The Estonian Telephone Company During the Rise of the Information Society
Erki Arus, Manager, Service Development Department, Estonian Telephone Company Ltd., Batic IT Review 3 '99
Estonian Telephone Company is the main provider of telecommunications infrastructure in Estonia playing also the leading role in most of the telecommunications service areas. In the middle of the nineties, though, the classical voice telephony service that is more than one hundred years old is about to give its way to other ways of communication. The social, technical and business environment has started to change faster than ever before leaving the traditional incumbent telecom operators with two basic options: whether to lose its leading role in the telecom services market or to change the way of operation they have practised for several decades.
Estonian Telephone Company (ETC), or Eesti Telefon, was founded in December 1992. Its main mission at that time was to provide fixed voice telephony services to all applicants in Estonia, generally known as universal service provisioning. The fixed voice telephony service was the only telecommunications service that was widely used and known. Mobile voice telephony service was still considered to be for business users only and the Internet was the playground of computer fanatics.
<big>The Backbone network
</big>ETC started to rebuild the existing telecommunications infrastructure. New digital software controlled switching capacity was introduced. A lot of effort was put into the transmission network – completely new FOC backbone was built and high capacity fully protected SDH-16 transmission system was installed. With the introduction of fibre optical technology the first big shift in conventional understanding became evident – distance was not an argument any more.
But as the distance became irrelevant the capacity deficit still remained. The needs of the society were growing together with the technological advances. More and more capacity was needed to satisfy the transmission requirements of new applications. There was another lesson to learn for ETC – you can never have too much transmission capacity.
<big>The Access network
</big>Besides backbone transmission network, ETC has also paid a lot of attention to the quality of access networks, as this is the most expensive part of the fixed communications network. Capability of the access network to support high bandwidth connections will become critical already in the near future. This is why ETC has put very strict demands on the technical quality of the access network – today nearly one half of the existing networks are reconstructed in order to support high-speed connections. Also new access technologies as xDSL (different kinds of Digital Subscriber Line technologies), FLL (Fibre in the Local Loop), etc. are gradually implemented.
During the last decade vast changes in our life- and business environment have taken place. The amount of information has grown rapidly, availability of telecommunications services has drastically improved and deregulation in the telecommunications industry has taken place in most of the European countries. Three industries – IT, Telecommunications and Media industry – have started to converge while value chain has shifted towards end-user services and value-added services. It means that end-users are not interested in the bare transport service only. They would rather pay for solutions and services (see Figure 1).
<big>The Information Highway is Open for Everybody
</big>Changes in technology are probably as big as the changes in the environment. As mentioned already above, distances have become irrelevant and transmission speeds are constantly increasing. Packet switched communications networks are developing faster than traditional circuit switched networks, and as the telecom world is looking for a universal transport media, the IP network growing faster than any other network in the world, is coming as the first option.
Terminal devices have also changed a lot being today several magnitudes smaller and more powerful than ten years ago. Functionality and ease of use have been improved as well.
Internet is probably the best example to illustrate all the trends that have and will take place in the telecommunications industry. Internet, being the packet switched network, is turning into a universal transport environment that is able to accommodate all telecommunications services. Internet has turned the PC into the communications device. Besides sending the traditional e-mail, also voice and video calls can be accomplished. Internet is also the place where IT, Telecommunications and Media industries are merging. A PC with the Internet connection can provide the user with electronic newspapers and magazines as well as with TV and radio programs or even films. Internet is also a large source of information – so large, that the users need already help to find their way to the data that will support their decision making.
<big>ETC and the Internet</big>
Estonian Telephone Company started to provide Internet services several years ago. At the beginning the service offering was not very successful, but nobody took it seriously as well. The main attention was paid to the fixed voice telephony service, as this was the main source of revenues. Then the focus changed because it became evident that not before long a considerable part of the voice telephony traffic would become mobile bypassing the fixed network completely. This understanding came with the arrival of the third GSM operator to the Estonian market. Terminal and service prices were reduced to the limit where the majority of potential customers become interested. The number of mobile service users exploded and reached the limit where the number of fixed telephone lines is only 1.6 times bigger than the number of mobile subscribers.
While the usage of mobile telephone service exploded, so did the Internet. The number of Internet service users in Estonia has tripled every year since 1997. Though classical voice telephony service and dial-up Internet service are putting different requirements on the telecommunications network offering these services. While the voice telephony is a narrow-band service, then Internet service users are always looking for faster connections and bigger bandwidth.
<big>Trends in Telecommunications Market</big>
From the outburst of aforementioned trends it can be concluded that the telecommunication service in the future will have two important parameters – mobility and bandwidth (see Figure 2).
Terminal mobility can not be accomplished in the fixed networks. At the same time fixed networks are superior in transporting high capacity signals. Consequently the next logical step for a fixed network operator is to provide services that are requiring large bandwidth and are providing value to the customers – like the Internet services.
In general the prognosis for the telecommunications industry is rather prosperous – in 2001 data transmission capacity will exceed the capacity of voice transmission. Naturally it does not mean that people are going to talk less. Several completely new applications and services will be available in modern telecommunications network – in 2002 the turnover of electronic commerce is expected to be $ 350*109. The bandwidth requirements for telecommunications networks are probably growing also in the future – in 2008 an adult is expected to consume 30 GB of information every day.
What does the customer expect from the telecommunications service in the future? The answer would very likely to be that the customer expects personalised and flexible services that are easy to use and with moderately low prices. He wants to use the same services in the same way everywhere and anytime.
<big>The Changing Role of a Service Provider
</big>Considering the last statement the role of the service provider is probably going to change as well. In the last decade the telecommunications service provider was primarily a network connection provider who made it possible to use telephony services and owned a nation-wide network. And ETC was no better than others. In the future the role of the service provider is to make a wide range of services available for the user. He neither owns a network nor produces all the services. The role of the service provider is to hold the customer contacts and find the right service for the customer from the market. Then he procures also network resources that will be necessary to bring this service to the customer. Modern telecommunications networks enable both – service provisioning and offered services will become global.
As several other European telecom operators, ETC has also entered the era of deep changes. A lot of attention is paid to end-user and value-added services as well as to overall effectiveness. A new organisational structure is prepared to support better customer service and flexibility. New business strategies are developed that are more focused on the rapidly changing market. ETC has the intention to stay as one of the leading companies in telecommunications services market in Estonia.
References
[1] Palmucci, D. ‘Achieving Fixed Mobile Convergence by Successfully Integrating IN into Your Network’. IIR Conference ‘Technical Solutions for Achieving Fixed Mobile Convergence’, 1998.
[2] Lage, P. A. ‘The Mobile Operators Perspective’. IIR Conference ‘Fixed Mobile Convergence’, 1998.