BCG：中國網(wǎng)絡(luò)通訊集團公司戰(zhàn)略報告英文課件

1、CHINA NETCOM BUSINESS PLAN UPDATEDecember 14, 1999 - BeijingTODAYS OBJECTIVESReview the overall analysis of regulation, competition, and market developmentDiscuss the specific implications for CNC strategyReview the specific draft business models for CNC How we might attack the business, carrier, an

2、d IDD/DLD marketsWhat key trade-offs we need to makeWhat are the key success factors and assumptions?Discuss the initial economics of these business models, and of CNC overallDiscuss the specific next steps in two key areas:How to finalize and endorse the overall CNC business modelHow to move forwar

3、d with the refined financials, organization design, and the plan for implementationCONTENTKey strategic principlesRegulatory overviewMarket overviewCompetition overviewBusiness modelsNext stepsKEY CNC STRATEGIC PRINCIPLESThe objective of these principles is to provide further clarity in the developm

4、ent and evaluation of the CNC business modelThese will be revisited and refined as the project progressesOur development of business models will seek to be aligned with the principlesStrategic principles and key assumptions will be considered in the following aspectsCNC shareholdersBackbone business

5、Local access businessInternational gateway businessRegulatory strategyCompetitive strategyMarketing strategyCNC SHAREHOLDERSPrinciples:Leverage shareholders concerted vision in creating a new generation IP broadband communication infrastructure and a profitable, successful companyLeverage shareholde

6、rs existing backbone assets, local access assets, research capabilities and local government relationships to secure time-to-market and create competitive advantageSet a model of a new type of “SOE”, as efficient as the best of the FIE/private companies; beat shareholders expectations by delivering

7、high returnAssumptions:CAS: strong interest in seeing CNC successful and profitable quickly, stands ready for favorable regulatory influence and research support; wants opportunities for networking R&DMOR and SARFT: extensive backbone and access assets and ROWmain focus on using MOR for right of way

8、, helping them participate in telecomwill not use SARFT local CATV in the near term, but they are a key user of the backboneLeverage CATVs city backboneMOR will continue to favor CNC over Unicom, provided CNC meets the expectation as a profit center for MORShanghai Municipal Govt: Eager to make Shan

9、ghai as Chinas test ground for building high-tech infrastructure (e.g. the integration of telecom, CATV, Internet)in particular, testing HFC to deliver broadband internetone issue: SPT and ATT JV; how to handle?BACKBONE BUSINESSPrinciples:Target advanced backbone among 15 key cities in Eastern China

10、; start with 2 cores from shareholders but quickly build own networkUse backbone for a variety of wholesale and retail voice and data servicesMaintain the leading edge IP/packet network, both for technological superiority and to fulfill shareholder missionMaintain the best cost position, using ROWs,

11、 purchasing clout, right technologyBuild reserve capacity/conduit to deter othersAssumptions:The costs of construction and ROW will be the majority of new network costsvirtually all of the network will use MOR or SARFT right of wayNetwork will be IP or packet in natureDeployment plan will keep costs

12、 low, build out quickly, and create good positionlay large number of conduits in one timelater fill, light up, and color fiber strandslease out conduit/fiber/bandwidth to maximize return (utilization)LOCAL ACCESS BUSINESSPrinciples:Be very focused in local deployment, targeting priority business are

13、as onlyEmphasize broadband to the customer, using FTTB and LMDS where logicalSeek strong local market share, especially in new data services growth areasDifferentiate from China Telecom by superior services, quality, responsiveness Build strong local team to enable fast service responseEmphasize “en

14、d to end” network ownership and managementAssumptions:SH, BJ, GZ, and SZ business districts as targets for the near termThese account for the vast majority of business telecom demandNeed to set specific estimates for timing and sequence of deploymentAssume that CNC will have access to key city ROW,

15、such as subway systemsWill need specific assumptions about the ease and cost of hooking up buildingsAssume that primary emphasis will be on FTTB, but that LMDS can play an important role, especially in initial deployment and in secondary citiesWill need specific assumptions about timing of adding se

16、condary citiesINTERNATIONAL GATEWAY BUSINESSPrinciples:CNC will be one of few players with a full international licenseVital to enable CNC to provide end-to-end services, global data services, and higher margin IDD serviceHK gateway link may be strategically importantAssumptions:HK as one of the key

17、 location for international connectiona major traffic destinationa major relay locationInternational voice remains highly profitable segment in medium term futureExpect high growth together with steep price drop in international servicesActively plan ahead for joining international sub-oceanic cable

18、 consortiumREGULATORY STRATEGYPrinciples:Must actively lobby for favorable regulatory decisions, together with shareholdersprovide regulators with international benchmarking for best practicesalign CNC objectives with fair competition, and public interestshave effective senior management focus on lo

19、bbying issuesBe careful about committing investment if regulatory issues too uncertainEnsure CNC strategy addresses national economic development prioritiesPay careful attention to managing relations with China TelecomExpected WTO in 2000 will imply greater opening of the market in the futureAssumpt

20、ions:At least a 2-3 year window when CNC can continue to enjoy favorable policy treatment, while also working to straighten out regulatory issues at local levelMany key regulations remain in grey areas, where CNC can play a role in shaping the policyWill need to make specific assumptions on a number

21、 of regulatory issues, and develop several scenariosAssume that CT and Unicom are the only full service competitors, but several niche playersWTO will introduce FDI into Chinas telecom market by 2002, but infrastructure play remain tightly controlled (still limited competition) until 2004/5may be op

22、portunity for some form of partnership with foreign telcosCOMPETITIVE STRATEGYPrinciples:Focus on the best service quality, supply what customers need, avoid competing on priceBuild both “highways” and “tollbooths”Prepare for rapidly changing industry structureBe careful in positioning toward China

23、Telecom: complementary and addressing unmet needsgrowing the whole marketThe only viable alternative to China Telecom for carriersThe only true “end to end” network across China, with clear central managementAssumptions:Technology leads to continual change in industry structureThe decentralized natu

24、re and business oriented behaviors of China Telecom enables CNC to partner at the local levelHigh opportunity for CNC to fill China Telecom product/service backlog Unicom will be a threat to start a “price war”Various niche players emerge in later years, more threat than (carrier) opportunity for CN

25、CMARKETING STRATEGYPrinciples:For local access, will target medium and large businesses in targeted buildingsFor backbone, provide carrier services For international, support other businesses and also offer IDD and refiling, etc.In all areas, emphasize quality, service, end to end, etc.Get a few key

26、 customers early; prove ourselves and then build furtherAssumptions:Carrier and large and medium sized corporations are the key focusespecially those in telecom-intensive industriesAssume a growing demand for business telecom serviceswill need both high and low growth scenariosNeed to validate the w

27、illingness of key customers to switch, and their anticipated areas of future demand growthIP phone still the source of revenue in the near futureDial-up ISP (171) may conflict with ISP carrier interests, but could also serve as strategic inroad for future 3G(1)(1) Not in scope of this project CONTEN

28、TKey strategic principlesRegulatory overviewMarket overviewCompetition overviewBusiness modelsNext stepsREGULATORY HIGHLIGHTSOur key assumptions:MII regards CNCs IP-based license as Full Service license, but lacks clear regulatory documentation. In case of local interpretation difference, MII is wil

29、ling to clarify on behalf of CNCe.g. ambiguity on local fixed line (CNC number)CNC will be granted International Gateway license by 1Q 2000CNC IP network protected by the current fixed/mobile interconnect regulation CNC not required to meet specific coverage targets for the near future (2-3 years)Th

30、e market will be opened up gradually, with FDI increasing:more value added service providers by 2003more I-Phone providers by 2001no new Full Service providers till 2004/2005Account settlement specific for I-Phone will be regulated after the trial stage ends. It will be lower than the RMB0.14/min ra

31、te for basic telecom networks on a per call basisEqual access by prefix/pre-select in 1 year; number portability may take another 1-2 years at leastCNC will have LMDS spectrumCNC anticipates a well-intentioned regulator, with varied degrees of control over local incumbent practice None of these assu

32、mptions are “guaranteed;” CNC must fight aggressively for themKEY REGULATORY ISSUES AND IMPLICATIONSService licensesFull Service license interpretationInterconnect enforcementAccount settlementPricing and rebalancingROW and access Frequency spectrum allocation and feesUniversal Service ObligationEqu

33、al AccessNumbering and portabilityIGW license important to competitiveness,size of customer base and # of partnersMII notification on each instance adds delay to CNC local interconnectionTime to market in each city affected, detract CNC resourcesFuture Interconnect economicsFuture price competitiven

34、ess vs. other players (e.g. CT)economics; price competitiveness vs. CTCase-by-case local coordination and negotiation delay local access build-out; may also be expensive to obtainTime to market for local access build-out by LMDS access solutionsSubsidizing incumbent for USO affect cost structure of

35、new entrantsUnable to reach CT local line customerMedium term implication: on-net voice not targeted for the near 4-5 years3 full service carrier including CNCMore licenses for value-added service providers (type II)MII supports CNC IP based license as Full Service LicenseBut lack of clear documenta

36、tion may cause confusion at local levelBased on cooperation of carriersArbitration/settlement process exist but time consumingMild punishment, law suit as last resortFor current IP-phone trial, fees not settledLikely future settlement: LD carrier pays local PSTN operator RMB0.14/minPrice floor likel

37、y specified for incumbent by regulationNo imminent initiative for rebalancingLegally feasible for public telecom carrier (e.g. CNC)Practice will have to coordinate with municipalities and infrastructure buildingControlled by MII in co-ordination with PTAsFrequency not likely to be auctionedUSO for i

38、ncumbent with contribution from new entrant2-3 years before transparent and equitable approachPrefix based solution provided by regulation in 1 yearNumber as national resources controlled centrallyFee will be collected for occupation of number resource2-3 years before portability regulationsImpact o

39、n CNCHighest/ImmediateHigh/Medium TermKey issuesAssumptionImplication to CNCKEY REGULATORY BODIES AND RESPONSIBILITIESOther depts, e.g SETCVarious law making bodiesNPCState CouncilDept. of Radio Frequency AdministrationTelecom Administration BureauOther depts.Provincial Telecom Administration Bureau

40、ChinaTelecomNationalCompanyMunicipal Level Telecom Administration BureauTelecom Operating Entities: e.g. CT fixed lineProvincial governmentMIIAdministrationOperationsNationalProvincialMunicipalityDrafting, passing of telecom laws and statues, e.g. China Telecoms LawInternational, National and Inter-

41、Provincial scope license grantingHighest level of regulatory enforcement/ arbitrationInternational Gateway administrationNational level telecom resources control (e.g. numbers, frequency spectrums)Provincial level telecom administrationProvincial level license grantingProvincial level regulatory enf

42、orcement focus on coordinationIn the process of splitting operation and administrationA number of Municipal Level TABs are yet to be createdLimited enforcement powerOperation and administration not separateSettle interconnect and other disputesWhen not settled by provincial & municipal coordination,

43、 propagate up to provincial level and MIIPTAsPTBSource: Pyramid Research; BCG analysisKEY LICENSE ASPECTS AND IMPLICATION TO CNCFull Service and InternationalValue added servicesownershipGeographic scopeDurationlicense feesPerformance targetsTechnologyKey AspectsNumber of licenses tightly controlled

44、: at most 3 in 2003, including CNCCNC full service license expected 1Q 2000International licenses tightly controlled: at most 4 in 2003, including CNCCNC IGW license expected by EOY1999More than 4 value-added service licenses possibleControl-share foreign ownership not allowed in basic telecom and p

45、ublic data transport servicesUp to 50% of FDI in value added service providersIntra provincial services under control of provincial TABsNo limitRegulation will require license feesRegulation will specify clear service buildout targetsRegulations will be technology neutralBut will give preference to

46、new technologyAssumptionsCurrent regulation only cover interconnection between 7 types of licensed basic telecom carriers (e.g. NLD, local, wireless, international)With IP-phone license, CNC needs to negotiate with CT local branches city by cityCNC IP based bandwidth wholesale service not covered in

47、 published regulation, adds delay in local negotiationNumber of potential customers for carriers carrier servicesSpeed of establishment and coverage of targeted customer for carriers carrier serviceFinancial strength of new entrant customersIntra-provincial LMDS service require application in each t

48、argeted areaCompetitors ability to lockout key service areasLimited degree of impact on economicsAdds planning and local coordination pressure to CNC local access solutionsCNC IP/DWDM backbone receive positive influenceImplication to CNCNATURE, SCOPE AND NUMBER OF LICENSESSource: BCG analysisVSAT tr

49、ansport serviceInternationalNLDOn-net voiceIP backboneIP-phone (including international)WirelessPagingVAS(e.g.ISP,VPN)Service natureOwning satelliteMaintain satellite channelVSAT base stationsOwnership & operation of international gatewaysInterconnect with foreign carriersLeasing IDD channels and li

50、nesBuilding & operating of national switches and trunk linesMaintaining POP is nationwideProvide basic voice & data national transportOwnership & operation of local access networksOwnership of last mileProvide basic local voice/data transport and access to NLD/IDDBuilding and leasing of broadband IP

51、 based backbone transport capacityProvide IP based voice serviceNo requirement in infrastructure buildingIncluding international IP based LDBuilding & operation of local BSC networkProvide wireless voice services Interconnect with national transport carrierBuilding & operation of Local Paging Networ

52、ks Interconnect with national transport carrierWith or without building & operation of local networkOffer web-hosting, VPN, call center services, etc.ScopeNational coverageCross international point of presenceService national transport carriersCross provincial boardersHave access to international PO

53、 connectsService local PSTNsCovers local service areas, (e.g. cities municipalities)Cross provincial boardersAccess to international points of connectCovers 12-25 trail cities Access to international points of connect Covers local service areas: cities municipalitiesMajority in local scope 4 nationa

54、l coveragePrimarily in local scopeNo. of futurelicensesRemain 3 for the next 6 years (CT, Unicom, and CNC) 3 In the next 6 years (CT, Unicom, CNC)3 In the next 6 years (CT, Unicom, CNC)45 in 1-2 years5-6 possible in the next 12 yearsMultiple licenses possible in the next 4-5 yearsNumerous national s

55、cope licensespossible in the next 2 yearsNumerous more licenses (with FDI) possible in the next 2 yearsLicense controlled byMIIMIIMIIMIIMIIMIIMIIPrimarily by provincial governmentProvincial governmentNo. of current licenses13223 (CT, Unicom,CNC)4Trail stage22 national scope;multiple localUnlimitedBa

56、sic telecom servicesRemain 1 for the next 6 yearsINTERCONNECTION ISSUES AND IMPLICATION TO CNCKey IssuesAssumptionsImplication to CNCObligation clearly specified by regulation for interconnection between 7 types of telecom network licensed operatorsCNCs IP broadband network receive equivalent protec

57、tionMII sets technical specification of interconnect solutionsClear provision on cost and ownership of technical assetFrom time of written request, interconnect complete within:2 months if only CO data modification is involved4 months if capacity expansion needed7 months if new POI (1) neededTime fr

58、ame not strictly adhered to, varies from 4-6 monthsDispute settled primary via coordinationArbitrated by MII and local governmentViolation fine is very low (30,000 RMB max per offense)Possible to claim for compensation due to non-cooperation of incumbents (the last resort)RMB0.07/min for PSTN access

59、 of each end of call pathSettlement for IP based will follow scheme when trial finishesIncumbents provide cabinet room and conduit accessIn case theres no excess conduit capacity, incumbent has to provide feasible expansion planLocal practice will varyIncumbent charges rental fee for conduit accessI

60、ncumbent charges for leased line needed for interconnectInfrastructure and network investment related to interconnect are responsibility of both parties, separated from POIIncumbent obligation to interconnectInterconnect timeframeEnforcementAccount settlementAccess and collocationCharges and feesIf