BCG－中国网通：战略咨询报告完整版(ppt 143页)(英文).ppt

1、CHINA NETCOM BUSINESS PLAN UPDATE,TODAYS OBJECTIVES,Review the overall analysis of regulation, competition, and market development Discuss the specific implications for CNC strategy Review the specific draft business models for CNC How we might attack the business, carrier, and IDD/DLD markets What

2、key trade-offs we need to make What are the key success factors and assumptions? Discuss the initial economics of these business models, and of CNC overall Discuss the specific next steps in two key areas: How to finalize and endorse the overall CNC business model How to move forward with the refine

3、d financials, organization design, and the plan for implementation,CONTENT,Key strategic principles Regulatory overview Market overview Competition overview Business models Next steps,KEY CNC STRATEGIC PRINCIPLES,The objective of these principles is to provide further clarity in the development and

4、evaluation of the CNC business model These will be revisited and refined as the project progresses Our development of business models will seek to be aligned with the principles Strategic principles and key assumptions will be considered in the following aspects CNC shareholders Backbone business Lo

5、cal access business International gateway business Regulatory strategy Competitive strategy Marketing strategy,CNC SHAREHOLDERS,Principles: Leverage shareholders concerted vision in creating a new generation IP broadband communication infrastructure and a profitable, successful company Leverage shar

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

7、vering high return Assumptions: CAS: strong interest in seeing CNC successful and profitable quickly, stands ready for favorable regulatory influence and research support; wants opportunities for networking R how to handle?,BACKBONE BUSINESS,Principles: Target advanced backbone among 15 key cities i

8、n Eastern China; start with 2 cores from shareholders but quickly build own network Use backbone for a variety of wholesale and retail voice and data services Maintain the leading edge IP/packet network, both for technological superiority and to fulfill shareholder mission Maintain the best cost pos

9、ition, using ROWs, purchasing clout, right technology Build reserve capacity/conduit to deter others Assumptions: The costs of construction and ROW will be the majority of new network costs virtually all of the network will use MOR or SARFT right of way Network will be IP or packet in nature Deploym

10、ent plan will keep costs low, build out quickly, and create good position lay large number of conduits in one time later fill, light up, and color fiber strands lease out conduit/fiber/bandwidth to maximize return (utilization),LOCAL ACCESS BUSINESS,Principles: Be very focused in local deployment, t

11、argeting priority business areas only Emphasize broadband to the customer, using FTTB and LMDS where logical Seek strong local market share, especially in new data services growth areas Differentiate from China Telecom by superior services, quality, responsiveness Build strong local team to enable f

12、ast service response Emphasize “end to end” network ownership and management Assumptions: SH, BJ, GZ, and SZ business districts as targets for the near term These account for the vast majority of business telecom demand Need to set specific estimates for timing and sequence of deployment Assume that

13、 CNC will have access to key city ROW, such as subway systems Will need specific assumptions about the ease and cost of hooking up buildings Assume that primary emphasis will be on FTTB, but that LMDS can play an important role, especially in initial deployment and in secondary cities Will need spec

14、ific assumptions about timing of adding secondary cities,INTERNATIONAL GATEWAY BUSINESS,Principles: CNC will be one of few players with a full international license Vital to enable CNC to provide end-to-end services, global data services, and higher margin IDD service HK gateway link may be strategi

15、cally important Assumptions: HK as one of the key location for international connection a major traffic destination a major relay location International voice remains highly profitable segment in medium term future Expect high growth together with steep price drop in international services Actively

16、plan ahead for joining international sub-oceanic cable consortium,REGULATORY STRATEGY,Principles: Must actively lobby for favorable regulatory decisions, together with shareholders provide regulators with international benchmarking for best practices align CNC objectives with fair competition, and p

17、ublic interests have effective senior management focus on lobbying issues Be careful about committing investment if regulatory issues too uncertain Ensure CNC strategy addresses national economic development priorities Pay careful attention to managing relations with China Telecom Expected WTO in 20

18、00 will imply greater opening of the market in the future Assumptions: 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 level Many key regulations remain in grey areas, where CNC can play a role in s

19、haping the policy Will need to make specific assumptions on a number of regulatory issues, and develop several scenarios Assume that CT and Unicom are the only full service competitors, but several niche players WTO will introduce FDI into Chinas telecom market by 2002, but infrastructure play remai

20、n tightly controlled (still limited competition) until 2004/5 may be opportunity for some form of partnership with foreign telcos,COMPETITIVE STRATEGY,Principles: Focus on the best service quality, supply what customers need, avoid competing on price Build both “highways” and “tollbooths” Prepare fo

21、r rapidly changing industry structure Be careful in positioning toward China Telecom: complementary and addressing unmet needs growing the whole market The only viable alternative to China Telecom for carriers The only true “end to end” network across China, with clear central management Assumptions

22、: Technology leads to continual change in industry structure The decentralized nature and business oriented behaviors of China Telecom enables CNC to partner at the local level High opportunity for CNC to fill China Telecom product/service backlog Unicom will be a threat to start a “price war” Vario

23、us niche players emerge in later years, more threat than (carrier) opportunity for CNC,MARKETING STRATEGY,Principles: For local access, will target medium and large businesses in targeted buildings For backbone, provide carrier services For international, support other businesses and also offer IDD

24、and refiling, etc. In all areas, emphasize quality, service, end to end, etc. Get a few key customers early; prove ourselves and then build further Assumptions: Carrier and large and medium sized corporations are the key focus especially those in telecom-intensive industries Assume a growing demand

25、for business telecom services will need both high and low growth scenarios Need to validate the willingness of key customers to switch, and their anticipated areas of future demand growth IP phone still the source of revenue in the near future Dial-up ISP (171) may conflict with ISP carrier interest

26、s, but could also serve as strategic inroad for future 3G(1),(1) Not in scope of this project,CONTENT,Key strategic principles Regulatory overview Market overview Competition overview Business models Next steps,REGULATORY HIGHLIGHTS,Our key assumptions: MII regards CNCs IP-based license as Full Serv

27、ice license, but lacks clear regulatory documentation. In case of local interpretation difference, MII is willing to clarify on behalf of CNC e.g. ambiguity on local fixed line (CNC number) CNC will be granted International Gateway license by 1Q 2000 CNC IP network protected by the current fixed/mob

28、ile interconnect regulation CNC not required to meet specific coverage targets for the near future (2-3 years) The market will be opened up gradually, with FDI increasing: more value added service providers by 2003 more I-Phone providers by 2001 no new Full Service providers till 2004/2005 Account s

29、ettlement specific for I-Phone will be regulated after the trial stage ends. It will be lower than the RMB0.14/min rate for basic telecom networks on a per call basis Equal access by prefix/pre-select in 1 year; number portability may take another 1-2 years at least CNC will have LMDS spectrum CNC a

30、nticipates a well-intentioned regulator, with varied degrees of control over local incumbent practice None of these assumptions are “guaranteed;” CNC must fight aggressively for them,KEY REGULATORY ISSUES AND IMPLICATIONS,Service licenses Full Service license interpretation Interconnect enforcement

31、Account settlement Pricing and rebalancing ROW and access Frequency spectrum allocation and fees Universal Service Obligation Equal Access Numbering and portability,IGW license important to competitiveness, size of customer base and # of partners MII notification on each instance adds delay to CNC l

32、ocal interconnection Time to market in each city affected, detract CNC resources Future Interconnect economics Future price competitiveness vs. other players (e.g. CT) economics; price competitiveness vs. CT Case-by-case local coordination and negotiation delay local access build-out; may also be ex

33、pensive to obtain Time to market for local access build-out by LMDS access solutions Subsidizing incumbent for USO affect cost structure of new entrants Unable to reach CT local line customer Medium term implication: on-net voice not targeted for the near 4-5 years,3 full service carrier including C

34、NC More licenses for value-added service providers (type II) MII supports CNC IP based license as Full Service License But lack of clear documentation may cause confusion at local level Based on cooperation of carriers Arbitration/settlement process exist but time consuming Mild punishment, law suit

35、 as last resort For current IP-phone trial, fees not settled Likely future settlement: LD carrier pays local PSTN operator RMB0.14/min Price floor likely specified for incumbent by regulation No imminent initiative for rebalancing Legally feasible for public telecom carrier (e.g. CNC) Practice will

36、have to coordinate with municipalities and infrastructure building Controlled by MII in co-ordination with PTAs Frequency not likely to be auctioned USO for incumbent with contribution from new entrant 2-3 years before transparent and equitable approach Prefix based solution provided by regulation i

37、n 1 year Number as national resources controlled centrally Fee will be collected for occupation of number resource 2-3 years before portability regulations,Impact on CNC,Highest/ Immediate,High/ Medium Term,Key issues,Assumption,Implication to CNC,KEY REGULATORY BODIES AND RESPONSIBILITIES,Other dep

38、ts, e.g SETC,Various law making bodies,NPC,State Council,Dept. of Radio Frequency Administration,Telecom Administration Bureau,Other depts.,Provincial Telecom Administration Bureau,China Telecom National Company,Municipal Level Telecom Administration Bureau,Telecom Operating Entities: e.g. CT fixed

39、line,Provincial government,MII,Administration,Operations,National,Provincial,Municipality,Drafting, passing of telecom laws and statues, e.g. China Telecoms Law International, National and Inter-Provincial scope license granting Highest level of regulatory enforcement/ arbitration International Gate

40、way administration National level telecom resources control (e.g. numbers, frequency spectrums) Provincial level telecom administration Provincial level license granting Provincial level regulatory enforcement focus on coordination In the process of splitting operation and administration A number of

41、 Municipal Level TABs are yet to be created Limited enforcement power Operation and administration not separate Settle interconnect and other disputes When not settled by provincial BCG analysis,KEY LICENSE ASPECTS AND IMPLICATION TO CNC,Full Service and International Value added services ownership

42、Geographic scope Duration license fees Performance targets Technology,Key Aspects,Number of licenses tightly controlled: at most 3 in 2003, including CNC CNC full service license expected 1Q 2000 International licenses tightly controlled: at most 4 in 2003, including CNC CNC IGW license expected by

43、EOY1999 More than 4 value-added service licenses possible Control-share foreign ownership not allowed in basic telecom and public data transport services Up to 50% of FDI in value added service providers Intra provincial services under control of provincial TABs No limit Regulation will require lice

44、nse fees Regulation will specify clear service buildout targets Regulations will be technology neutral But will give preference to new technology,Assumptions,Current regulation only cover interconnection between 7 types of licensed basic telecom carriers (e.g. NLD, local, wireless, international) Wi

45、th IP-phone license, CNC needs to negotiate with CT local branches city by city CNC IP based bandwidth wholesale service not covered in published regulation, adds delay in local negotiation Number of potential customers for carriers carrier services Speed of establishment and coverage of targeted cu

46、stomer for carriers carrier service Financial strength of new entrant customers Intra-provincial LMDS service require application in each targeted area Competitors ability to lockout key service areas Limited degree of impact on economics Adds planning and local coordination pressure to CNC local ac

47、cess solutions CNC IP/DWDM backbone receive positive influence,Implication to CNC,NATURE, SCOPE AND NUMBER OF LICENSES,Source: BCG analysis,VSAT transport service,International,NLD,On-net voice,IP backbone,IP-phone (including international),Wireless,Paging,VAS (e.g.ISP, VPN),Service nature,Owning sa

48、tellite Maintain satellite channel VSAT base stations,Ownership multiple local,Unlimited,Basic telecom services,Remain 1 for the next 6 years,INTERCONNECTION ISSUES AND IMPLICATION TO CNC,Key Issues,Assumptions,Implication to CNC,Obligation clearly specified by regulation for interconnection between

49、 7 types of telecom network licensed operators CNCs IP broadband network receive equivalent protection MII sets technical specification of interconnect solutions Clear provision on cost and ownership of technical asset From time of written request, interconnect complete within: 2 months if only CO d

50、ata modification is involved 4 months if capacity expansion needed 7 months if new POI (1) needed Time frame not strictly adhered to, varies from 4-6 months Dispute settled primary via coordination Arbitrated by MII and local government Violation fine is very low (30,000 RMB max per offense) Possibl

51、e to claim for compensation due to non-cooperation of incumbents (the last resort) RMB0.07/min for PSTN access of each end of call path Settlement for IP based will follow scheme when trial finishes Incumbents provide cabinet room and conduit access In case theres no excess conduit capacity, incumbe

52、nt has to provide feasible expansion plan Local practice will vary Incumbent charges rental fee for conduit access Incumbent charges for leased line needed for interconnect Infrastructure and network investment related to interconnect are responsibility of both parties, separated from POI,Incumbent

53、obligation to interconnect Interconnect timeframe Enforcement Account settlement Access and collocation Charges and fees,If CNC network is not covered by regulation, local negotiation will leave loophole for incumbent and add delay Incumbent local practice varies, add complexity and delay to project

54、 Incumbent can take advantage of timeframe loopholes, add delays at local level Central control over local TAB(2) varies due to varied degree of separation, lead to different degree of just and resolution timeframe Upward propagation to MII time consuming, adding delays to resolution Future economic

55、s: up to 30% of revenue paid to PSTN based on 0.30/min IP rate Incumbent can take advantage of capacity constraints to delay interconnect at local level Some incumbent local branches require CNC to pay for investment, ownership goes to incumbent, adds cost to CNC service,Note 1: Point Of Interconnec

56、t 2: Telecommunications Administration Bureau,CLEAR GUIDANCE FOR INTERCONNECT ALREADY PUBLISHED, LOCAL PTA OBLIGED TO FOLLOW,Local PTA can be resistant, also its organization not suitable for quick execution The policy decision requesting local PTAs to corporate with interconnection trickles from to

57、p down: the central provincial PTA city PTA City PTA before implementation will generally ask for lead time for verification with upper levels. E.g. in some cases new entrant has to wait for extended time period for this process Under the Market Departments coordination, there are up to 18 independe

58、nt departments within each city PTA to cooperate for the execution and resource planning of interconnect Each of these department can add delay to the process, lead times add up In case of insufficient resource, the requesting and approval process for expansion / upgrade is even longer Local PTA can

59、 easily use resource constraint as an excuse for delay in interconnection But interconnection is feasible CNC has so far been able to reach interconnect contract at provincial levels Most PTAs in CNCs target cities displayed timely cooperation In order to ensure quick execution, CNC should Understand and incorporate into planning process the status of incumbent network resources Give lead time in planning and communicating intention to interconnect with the incumbent Build strong communication channel with all levels of PTAs Co-ordinate for goo