Just as the PSTN is within the scope of telecommunications, so also is an Internet or cable TV network carrying a direct substitute telephony application. Perhaps the most fundamental change, both in terms of technology and its implications for industry structure, has occurred in the architecture of telecommunications networks.
Architecture in this context refers to the functional description of the general structure of the system as a whole and how the different parts of the system relate to each other. Previously the PSTN, cable, and data networks coexisted as separately owned and operated networks carrying different types of communications, although they often shared a common technology base such as point-to-point digital communications and some facilities e.
How are the new networks different? First, they are integrated, meaning that all media— be they voice, audio, video, or data—are increasingly communicated over a single common network. This integration offers economies of scope and scale in both capital expenditures and operational costs, and also allows different media to be mixed within common applications.
As a result, both technology suppliers and service providers are increasingly in the business of providing telecommunications in all media simultaneously rather than specializing in a particular type such as voice, video, or data. Second, the networks are built in layers, from the physical layer, which is concerned with the mechanical, electrical and optical, and functional and procedural means for managing network connections to the data, network, and transport layers, which are concerned with transferring data, routing data across networks between addresses, and ensuring end-to-end.
Both technology equipment and software suppliers and service providers tend to specialize in one or two of these layers, each of which seeks to serve all applications and all media. As a consequence, creating a new application may require the participation and cooperation of a set of complementary layered capabilities.
This structure results in a horizontal industry structure, quite distinct from the vertically integrated industry structure of the Bell System era. All these changes suggest a new definition of telecommunications: Telecommunications is the suite of technologies, devices, equipment, facilities, networks, and applications that support communication at a distance.
The range of telecommunications applications is broad and includes telephony and video conferencing, facsimile, broadcast and interactive television, instant messaging, e-mail, distributed collaboration, a host of Web- and Internet-based communication, and data transmission.
Deciding what is and is not telecommunications is always a judgment call. Applications of information technology range from those involving almost no communication at all word processing to simple voice communications telephony in its purest and simplest form , with many gradations in between. As supported by the horizontally homogeneous layered infrastructure, applications of various sorts increasingly incorporate telecommunications as only one capability among many.
For example telephony, as it evolves into the Internet world, is beginning to offer a host of new data-based features and integrates other elements of collaboration e. Another important trend is machine-to-machine communication at a distance, and so it cannot be assumed that telecommunications applications exclusively involve people. Like telecommunications itself, the telecommunications industry is broader than it was in the past.
It encompasses multiple service providers, including telephone companies, cable system operators, Internet service providers, wireless carriers, and satellite operators. The industry today includes software-based applications with a communications emphasis and intermediate layers of software incorporated into end-to-end communication services. It also includes suppliers of telecommunications equipment and software products sold directly to consumers and also to service providers, as well as the telecommunications service providers.
The broad definition adopted here is intended solely to capture the scope of relevant research, not to make any statement about what technologies and services should or should not be considered telecommunications for regulatory purposes. It includes companies selling components or intellectual property predominately of a communication flavor, including integrated circuit chip sets for cell phones and cable and digital subscriber line DSL modems.
No longer a vertically integrated business, the telecommunications industry is enabled by a complex value chain that includes vendors, service providers, and users. The telecommunications value chain begins with building blocks such as semiconductor chips and software.
These components are, in turn, incorporated into equipment and facilities that are purchased by service providers and users. The service providers then, in turn, build networks in order to sell telecommunications services to end users. The end users include individuals subscribing to services like telephony landline and cellular and broadband Internet access, companies and organizations that contract for internal communications networks, and companies and organizations that operate their own networks.
Some major end-user organizations also bypass service providers and buy, provision, and operate their own equipment and software, like a corporate local area network LAN or a U. Software suppliers participate at multiple points in the value chain, selling directly not only to equipment vendors but also to service providers e. An implication of defining telecommunications broadly is that every layer involved in communication at a distance becomes, at least partially, part of the telecommunications industry.
The broad range and large number of companies that contribute to the telecommunications industry are evident in the following list of examples:. Networking service providers across the Internet and the PSTN, wireless carriers, and cable operators. Communications equipment suppliers that are the primary suppliers to service providers.
Examples include Cisco, Lucent, and Motorola. Networking equipment suppliers selling products to end-user organizations and individuals. Semiconductor manufacturers , especially those supplying system-on-a-chip solutions for the telecommunications industry. Suppliers of operating systems that include a networking stack. Microsoft is an example. Software suppliers , especially those selling infrastructure and applications incorporating or based on real-time media. Utility or on-demand service providers selling real-time communications-oriented applications.
Consumer electronics suppliers with communications-oriented customer-premises equipment and handheld appliances. Examples include Motorola and Nokia cell phones , Research in Motion handheld e-mail appliances , Polycom videoconferencing terminals , Microsoft and Sony networked video games , and Panasonic televisions.
What is striking about this list is how broad and inclusive it is. Even though many of these firms do not specialize solely in telecommunications, it is now quite common for firms in the.
The societal importance of telecommunications is well accepted and broadly understood, reflected in its near-ubiquitous penetration and use. Noted below are some of the key areas of impact:. Telecommunications provides a technological foundation for societal communications. Communication plays a central role in the fundamental operations of a society—from business to government to families.
In fact, communication among people is the essence of what distinguishes an organization, community, or society from a collection of individuals. Communication—from Web browsing to cell phone calling to instant messaging—has become increasingly integrated into how we work, play, and live. Telecommunications enables participation and development. Telecommunications plays an increasingly vital role in enabling the participation and development of people in communities and nations disadvantaged by geography, whether in rural areas in the United States or in developing nations in the global society and economy.
Telecommunications provides vital infrastructure for national security. From natural disaster recovery, to homeland security, to communication of vital intelligence, to continued military superiority, telecommunications plays a pivotal role. When the issue is countering an adversary, it is essential not only to preserve telecommunications capability, but also to have a superior capability.
There are potential risks associated with a reliance on overseas sources for innovation, technologies, applications, and services. It is difficult to predict the future impact of telecommunications technologies, services, and applications that have not yet been invented. The telecommunications industry is a major direct contributor to U. The U. Census Bureau estimates that just over 3 percent of the U.
At 3 percent, telecommunications thus represented more than a third of the total fraction of GDI spent on information technology IT; 7. In fact, the fraction attributable to telecommunications is probably larger relative to that of IT than these figures suggest, given that much of the GDI from IT hardware particularly semiconductors could apply to any of several industries computing, telecommunications, media, and electronics, for example. If one assumes IT to be the sum of computers calculating , computers wholesale , computers retail , and software and services, the total GDI for IT is.
The telecommunications-related industries are also a major employer—communications services employed 1 million U. Telecommunications is a growth business. Although markedly reduced investment in some parts of the sector following the bubble years of the late s may have given an impression of low growth in the long run, a longer-term view taking into account the need for humans and machines to communicate suggests that telecommunications will continue to grow apace, as evidenced by the ongoing expansion of wireless and broadband access services throughout the world.
Telecommunications is also a key enabler of productivity across the U. In the s the U. GDP grew rapidly, and the U. It is widely believed that the Internet economy played a significant role in this success. For the United States to compete in the global marketplace—across industries—it needs the productivity that comes from enhancements in telecommunications. If the telecommunications infrastructure in the United States were to fall significantly behind that of the rest of the world, the global competitiveness of all other U.
Conversely, the growth in U. Telecommunications has been and likely will continue to be an important foundation for innovative new industries arising in the United States that use telecommunications as a primary technological enabler and foundation. Recent examples of innovative new businesses leveraging telecommunications include Yahoo! GDI estimates for from U. Data for from U.
For more on the relationship between information and communications technologies and economic productivity, see, for example, Dale W. Jorgenson and Kevin J. Finally, telecommunications is an important component of the broader IT industry, which is sometimes viewed as having three technology legs: 7 processing to transform or change information , storage to allow communication of information from one time to another , and communications to transmit information from one place to another.
The boundaries between these areas are not very distinct, but this decomposition helps illustrate the breadth of IT and the role that telecommunications plays. Increasingly IT systems must incorporate all three elements to different degrees, 8 and it is increasingly common for companies in any sector of IT to offer products with a communications component, and often with a communications emphasis.
Increasing numbers of businesses compete globally. Every company and every industry must assess the segments and niches in which it operates to remain globally competitive.
Both Asian and European nations are continuing to pursue strategies that exploit perceived U. Leapfrogging the United States in telecommunications has, in the opinion of the committee, been an explicit and stated strategy for a number of Asian in broadband and wireless and European in wireless nations for the past decade, with notable success.
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