Support seen for telecoms extranet plan - Industry Trend or Event

CommunicationsWeek International, May 22, 2000 by David Molony, George Malim, Joanne Taaffe

Telecoms companies and industry associations are considering setting up an industry-wide extranet as a forum for electronic business across the industry.

A telecoms extranet would give companies in the sector the same cost economies and trading advantages that corporations in the automotive and aerospace industries hope to gain from shared Internetworking with each other.

A telecoms equivalent of these sector e-commerce portals could provide a worldwide equipment supplier-buyer trading place, a place for coordinating interoperability testing of networks and applications, as well as an information exchange for regulator and standards data.

"I think there would be significant advantages in the development of a vertical telecoms portal," said Martyn Emery, head of e-business consulting at 4th Wave Technologies Ltd. in Romsey, England. "The coordination of inter-carrier testing and the introduction [of] a real-time reverse auction mechanism, where global suppliers could compete for business [with vendors or service providers], are just two applications."

Some companies in the United States have approached their industry associations for help with an idea that could be particularly sensitive in the sector, which is supplying the rest of the world with its electronic trading places, but not yet its own.

The Cellular Telecommunications Industry Association, Washington DC, is currently considering requests from member companies to develop a plan for a shared wireless industry extranet.

"Several [telecoms] companies are talking about doing this together," said Merle Gilmore, executive vice president at Schaumburg, Illinois-based Motorola Inc.'s communications enterprise division. "There could be significant benefits-in some areas[ldots]But it's not clear the industry can do this itself. It's more likely to come from an industry association."

Until now, telecoms operators and equipment manufacturers have been concentrating on driving costs out of their own businesses by using the Internet to bypass traditional trading arrangements with suppliers, for example, of office equipment or contract personnel.

On-line procurement

"All of the telcos are already all pretty much procuring on-line and have the ability to share connections with suppliers," said Chris Phillips, London-based marketing director at e-commerce software supplier CommerceOne Inc., Walnut Creek, California, "They clearly don't aggregate their purchasing, but a lot of on-line procurement is already happening."

Extending corporate intranets to include indirect procurement has, for example, helped BT claim savings of as much as [pounds]5 billion ($7.45 billion) in purchasing costs for the organization.

Now, it seems, telecoms companies believe they can reduce shared costs in their operational dealings with each other.

"We are currently in discussions with a number of telcos [telecom operators], equipment providers and suppliers of services across the supply chain," said a spokesperson for BellSouth Corp., Atlanta, Georgia, which, with CommerceOne is developing an open electronic exchange for telecoms service providers and their suppliers. "We are having conversations now to determine how best the portal should be run and what services it should offer. There is quite a bit of fluidity [in the concept] that is to be determined as more players come on-line."

At the same time there are very good reasons why the telecoms industry has not been a trail-blazer when it comes to building extranets that unite competitors, as built by the automobile industry.

Whereas the automobile and aerospace markets are mature and dominated by a few large, unchanging names, operators and service providers are still carving out their territory. No single operator in Europe, be it MCI WorldCom Inc., Telef[acute{o}]nica or Concert, could claim the international market power and brand of a Ford, a BMW or a General Motors.

"The problem with the telco side is that people are still scrappy in terms of competing," said Bridget Cosgrave, deputy of the European Telecommunications Standards Institute, Sophia Antipolis, France. "Whereas Ford, General Motors [are comfortable] saying 'When it comes to the procurement of parts we can do something together.'"

A lack of a few operators dominating the marketplace also raises the question of whether any group of operators could afford to dictate terms to suppliers and customers.

Market power

Equally, however, the formation of an extranet between the biggest telecoms players, particularly in the more homogenous U.S. market, could strengthen the market power of its members.

"I do think that the industry needs to protect its market from new entrants," said Emery. "An exclusive extranet club is just one initiative that could be used to make life difficult for the competition."

However, carriers are not expected to lead development of a single industry-wide network for services, because that is what they are competing to provide.

"There's a close-knit relationship between operators and vendors," said Motorola's Gilmore. "It's not like buying cement or raw materials. But across the sector there are areas where the buyer-supplier dynamic could lend itself to extranet buying, especially between equipment makers and their suppliers of electronic components and parts."