satisfaction Among Broadband Internet Service Providers."
Best Sumo Consumer Broadband
Best Heavy Consumer Broadband
Best Portal
Award Internet Service Providers' Association Awards 2006 Internet Service Providers' Association Awards 2006 .net Awards
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Hector Chapa Sikazwe Keywords Competition, Fiber-optic, Broadband, ADSL, merger, Phone industry marketing strategy competitive advantage creative marketing.
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TABLE OF CONTENTS 1.0
Introduction ................................................................................... 4
1.1
Legislation restrictions ................................................................................................................ 5
1.2
Telewest products ....................................................................................................................... 7
Three tier services (Telewest.co.uk) ..................................................... 7 1.3
Competitors ................................................................................................................................. 8
1.4
Lay out of Report ........................................................................................................................ 8
2.0
The organisation............................................................................ 9
2.1
The Strategic business strategy ................................................................................................... 9
2.2
Telewest Core Competence Factors .......................................................................................... 10
2.2.1
Fiber Optic Network.......................................................................................................... 10
2.2.2
Self sufficient Network facilities ....................................................................................... 11
2.2.3
Service via Cables ............................................................................................................. 11
3.0
Company analysis ....................................................................... 12
3.1
Porters forces ............................................................................................................................ 12
3.1.1
Competitive Rivalry .......................................................................................................... 12
3.1.2
Power of supplier .............................................................................................................. 13
3.1.3
Power of buyer .................................................................................................................. 14
3.1.4
Threats of substitute .......................................................................................................... 14
3.1.5
Threat of new entrants. ...................................................................................................... 15
3.2
Swot analysis of the Company ................................................... 16
3.2.1
Strengths ............................................................................................................................... 16
3.2.2
Weaknesses ........................................................................................................................... 16
2
3.2.3
Opportunities......................................................................................................................... 17
3.2.4
Threats .................................................................................................................................. 17
3.2.4.1
4.0
Market risk ........................................................................................................................ 17
Where the Business is now ......................................................... 19
4.1
Market Penetration .................................................................................................................... 20
4.2
Market Development ................................................................................................................. 20
4.3
Product Development ................................................................................................................ 21
4.4
Diversification........................................................................................................................... 22
6.0
Recommendations ....................................................................... 23
6.1
E-commerce .............................................................................................................................. 23
6.2
Knowledge management ........................................................................................................... 24
6.3
Product and service Innovation ................................................................................................. 25
6.4
The value of next generation networks...................................................................................... 25
6.5
Training..................................................................................................................................... 26
7.0
References .................................................................................... 27
All copyrights reserved ............................. Error! Bookmark not defined.
3
1.0
Introduction
Ntl:Telewest was created in March 2006 after a merger of Telewest Global Inc and Ntl incorporated creating ntl:Telewest Business. This report is an in-depth analysis of Telewest communication business strategy before the merger that formed the new corporation. Telewest, (formerly Telewest Broadband and Telewest Communications) is a trading name of NTL Incorporated, the dominant cable operator in the United Kingdom with more than 90% of the market. The merger of Telewest and NTL's UK businesses was completed on March 3, 2006. NTL trading as Telewest passes approximately 4.2 million homes. Corporately, now Ntl: Telewest boasts of a success that is based on a £13 billion investment in a state-of-the-art, fibrerich network provision of services. As documented in Broadcasting Committee (Nov 1998), the first official announcement about the creation of a new cable industry in the UK was made in a House of Commons debate on 2 December 1982, when the Government brought forward legislation to create a new statutory authority to award franchises to cable operators. The following year, 1983, the Government published a White Paper, “The Development of Cable Systems and Services” (the "White Paper"), which set out its policy proposals in more detail. In 1984, the Telewest story began in Croydon operating under the name of Croydon Cable. Murray (2000) observed that Telewest as a company has grown through marathon mergers and acquisitions, Telewest Broadband replaced regional company names such as Yorkshire Cable, Cable London and Birmingham Cable, which remained from a history of consolidation. See appendix A.
4
1.1
Legislation restrictions
There were strict restrictions that accompanied the statutory instrument. The Telewest media centre1 reports that uunder the terms of the White Paper, cable operators were prohibited from providing voice telephony services in their own right over their networks, as the provision of these services remained the exclusive privilege of British Telecom and Mercury Communications. More significant restrictions were also imposed on the provision of data services. The White Paper also specified that cable operators were prohibited in their own right from linking individual franchise areas, and also ruled out the possibility of any company outside the EU owning a UK cable franchise. In 1990, the broadcasting ACT introduced the advent of competitive provision of services. The Broadcasting Act 1990 established a new regulatory authority, the Independent Television Commission (ITC) for the television sector and also created a new framework for the licensing of cable services. In 1991, the period of protected duopoly which had been granted to BT and Mercury Communications expired. This stimulated a period of several years of inward investment into the UK cable industry from US telephony companies. Telewest communication took advantage of the relaxing of the law and reinvented itself in the UK as a leading cable company Commenting on the growth of Telewest at the 2005 annual reporting party, Philip Jansen, managing director, consumer division stated that "As we move into the new era of broadband and put the legacy of consolidation behind us we decided to bring all our operations under one
1
http://mediacentre.telewest.co.uk/phoenix.zhtml?c=76808&p=IROL-MediaHome
5
unifying name. This undertaking reinforces our commitment to building lasting and meaningful customer relationships." Below is the TIMELINE of the organization reflecting performance since its inception in Croydon. The graph needs to be interpreted in conjunction with appendix A.
Time line of growth
6
1.2
Telewest products
The organization provides the following products and services: (a)
Broadband Internet services: This is a national product portfolio of voice, data, internet and IP solutions for all UK businesses from developing businesses right up to large corporates, public sector organizations and service providers
(b)
A network built to the office, enabling the delivery of high bandwidth IP and voice services to UK businesses
(c)
Residential Cable TV: The majority of Telewest's television is digital. However, there are still areas that receive an analogue
(d)
Residential and business telephone services: Telewest was the first UK landline company to offer 'unlimited' calls to landlines for a fixed monthly fee.
Telewest is the only unique organization in the UK that provides a three tier residential services of Telephone, internet and television to residential consumers. (see picture below) This automatically gives the organization undue competitive advantage.
Three tier services (Telewest.co.uk)
7
1.3
Competitors
The main competitors in the Industry are British telecommunication (BT) and Sky British broadcasting company. These two main competitors are closely followed by several small organisations who supply similar services to households on the back of networks already setup by the main competitors. 1.4
Lay out of Report
As mentioned, this report dwells on the ex Telewest communication component of the new organization because the “Ntl:Telewest” emerging strategic structure of the new organization is still fluidic and unstructured to be used for purposes and objectives of this report. The report is divided into 4 parts. (a) The organization and its products (b) The organization’s operational competitive advantages and value creating activities, strategic position and its business model (c) The factors behind the organization’s success in the industry (d) The organization’s current strategy to remain a player in the telecommunication market Each part listed above will be treated as a separate section in the report and will embody complete information that can be utilized to support the section in question. The concluding section will consist of a summary of the report and recommendations.
8
2.0
The organisation
According to Murray (2000), supported by information on the official Telewest website, 2 Telewest Communications is one of Britain’s most diversified communications companies, with activities spanning two of the fastest growing sectors in the UK economy: telecommunications and media. The organization provides multiple broadband services including cable television, telephone and Internet access services to more than 1.7 million homes and delivers business communications solutions to over 70,000 public and private sector accounts. 2.1
The Strategic business strategy
According to the Telewest (2002) annual report, different strategic decisions by Telewest were made to remain competitive in the business environment this was not far from the ability to cope with the changes in the market place. Over the years, the business competitive strength of Telewest was based on but not limited to. (a) Investment in technology that built service strength (b) Optimisation of logistics and supply chain system: (c) Development of strategic relationships with major players in the market (d) Mergers and acquisition: (see appendix A) (e) Human capital development: the improvement of employee and continuous upgrade of there capacity.
2
www.telewest.co.uk
9
As already observed, Telewest business model centres on the provision of “three tier services” of business and residential telecom (telephone and internet services) and interactive TV services to the UK business and residential consumers. As reported in Great Britain (1998) and Media & Sport Committee Culture (1999) the organization was formed with the initial objective of providing basic “cable services consisting of analogue and digital facilities” to businesses and residential consumers. Detailed in Bradley and Austin (2005), Telewest communications pl which is now the chosen provider of multiple broadband services to homes and businesses in the UK, was the first to launch unmetered internet access in the UK. 2.2
Telewest Core Competence Factors
The major impact that Telewest has had on the business stems from the company offering a one stop shop for broadband services with unbeatable value. Telewest has further strengthened broadband leadership by positioning brand values across the business, from providing excellent customer service to delivering exciting content via blueyonder high-speed internet." 2.2.1
Fiber Optic Network
Uniquely, according to Telewest (2000) Customers receive services over a highly advanced broadband communication network built entirely from scratch over the past decade. It combines high-bandwidth fibre optic technology with modern digital transmission and switching techniques. Agrawal (2002) explained that Fiber-optic communication is a method of transmitting information from one place to another by sending light through an optical fiber. The light forms an electromagnetic carrier wave that is modulated to carry information. Because of its advantages over electrical transmission, the use of optical fiber has largely overtaken copper wire communications. 10
Telewest’s Competitors still use old network infrastructure using Asymmetric Digital Subscriber Line (ADSL), a data communications technology that enables faster data transmission over copper telephone lines than a conventional modem can provide. ADSL can only be used over short distances; typically less than 5km. Fiber optic cables that Telewest uses has no distance restrictions. This has created competitive advantage over BT and SKY. 2.2.2
Self sufficient Network facilities
Telewest is self sufficient in network facilities and does not rely on external organization for its supply of services. Bradley and Austin (2005) described Telewest broadband expansion and success as being based on Telewest’s regional networks that is connected by a state-of-the-art digital backbone network that was completed in 1998. This national network enabled Telewest to expand its range of voice and data communications services for the business market. At the same time, Bradley and Austin (2005) observes, Telewest reduced its dependence on other operators for carrying calls between its regions and paved the way for Telewest to develop its own ‘wholesale’ business, providing capacity for other smaller telecommunications operators. 2.2.3
Service via Cables
Telewest provides services using cables buried in the ground, reducing vandalism and increment weather has little of no effects on the performance of service provision. This has given Telewest reduced outage and disruption of services. This is key to this industry that relies on the satisfaction of the end user for its existence and continued sustenance of business partnering with the buyer.
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3.0
Company analysis
3.1
Porters forces
Porters fives forces model is an excellent model to use to analyze a particular environment of an industry. The is essential to help understand the industry in depth before an organization decides to enter. Its dictates allows Telewest to be evaluated in the light of the following factors that can be represented graphically:
Porters five forces
3.1.1
Competitive Rivalry
The telecom industry provides opportunity for customers to move from one supplier to another. If it is easy for customers to move to substitute products for example from BT to Tiscali etc. Generally competitive rivalry is high in the industry due to: (i) little differentiation between the products sold between customers.
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(ii) Competitors are approximately the same size of each other. (iii)Competitors all have similar strategies. (iv) It is costly to leave the industry Telewest has direct competition from many organizations. Specifically, BT and Sky broadcasting are the major competitors that Telewest has to compete with. BT directly swoops on all telephone customers that defect from Telewest. There are several smaller competitors like Tiscali, Talk Talk, Onetel etc who operate in the periphery and receive many customers who are let down by either Telewest or BT. Sky is directly the main rival for the television service and recently has become a broadband provider as well. 3.1.2
Power of supplier
Suppliers are essential for the success of an organization. Raw materials are needed to complete the finish product of the organization. Suppliers do have power and it is significant: (i) If they are the only supplier or one of few suppliers who supply that particular raw material. (ii) If it costly for the organization to move from one supplier to another (known also as switching cost (iii)If there is no other substitute for their product. Telewest has direct control of most of its raw materials like the TV content through Flextech. The organization controls what is on offer on the TV content provided by Telewest. Telewest similarly has control on what it offers using the fibre optic services as it has absolute ownership of the service
13
3.1.3
Power of buyer
Buyers or customers can exert influence and control over an industry in certain circumstances. This happens when: i.
There is little differentiation over the product and substitutes can be found easily.
ii.
Customers are sensitive to price.
iii.
Switching to another product is not costly.
Buyers have power to determine what quality/type/price of services supplied. Service industry organizations that are embodied in competitive market scenarios are subject to fluctuating numbers of subscribers. Buyers tend to move with product pricing and only organizations that respond swiftly maintain a sizeable subscribership. Telewest regularly responds to the demands of the consumer by innovating and providing value for money services. Strategic regular repricing to respond to the market forces has been Telewest’s strategy that has seen it’s subscribership being maintained. 3.1.4
Threats of substitute
Telewest is under constant threat from cheaper substitutes coming from smaller organizations. The reason is that there are alternative products that customers can purchase other than the Telewest product at cheaper prices. The threat of substitute is higher due to the: (i) Price of that substitute product falling. (ii) easy of consumers to switch from one substitute product to another. (iii)Buyers willing to substitute.
14
Due to this threat of substitutes, Telewest has kept innovating and rebranding its products so that the customer base is not adversely affected by the switching of subscribers due to cheaper substitutes. 3.1.5
Threat of new entrants.
The telecom industry has one of the lowest entry barriers. This creates a problem for the larger organizations that invest massively in the industry. The threat of a new organization entering the industry is high when it is easy for an organization to enter the industry. Smaller organization (i) will look at how loyal customers are to existing products, (ii) how quickly they can achieve economy of scales, (iii)access to suppliers, (iv) Government legislation prevents them or encourages them to enter the industry. The above five main factors are key factors that influence industry performance; hence it is common sense and practical to find out about these factors before entry into the industry. This is one area that Telewest has very little control over as the industry is a developing one and innovation and customer loyalty that Telewest has created over the years assists in maintaining a loyal customer following.
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3.2
Swot analysis of the Company
3.2.1
Strengths
The uniqueness of Telewest strength lies in the (a) Combination of its manageable size, (b) Ownership of content assets in TV programming using Flextech (c) Ownership of its own network structure (d) Ownership of fibre optic technology, thus providing faster internet speeds compared to BT and other competitors. (e) The trend of digitalization of TV content further strengthens its position in the Cable segment (f) Customer care unit that subsist on customer care satisfaction and employs and trains carefully selected individuals to become members of staff
3.2.2
Weaknesses
However, the company faces twin challenges of (a) Servicing its debt burden and (b) plugging the leakage in its telephone subscriber base, which declined in absolute terms, in the past two years (c) Getting external funding to maintain its infrastructure remains the most serious weakness the organization faces (d) Fear of the television products going full product life cycle and subscribers wanting better content of what is on the television service or defect to competitors.
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3.2.3
Opportunities
Telewest believe that the commercial benefits of the merger with NTL will include the following: (a)
accelerated development of new tailored service offerings to residential and business customers in form of digitalized content
(b)
increased momentum for online and interactive development initiatives
(c)
cross-promotion opportunities across services and platforms
(d)
increased bundling opportunities to maximize broadband network distribution
(e)
opportunity to leverage broadcasting skills and a wider range of content relationships
(f)
enhanced growth prospects for advertising and e-commerce revenues
(g)
investment into the organization from organizations that see the future of ntl:Telewest to be of strategic importance to the
(h)
Due to current size and organization strategic makeup, Telewest can now effectively compete with established competitors like BT and Sky
3.2.4
Threats
3.2.4.1 Market risk Telewest as an organization that identifiably has two areas that are regarded as potential threats to its strategic operations. The principal market risks stem from problems with servicing debts that accumulated in the earlier days of being launched. (a) Interest rate changes on variable-rate long-term bank debt;
17
(b) Foreign exchange rate changes, generating translation and transaction gains and losses on non-sterling denominated debt instruments. Telewest uses derivative financial instruments solely to reduce exposure to these market risks and does not enter into these instruments for trading or speculative purposes.
3.2.4.2 Interest rate risk Telewest’s outstanding long-term debt is denominated in pounds sterling and bears interest at variable rates. The organization seeks to reduce exposure to adverse interest rate fluctuations on borrowings under current senior bank facilities principally through interest rate swaps. These interest rate swaps provide for payments by Telewest at a fixed rate of interest (ranging from 7.175% to 7.910%) and the receipt of payments based on a variable rate of interest.. The aggregate notional principal amount of these hedging arrangements is in the excesses of £1.2 billion..
3.2.5
Foreign currency exchange risk
As at 31 December 2000, Telewest fixed-rate debt instruments were denominated in US dollars. The organization entered into certain derivative instruments to reduce exposure to adverse changes in exchange rates. These derivative instruments comprised of (a) foreign currency options, (b) foreign currency swaps and a (c) Series of foreign exchange forward contracts. The results were materially influenced by future exchange rate movements, due to the requirement that certain hedging instruments be marked to their market value at the end of the 18
financial period whereas the underlying liabilities may be re-translated at the spot rate of exchange. Telewest had foreign currency swaps and contracts hedging the principal and interest exposures of the Group totaling in aggregate £2,732 million.
4.0
Where the Business is now
Ansoff (1979) stated that organizations needed to apply strategic measurements to their organizations to monitor growth and create a vision for the future. He proposed a matrix, (see below) which encapsulates the future vision of a company. It maps the status of each niche against status both of Product and of Market.
Source: Ansoff (1979)
19
The official Telewest website 3 reports that Telewest organization prides to exercise profitable competitive advantage over it’s competitors, using a strategic operational motto that subsist on (a)
designing and launching its products and services at cost effective levels and on a
(b)
Researched and clearly determined market demand.
Bradley and Austin (2005) expanded in their book that Telewest believes in market research and delights in getting this information out to the right people at the right time. 4.1
Market Penetration
Using its research competitive advantage factor of researching before launching new products, Telewest has markets her existing products to her existing customers with vigor. Telewest (2002) reported that over the years, Telewest has increased exponentially the revenue generated from existing products. The Massive marketing ploys that were employed in repositioning cable television services to exiting customers resulted in the growth of the number of subscribers. According to Telewest (2004) this resulted in an increase in the number of channels subscribed to and the variety of phone features sought increased inexplicably. McKenna and Moore (1998) had predicted that such an act of marketing would result in revenue growth for any organization 4.2
Market Development
According to Murray (2000), Telewest realized the rise in popularity of the “cable based” services to be of significant market implications. From the various mergers around the Country
3
www.telewest.co.uk
20
(Appendix A), Telewest has been positioned strategically to market its products in new areas resulting in the introduction of the “cable products” in new areas of the country. For instance in 2000, after receiving professional advice from Schroder Salomon, Smith Barney and Deutsche Telekom working for Lehman Brothers, Telewest acquired Eurobell, a cable telecommunications service provider that supplied telephone, internet, data and cable television services to residential and business customers in the south of England. Eurobell held franchises in Crawley, west Kent and south Devon together with local access and a backbone network across the south east linking international landing points in Cornwall to London. 4.3
Product Development
Product innovation is a key Telewest marketing strategy. According to Telewest (2005), Telewest has strategically launched several strategic new products for its digital customers. The following are the products that are being used by the organization to compete: (a) Teleport is a new service, coupled with “video on demand” available to all Telewest Digital TV customers. This service does not require any extra equipment and allows customers to have access to the service and it is included with all Telewest digital packages. (b) TVDrive, the equivalent of “Sky Plus” service that is offered by Sky digital. TVDrive is a smart personal video recorder, designed to make TV fit around Telewest customer’s lives. (c) Telewest has also introduced “talk anywhere”, a revolutionary way of using the telephone service in the UK. Talk Anywhere phone services are the easiest and most revolutionary way to use and pay for the home phone. This service allows customers to call anyone, anywhere, any time, any phone for a fixed monthly fee just like mobile companies.
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4.4
Diversification
Telewest keeps rebranding its products and more services are being introduced as the organization has expanded. Telewest has applied “related diversification” by incorporation virgin mobile into its acquisition operations. The acquisition of virgin mobile by ntl: Telewest indicates the organization’s desire to expand. Virgin Mobile offers a broad range of mobile communications products and services, including mobile voice and non-voice services, including SMS, MMS and 3G, and entertainment services over the Virgin Mobile Bites portal including games, information and music services, and international roaming. 5.0
Conclusions
Telewest is a trading name of NTL Incorporated, the dominant cable operator in the United Kingdom with more than 90% of the market. This report has shown that Telewest is one of the largest broadband communications and media groups in the United Kingdom, providing multichannel television, telephone, and Internet services to 1.8 million residential customers in England and Scotland.
While Telewest Business supplies broadband services to consumer, business, and public-sector markets, its content division, Flextech, is the BBC’s partner in UKTV. Together they are the largest supplier of basic channels to the UK pay-TV market with a portfolio that combines wholly owned and managed channels, including ten joint venture channels with the BBC.
One of Telewest’s growth strategic goals was to launch Teleport, a TV-on-demand (TVoD) service for customers by 2006, and the TVDrive which would also include on-demand 22
programming from the BBC and other television content providers. Telewest undertook a reevaluation of its network in light of delivering future capabilities by building it’s own network facilities. The uniqueness of Telewest lies in the combination of its size and the ownership of content assets in TV programming. The trend of digitalization of TV content will further strengthen its position in the Cable segment.
6.0
Recommendations
6.1
E-commerce
Today’s communications networks have moved business further into the electronic world where speedy reactions and access to accurate and timely information are essential. Ecommerce should be the future for Telewest. The following are the reasons why Telewest can gain competitive advantage over other competitors. E-commerce (a) liberates companies; (b) makes their size irrelevant; (c) Opened up new markets and new ways of working. (d) It has also made it easier, more efficient and less costly to do business and compete. However, customers will have higher expectations and be less tolerant of delays and more willing to switch suppliers. Success depends on Telewest being able to meet those expectations efficiently, a need, which service Telewest understand and support. Telewest already has the state of the art information’s systems installed in the organization. The current new converged networks and technologies that already exist in Telewest will be behind the ability to 23
(a) move between and combine applications, (b) make information accessible to anyone in the organization regardless of location and (c) Integrate data from different systems. Convergence has increased flexibility and contributed to overall efficiency but it has also made it faster and easier to create the innovative products and services which differentiate Telewest from other companies like BT and Sky. 6.2
Knowledge management
To maintain this competitive advantage Telewest is obligated to invest heavily in the state of the art virtual computer information systems. Telewest current use of knowledge management creates competitive advantage. When applied efficiently, knowledge management incorporates: (a) The use of up to date software programs that allows both the employees and the client to quickly access information on products and services creates customer satisfaction. This is a vital competitive strategy contributing to business efficiency and high levels of customer service that lacks in this industry (b) Information about customers and products are stored in one place so all applications access the same database. Telewest easily segment customers and offer different service levels according to their value. (c) Advantageously, Telewest easily conducts
market research, design and launches
products and targeted campaigns to produce maximum effect since calculations are based on accurate information stored on the data base
24
6.3
Product and service Innovation
As stated in Telewest (2002) annual report, the chairman predicted that by the turn of the decade strong strategic Companies will separate themselves from other competitors largely by (a) creating innovative products and services, (b) being price competitive and reacting fast to market demand. (c) Equally important to give customers the products and information they need when and how they need them. Telewest should continue on the path they already are treading on ie product and service innovation. Competitors are struggling along with outdated, expensive to run and want to maintain legacy systems which make it difficult to compete effectively. Some have neither the time nor expertise to thoroughly research or cost, upgrade or install the modern and efficient communications solutions which are important tools in differentiating one company from another. This remains Telewest strong marketing competitive advantage. 6.4
The value of next generation networks
Within Telewest, unlike legacy systems, the new installed networks are flexible. Telewest need to build on its High speed fixed and wireless networks; converged services; secure, flexible and cost effective systems that support the advantages of the new ways of working because they create (a) seamless connections between applications so people can collaborate efficiently regardless of their location all of which contribute to more efficient working practices and therefore competitive edge
25
(b) Supporting business agility, the networks make it easier for Telewest to adapt quickly to changing markets and customer demands. (c) Less expensive to manage and maintain as they are designed to grow with the business, can be future-proofed and, because they support the business needs better, make the return on investment faster. 6.5
Training
Telewest already invests extensively in the training of its members of staff. By relying on the expertise of professionals, even the smallest companies can reap the benefits of the latest technologies, together with all their updates, without having to employ teams of expert IT staff. Telewest should continue using the existing system of in-house training.
26
7.0
References
Annabelle Dodd (Jul 2005)The Essential Guide to Telecommunications (Paperback) ISBN: 0131487256Prentice Hall PTR Broadcasting Committee (Nov 1998) The Development of Parliamentary Broadcasting: Minutes of Evidence, Wednesday 15 July 1998 - Telewest, General Cable and Wireless; National Telecommunications Ltd; Flextech; BBC (House of Commons Papers) ISBN: 010555068X The Stationery Office Books, UK
Carl Stern and George Stalk (1998) Perspectives on Strategy: From the Boston Consulting Group (Hardcover) "what is strategy? ..." (more) John Wiley & Sons Inc Clayton M. Christensen (1 Jul 1997)The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail (Hardcover) ISBN: 0875845851 Harvard Business School Press Great Britain (1998) The Public Telecommunication System Designation (Telewest Communications Fylde and Wyre Limited) Order 1997: Telecommunications (Statutory Instruments: 1997: 315) (Paperback) ISBN: 0110639162 Stationery Office Books, UK Great Britain (April 1997) The Public Telecommunication System Designation (Telewest Telecommunications PLC) (No. 2 ) Order 1997: Telecommunications (Statutory Instruments: 1997: 923) (Paperback) Stationery Office Books, UK Icon Group Ltd. (April 2000) Telewest communications plc: International Competitive Benchmarks and Financial Gap Analysis (Financial Performance Series) (Unbound) ISBN: 059718769X Icon Group International Inc, UK Lillian Goleniewski (8 Jan 2002) Telecommunications Essentials: The Complete Global Source for Communications Fundamentals, Data Networking and the Internet, and Next-generation (Paperback) Addison Wesley
Media & Sport Committee Culture (Dec 1999) Funding of the BBC: Minutes of Evidence, Tuesday 2 December 1999 - BECTU; Ntl; Telewest; National Consumer Council (House of Commons) ISBN: 0102027005 The Stationery Office Books, UK Michael A. Cusumano (May 2004) The Business of Software: What Every Manager, programmer and Entrepreneur Must Know to Succeed in Good Times and Bad (Hardcover) ISBN: 074321580X Simon & Schuster Ltd Murray john (2000)
“Telewest extends cable network with Eurobell acquisition” 27
http://www.telewest.co.UK/ourcompany/pressreleases/pr281.html accessed 23/11/2006
Regis McKenna and Geoffrey A. Moore (1 Aug 1998) Crossing the Chasm: Marketing and Selling Technology Products to Mainstream Customers (Paperback) Capstone Publishing Ltd, UK Stephen P. Bradley and Robert D. Austin (Eds) (1 Sep 2005) Broadband Explosion: Leading Thinkers on the Promise of a Truly Interactive World (Hardcover) ISBN: 1591396700 Harvard Business School Press, NY, London. Telewest annual repots( 2000, 2002, 2004, 2005) http://mediacentre.telewest.co.uk/phoenix.zhtml?c=76808&p=IROL-reportsAnnualArch William H. Davidow (Jun 1986) Marketing High Technology (Hardcover) ISBN: 002907990X Macmillan USA
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Appendix A- TIME LINE
Year
Event
1984
The Telewest story begins in Croydon operating under the name of Croydon Cable.
1988
Croydon Cable is acquired by United Cable of Denver, US. Franchises in Edinburgh, Avon and south east are added. United Cable of Denver merges with United Artists Cable International.
1989 1991
United Artists merges with their largest shareholder TCI (now Liberty Media), to create the largest cable operator in the US. A joint venture between TCI and US West is announced.
1992
The joint venture company is renamed Telewest Communications.
1994
Telewest successfully completes a stock market flotation.
1995
Telewest merges with SBC Communications, adding franchises in the midlands and north west totaling 1.3 million homes.
1998
Telewest announces a merger with General Cable, and acquires an outstanding interest in Birmingham Cable, adding a further 1.7 million franchise homes in Yorkshire, west London and Birmingham.
1999
Telewest purchases the remaining 50% stake in Cable London from ntl, adding 0.4 million franchise homes in north London.
2000
In April, Telewest merges with Flextech. In November, Telewest extends its cable network with the acquisition of Eurobell taking the total number of homes passed to 4.9 million.
2002
Telewest Communications plc enters discussions on financial restructuring with its stakeholders.
2004
In July, Telewest emerges from its financial restructuring as Telewest Global Inc. Shares begin trading on NASDAQ National Market. In October, Telewest announces a merger with ntl, which will create the UK's second largest communications company and leading triple-play service provider. Telewest Business delivers a comprehensive range of solutions, across the UK, including broadband and internet services, networking solutions, voice and IP and multimedia services
2005
2006
The ntl and Telewest merger was completed in March, creating ntl:Telewest Business
29
Appendix B: BROADBAND AWARDS Awards won by blueyonder broadband Award
Award Title Best Sumo Consumer broadband finalist
Finalist Best portal finalist
Finalist Best ISP
Best ISP/Broadband company
Awarded
"Highest in Customer Satisfaction Among Broadband Internet Service Providers."
Best Sumo Consumer Broadband
Best Heavy Consumer Broadband
Best Portal
Award Internet Service Providers' Association Awards 2006 Internet Service Providers' Association Awards 2006 .net Awards
Service broadband
Date 2006
broadband
2006
broadband
2005
Computer Active Readers Choice awards J.D. Power and Associates
broadband
Dec 2005
broadband
Dec 2005
Internet Service Provider Awards Internet Service Provider Awards Internet Service Provider Awards
broadband elite 2 Mb
2005
broadband complete
2005
broadband
2005
30
Best unmetered dial-up ISP
Internet Service Provider Awards Internet Service Provider Awards Practical Internet Reader Awards PC Pro Awards
Surf Unlimited
2004
broadband
2004
broadband
2003
broadband
2003
Communications Product of Year (2mb) ISP of the year Award
Computing Excellence Awards ISP Review
broadband elite 2Mb
2003
broadband
2002
Telecommunications Product of the year (1Mb)
Computing Industry Awards
broadband complete
2002
Most satisfying ISP in Britain
Web-User magazine
broadband
2002
Best broadband ISP
PC Pro Awards
broadband
2002
Best unmetered ISP
Internet Service Provider Association
broadband
2002
Best Consumer Broadband ISP
Best ADSL Alternative
Best broadband ISP & Best dial-up ISP
Copyrighted
31
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