THE INFORMATION SUPERHIGHWAY

The Information Superhighway Strategic Alliances in Telecommunications and Multimedia

Randall L. Carlson

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© Randall L. Carlson 1996 Softcover reprint of the hardcover 1st edition 1996 978-0-333-65064-6

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First published 1996 by MACMILLAN PRESS LTD Houndmills, Basingstoke, Hampshire RG21 6XS and London Companies and representatives throughout the world

ISBN 978-1-349-24595-6 ISBN 978-1-349-24593-2 (eBook) DOl 10.1007/978-1-349-24593-2

A catalogue record for this book is available from the British Library.

10 9 8 7 6 05 04 03 02 01

5 4 3 2 I 00 99 98 97 96

Published in the United States of America 1996 by ST. MARTIN'S PRESS, INC., Scholarly and Reference Division 175 Fifth Avenue, New York, N.Y. 10010

ISBN 978-1-349-24595-6

To Dad and Mom

Contents

List of Figures x

List of Tables xii

Acknowledgments xiii

1 Introduction 1

1.1 The telecommunications industry 2 1.2 On ramp to the Information Superhighway 3 1.3 The Bells' new services strategy 4 1.4 Reasons for alliances

2 Telephone and Cable Television: The Main Drivers 6

2.1 Merging industries in the Information Superhighway 6 2.2 Company strategy 8 2.3 CATV-telephone technology 9 2.4 CATV-telco regulations 12

3 US West's Full Service Network

4 AT&T's Alliances

4.1 Alliance strategy 4.2 Bell Laboratories

5 Multimedia Alliances

6 The German Market

6.1 Introduction 6.2 Strategic alliances

7 Wireless Communications

7.1 Introduction 7.2 Cellular marketing partnerships 7.3 Wireless technology

vii

20

26

26 29

32

40

40 42

48

48 49 52

viii Contents

8 Nortel-Ameritech Service Improvement Program

8.1 Introduction 8.2 Key areas of ASIP

9 R & D Consortia

9.1 Global satellite consortia 9.2 Bell core

10 Joint Development Alliances

56

56 58

65

65 72

78

10.1 Network management system alliance 78 10.2 Advanced intelligence networking (AIN) alliances 80 10.3 Pratt & Whitney's aerospace alliances 89

11 Telecom Equipment Integration at Unisource

11.1 The partners 11.2 The equipment

12 Internal Ventures

12.1 Nortel-Bell Northern Research-Bell Canada Enterprises

12.2 Nortel's BusinessExpress

13 Re-engineering an Alliance: A Customer Service Program

13.1 Introduction to Re-engineering 13.2 Process capture and business modeling

14 Conclusions

14.1 Conclusion: internal groups are competing against

91

91 92

95

96 97

105

105 107

117

potential external partners 117 14.2 Conclusion: management prefers internal ventures

over strategic alliances 119 14.3 Conclusion: core competencies are being built and

strengthened using alliances 121 14.4 Conclusion: there is more communication within

the corporation and communication is important for strategic alliances 123

Contents ix

14.5 Conclusion: alliances are more operational than strategic 124

14.6 Conclusion: alliances are made with more luck and chance than planning 125

15 Summary 126

Appendix 1: 1984 Cable Act, Section 533 131

Appendix 2: Bel/core Customers and Areas of Collaboration 133

Notes and References 135

Bibliography 141

~~ 1~

List of Figures

1.1 Top Motivations for Forming Alliances 5 2.1 The Information Superhighway 6 2.2 Merging Communications, Information and Entertainment

Applications and Technology 8 2.3 How Broadband Works 10 3.1 Home Entertainment Market 21 3.2 US West-TWE Partnership Presence 22 3.3 Ownership Structure of Time Warner Entertainment 24 4.1 AT&T's Rising Share of the US Public Switch Market 27 5.1 Multimedia Alliances 35 6.1 Comparison of Employees per 10 000 Phone Lines 41 6.2 Alliances in Germany 43 6.3 Prices of European 2Mbps Leased Line Circuits 44 7.1 Emerging Cellular Market Based on Partnerships 50 7.2 Cellular Call Model 52 7.3 The Radio Spectrum 53 7.4 Nortel-Matra Commitment to Open Interfaces 54 8.1 Suppliers Report Card 57 8.2 Customer Pain Index (Monthly vs. Cumulative) 60 8.3 Latent Defect Elimination 61 8.4 Software Quality Improvement 63 9.1 Comparison of Satellite Systems 67 9.2 Global Satellite Consortia 70 9.3 Heilmeier' s Game Plan for Bell core 74 9.4 Initial View of the Budget 76 9.5 Increased Participational View of the Budget 76

10.1 Top Vendor Market Shares in US Public Switch Market 81 10.2 A Business Model 84 10.3 Long-Distance Call Completion 86 10.4 Service Builder's Service Creation Environment 87 10.5 Telemarketing Using Voice Generation/Recognition 88 11.1 The Emerging Global Unisource Consortium 92 12.1 Nortel-BCE-Bell Canada-BNR Relationships 96 12.2 Nortel-Partner Product Development 97 12.3 Major Centrex Growth Opportunity 98 12.4 B usinessExpress 99

X

List of Figures xi

12.5 Multilocation Business Groups 101 12.6 Multi-Service BusinessExpress Server 103 13.1 Service Improvement: Program Goals 106 13.2 Spectrum of Re-engineering Activity 106 13.3 Service Improvement Program, Top Level 108 13.4 SIP: Co-design, Manufacture, Deliver and Support

Products 109 13.5 Original Design and Manufacture Product 111 13.6 Design and Manufacture Product 112 13.7 SIP: Productize Internally 114 13.8 Administrative Action Request for Delivery 115 13.9 Technical Troubleshooting of Existing Equipment 116 14.1 Frequencies for 'Look' Question 118 14.2 Distribution of 'Find' Question 118 14.3 Frequencies for 'OK to Duplicate' Question 119 14.4 Boxplot of Find Alliance vs. Top Motivation 122 14.5 Boxplot of Look for Alliance vs. Top Motivation 125

List of Tables

4.1 AT&T' s Major Alliances 30 8.1 Ameritech Service Improvement Program: Areas of

Dissatisfaction, Solutions and Impacts 58 8.2 Ameritech Objectives and Nortel Responses 64 9.1 Voting and Non-Voting Members of Bellcore 73

11.1 Services and Hardware Platforms of Major Service Providers 93

13.1 Team Positions/Objectives 110 13.2 Product Development Options 113 14.1 Look vs. Find Alliance Partner 120 14.2 Look vs. Find Alliance Partner with Organizational

Efficiency as Motive 121 14.3 Sufficient Intra-Corporate Communication 124

xii

Acknowledgments

The research in this book stems from international business research conducted at the Fletcher School of Law and Diplomacy. The research was supported through the funding of the Fletcher School and the Nortel Corporation. Together these two institutions have made possible a much­needed study of strategic alliances in telecommunications and multi­media.

I would like to thank Professor Denis Simon for his guidance on the politics of alliances. Dr. Jim Doherty was particularly instrumental in data collection. I would also like to thank Professor Russ Neuman for his assistance on the methodological framework. Karen McMaster made it possible for these international persons to meet, making this work possible.

Nortel was very supportive of the work and contributed generously. I would like to thank Joao Mendonca, Pat Dowling, Jerry Aiken, Mark Starkebaum, Paul Brant, Alan Fraser, Larry Gaudet and Serge Fournier. Len Fawcett, Peter Knowles, and Gavin Alpe were instrumental in achieving the required Process Re-engineering research.

Neil Knight and Tom Bouchard of US West contributed generous amounts of time and materials for understanding the CATV -tel co re­lationship.

I would like to thank all those who completed the questionnaires. For completing the first, very extensive questionnaire, I thank: Lotus Development Corp., Medrad Inc., Policy Management Systems Corp., Xilinx, Medicus Systems Corp., Merck & Co., and Honeywell Corp.

The author and publishers are grateful to Elsevier Science Limited, CMP Publications and the Institute for Management Science for per­mission to reproduce copyright material. Every effort has been made to contact all copyright-holders for permission to reproduce copyright material. If anything has been omitted, the publisher will be pleased to make the necessary arrangement at the earliest opportunity.

Last but not least, I thank Betsy Andrews for editorial saves, Macmillan and St. Martin's Press for publication, Keith Povey for edits and Rosabeth Moss· Hunter for the book review.

RANDALL L. CARLSON

xiii