173波士頓--中國戰(zhàn)略咨詢報告完整版1

1、CHINA NETCOM BUSINESS PLAN UPDATE,December 14, 1999 - Beijing,TODAY’S OBJECTIVES,Review the overall analysis of regulation, competition, and market developmentDiscuss the specific implications for CNC strategyReview t

2、he specific draft business models for CNC How we might attack the business, carrier, and IDD/DLD marketsWhat key trade-offs we need to makeWhat are the key success factors and assumptions?Discuss the initial economi

3、cs of these business models, and of CNC overallDiscuss the specific next steps in two key areas:How to finalize and endorse the overall CNC business modelHow to move forward with the refined financials, organization

4、design, and the plan for implementation,,CONTENT,Key strategic principlesRegulatory overviewMarket overviewCompetition overviewBusiness modelsNext steps,KEY CNC STRATEGIC PRINCIPLES,The objective of these princ

5、iples is to provide further clarity in the development and evaluation of the CNC business modelThese will be revisited and refined as the project progressesOur development of business models will seek to be aligned wi

6、th the principlesStrategic principles and key assumptions will be considered in the following aspectsCNC shareholdersBackbone businessLocal access businessInternational gateway businessRegulatory strategyCompetit

7、ive strategyMarketing strategy,CNC SHAREHOLDERS,Principles:Leverage shareholders’ concerted vision in creating a new generation IP broadband communication infrastructure and a profitable, successful companyLeverage sh

8、areholders’ existing backbone assets, local access assets, research capabilities and local government relationships to secure time-to-market and create competitive advantageSet a model of a new type of “SOE”, as efficie

9、nt as the best of the FIE/private companies; beat shareholders’ expectations by delivering high returnAssumptions:CAS: strong interest in seeing CNC successful and profitable quickly, stands ready for favorable regula

10、tory influence and research support; wants opportunities for networking R&DMOR and SARFT: extensive backbone and access assets and ROWmain focus on using MOR for right of way, helping them participate in telecomwi

11、ll not use SARFT local CATV in the near term, but they are a key user of the backboneLeverage CATV’s city backboneMOR will continue to favor CNC over Unicom, provided CNC meets the expectation as a profit center for MO

12、RShanghai Municipal Gov't: Eager to make Shanghai as China’s test ground for building high-tech infrastructure (e.g. the integration of telecom, CATV, Internet)in particular, testing HFC to deliver broadband inter

13、netone issue: SPT and ATT JV; how to handle?,BACKBONE BUSINESS,Principles:Target advanced backbone among 15 key cities in Eastern China; start with 2 cores from shareholders but quickly build own networkUse backbone f

14、or a variety of wholesale and retail voice and data servicesMaintain the leading edge IP/packet network, both for technological superiority and to fulfill shareholder missionMaintain the best cost position, using ROWs,

15、 purchasing clout, right technologyBuild reserve capacity/conduit to deter othersAssumptions:The costs of construction and ROW will be the majority of new network costsvirtually all of the network will use MOR or S

16、ARFT right of wayNetwork will be IP or packet in natureDeployment plan will keep costs low, build out quickly, and create good positionlay large number of conduits in one timelater fill, light up, and color fiber str

17、andslease out conduit/fiber/bandwidth to maximize return (utilization),LOCAL ACCESS BUSINESS,Principles:Be very focused in local deployment, targeting priority business areas onlyEmphasize broadband to the customer, u

18、sing FTTB and LMDS where logicalSeek strong local market share, especially in new data services growth areasDifferentiate from China Telecom by superior services, quality, responsiveness Build strong local team to ena

19、ble fast service responseEmphasize “end to end” network ownership and managementAssumptions:SH, BJ, GZ, and SZ business districts as targets for the near termThese account for the vast majority of business telecom d

20、emandNeed to set specific estimates for timing and sequence of deploymentAssume that CNC will have access to key city ROW, such as subway systemsWill need specific assumptions about the ease and cost of hooking up bui

21、ldingsAssume that primary emphasis will be on FTTB, but that LMDS can play an important role, especially in initial deployment and in secondary citiesWill need specific assumptions about timing of adding secondary citi

22、es,INTERNATIONAL GATEWAY BUSINESS,Principles:CNC will be one of few players with a full international licenseVital to enable CNC to provide end-to-end services, global data services, and higher margin IDD serviceHK ga

23、teway link may be strategically importantAssumptions:HK as one of the key location for international connectiona major traffic destinationa major relay locationInternational voice remains highly profitable segment

24、in medium term futureExpect high growth together with steep price drop in international servicesActively plan ahead for joining international sub-oceanic cable consortium,REGULATORY STRATEGY,Principles:Must actively l

25、obby for favorable regulatory decisions, together with shareholdersprovide regulators with international benchmarking for best practicesalign CNC objectives with fair competition, and public interestshave effective se

26、nior management focus on lobbying issuesBe careful about committing investment if regulatory issues too uncertainEnsure CNC strategy addresses national economic development prioritiesPay careful attention to managing

27、relations with China TelecomExpected WTO in 2000 will imply greater opening of the market in the futureAssumptions:At least a 2-3 year window when CNC can continue to enjoy favorable policy treatment, while also work

28、ing to straighten out regulatory issues at local levelMany key regulations remain in grey areas, where CNC can play a role in shaping the policyWill need to make specific assumptions on a number of regulatory issues, a

29、nd develop several scenariosAssume that CT and Unicom are the only full service competitors, but several niche playersWTO will introduce FDI into China’s telecom market by 2002, but infrastructure play remain tightly c

30、ontrolled (still limited competition) until 2004/5may be opportunity for some form of partnership with foreign telcos,COMPETITIVE STRATEGY,Principles:Focus on the best service quality, supply what customers’ need, avoi

31、d competing on priceBuild both “highways” and “tollbooths”Prepare for rapidly changing industry structureBe careful in positioning toward China Telecom: complementary and addressing unmet needsgrowing the whole mark

32、etThe only viable alternative to China Telecom for carriersThe only true “end to end” network across China, with clear central managementAssumptions:Technology leads to continual change in industry structureThe dec

33、entralized nature and business oriented behaviors of China Telecom enables CNC to partner at the local levelHigh opportunity for CNC to fill China Telecom product/service backlog Unicom will be a threat to start a “pri

34、ce war”Various 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 buildingsFor backb

35、one, provide carrier services For international, support other businesses and also offer IDD and refiling, etc.In all areas, emphasize quality, service, end to end, etc.Get a few key customers early; prove ourselves a

36、nd then build furtherAssumptions:Carrier and large and medium sized corporations are the key focusespecially those in telecom-intensive industriesAssume a growing demand for business telecom serviceswill need both

37、 high and low growth scenariosNeed to validate the willingness of key customers to switch, and their anticipated areas of future demand growthIP phone still the source of revenue in the near futureDial-up ISP (171) ma

38、y conflict with ISP carrier interests, but could also serve as strategic inroad for future 3G(1),(1) Not in scope of this project,,CONTENT,Key strategic principlesRegulatory overviewMarket overviewCompetition overv

39、iewBusiness modelsNext steps,REGULATORY HIGHLIGHTS,Our key assumptions:MII regards CNC’s IP-based license as Full Service license, but lacks clear regulatory documentation. In case of local interpretation differenc

40、e, MII is willing to clarify on behalf of CNCe.g. ambiguity on local fixed line (CNC number)CNC will be granted International Gateway license by 1Q 2000CNC IP network protected by the current fixed/mobile interconnect

41、 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 2003more I-Phone provide

42、rs by 2001no new Full Service providers till 2004/2005Account settlement 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

43、 call basisEqual access by prefix/pre-select in 1 year; number portability may take another 1-2 years at leastCNC will have LMDS spectrumCNC anticipates a well-intentioned regulator, with varied degrees of control ov

44、er local incumbent practice None of these assumptions are “guaranteed;” CNC must fight aggressively for them,KEY REGULATORY ISSUES AND IMPLICATIONS,Service licensesFull Service license interpretationInterconnect

45、enforcementAccount settlementPricing and rebalancingROW and access Frequency spectrum allocation and feesUniversal Service ObligationEqual AccessNumbering and portability,IGW license important to comp

46、etitiveness,size of customer base and # of partnersMII notification on each instance adds delay to CNC local interconnectionTime to market in each city affected, detract CNC resourcesFuture Interconnect economic

47、sFuture price competitiveness vs. other players (e.g. CT)economics; price competitiveness vs. CTCase-by-case local coordination and negotiation delay local access build-out; may also be expensive to obtainTime to

48、 market for local access build-out by LMDS access solutionsSubsidizing incumbent for USO affect cost structure of new entrantsUnable to reach CT local line customerMedium term implication: on-net voice not targeted

49、 for the near 4-5 years,3 full service carrier including CNCMore licenses for value-added service providers (type II)MII supports CNC IP based license as Full Service LicenseBut lack of clear documentation may cause

50、confusion at local levelBased on cooperation of carriersArbitration/settlement process exist but time consumingMild punishment, law suit as last resortFor current IP-phone trial, fees not settledLikely future sett

51、lement: LD carrier pays local PSTN operator RMB0.14/minPrice floor likely specified for incumbent by regulationNo imminent initiative for rebalancingLegally feasible for public telecom carrier (e.g. CNC)Practice wi

52、ll have to coordinate with municipalities and infrastructure buildingControlled by MII in co-ordination with PTAsFrequency not likely to be auctionedUSO for incumbent with contribution from new entrant2-3 years be

53、fore transparent and equitable approachPrefix based solution provided by regulation in 1 yearNumber as national resources controlled centrallyFee will be collected for occupation of number resource2-3 years before

54、portability regulations,,Impact on CNC,Highest/Immediate,High/Medium Term,Key issues,Assumption,Implication to CNC,,,,,KEY REGULATORY BODIES AND RESPONSIBILITIES,Other depts, e.g SETC,Various law making bodies,NPC,Stat

55、e Council,Dept. of Radio Frequency Administration,Telecom Administration Bureau,Other depts.,,,Provincial Telecom Administration Bureau,ChinaTelecomNationalCompany,Municipal Level Telecom Administration Bureau,Telecom

56、 Operating Entities: e.g. CT fixed line,Provincial government,MII,,Administration,Operations,National,Provincial,Municipality,,,,,Drafting, passing of telecom laws and statues, e.g. China Telecoms LawInternational, Nat

57、ional and Inter-Provincial scope license grantingHighest level of regulatory enforcement/ arbitrationInternational Gateway administrationNational level telecom resources control (e.g. numbers, frequency spectrums)

58、Provincial level telecom administrationProvincial level license grantingProvincial level regulatory enforcement focus on coordinationIn the process of splitting operation and administrationA number of Municipal Le

59、vel TABs are yet to be createdLimited enforcement powerOperation and administration not separateSettle interconnect and other disputesWhen not settled by provincial & municipal coordination, propagate up to provi

60、ncial level and MII,…,,PTAs,PTB,Source: Pyramid Research; BCG analysis,,,,,KEY LICENSE ASPECTS AND IMPLICATION TO CNC,Full Service and InternationalValue added servicesownershipGeographic scopeDuration

61、license feesPerformance targetsTechnology,Key Aspects,Number of licenses tightly controlled: at most 3 in 2003, including CNCCNC full service license expected 1Q 2000International licenses tightly controlled: at

62、 most 4 in 2003, including CNCCNC IGW license expected by EOY1999More than 4 value-added service licenses possibleControl-share foreign ownership not allowed in basic telecom and public data transport servicesUp

63、 to 50% of FDI in value added service providersIntra provincial services under control of provincial TABsNo limitRegulation will require license feesRegulation will specify clear service buildout targetsRegulat

64、ions will be technology neutralBut 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, internat

65、ional)With IP-phone license, CNC needs to negotiate with CT local branches city by cityCNC IP based bandwidth wholesale service not covered in published regulation, adds delay in local negotiationNumber of potential

66、customers for carrier’s carrier servicesSpeed of establishment and coverage of targeted customer for carrier’s carrier serviceFinancial strength of new entrant customersIntra-provincial LMDS service require applicat

67、ion in each targeted areaCompetitor’s ability to lockout key service areasLimited degree of impact on economicsAdds planning and local coordination pressure to CNC local access solutionsCNC IP/DWDM backbone recei

68、ve 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