Introduction to Telecommunications Industries

Introduction

Telecommunications is one of the most important sectors of the American economy. [Query: are we U.S. focused? Or global?] [insert: stats on 15% of US economy, growth] [insert: starts if you just focus on residential networks]

Our study of telecommunications industries focuses on the ongoing revolution in residential broadband. The industries that we profile historically provided four distinct consumer-facing products -- home telephony, mobile telephony, television, and internet access. But these historical divisions are disappearing. Cable and telephone companies have each refashioned their network to provide general-purpose high speed data transmission capacity. Using these ever-growing and improving networks, both now compete directly to provide the dominant "triple play": vertically-integrated voice and video services, along with data transmission to the public internet. Municipalities and other new actors are building their own residential broadband networks, offering the same basic services.

Cell phone companies are also racing to become broadband providers, with data rapidly overtaking voice as the dominant source of revenue in the industry. While mobile services offer lower bandwidth than residential service, it compensates with ubiquitous access. Most analysts therefore assume that mobile and residential broadband will remain distinct and complementary industry segments, because users will want both ubiquity and speed. Still, even the boundaries between mobile and home service are beginning to blur as wireless devices increasingly roam freely between cellular wireless networks and home WiFi networks, at the same time as WiFi and cellular technology themselves evolve closer together: WiFi is constantly becoming more prevalent, and cellular is constantly pushing bandwidth limitations.

The charts below demonstrate these pervasive, revolutionary transformations ongoing in telecommunications.

• [insert: market share for voice]
• [insert: market share for video]
• [insert: market share for broadband internet]
• [insert: revenue by service over time for Comcast]
• [insert: revenue by service over time for Verizon]
• [insert: mobile ARPU for voice and data]

The Basic Areas of Innovation

For our purposes, the study of innovation in telecommunications is the study of the transformations described above. How has the technology behind residential and mobile broadband been developed and deployed? To what extent has the underlying innovation relied on proprietary models, and to what extent has innovation been available through commons-based approaches?

Technically, the various providers of new broadband services all offer some variation on the same very general network design. Fiber optic lines--by far the dominant telecommunications technology--form the high bandwidth core of any modern network. These lines may run all the way to the end-user's access device, or their reach may be extended by other wired and wireless technologies. In particular many residential broadband networks make use of legacy telephone or cable wires to carry the "last mile" communications. These networks are often extended with the home with WiFi routers: low power customer-owned wireless equipment operating on open frequencies. Commercial wireless networks are not all that different in principle, except that they operate at much high power, and on frequencies where the operator has purchased an exclusive license to broadcast from the federal government. The figures below illustrate both this general network design, and its variations in various network implementations.

• [insert: basic network design schematic]
• [insert: FTTN VDSL Network (e.g. AT&T U-Verse) diagram]
• [insert: Cable Network (e.g. Comcast) diagram]
• [insert: FTTH Network (e.g. Verizon FiOS) diagram]
• [insert: Cellular Network diagram]

Following this network design, the three broad areas of innovation necessary for the deployment of residential and mobile broadband have been:

• the development of fiber optic technology;
• the development of new network electronics to coax greater speeds and two way capacity from legacy cable and telephony systems; and
• the development of new high speed wireless communication systems.