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apparently focusing instead on higher-value international and domestic long-distance traffic and relying on the established carrier for local service.
Furthermore, after five years of competition, Mercury - the U.K.'s second network - serves less than 5% of all local subscribers and is heavily concentrated on accessing large business customers, such as banks in the City, that generate profitable long-haul traffic. TTNet, Tokyo's second local network, has managed to sign up less than 3,000 subscribers. In the U.S., alternative access carriers such as Metropolitan Fiber Systems typically provide access to long-distance carriers, bypassing the local loop rather than offering true local service. This type of carrier currently has less than 5% of the U.S.
access market.
4. Different approaches and new technologies may be the most effective way to provide customer choice and competition at the local level.
The U.S., as well as in other countries with advanced telecommunications infrastructure,
radio-based cellular systems and personal communications networks (PCNs) may in time create significant competition in local telephony. Cellular systems can already provide the same level of functionality as fixed-link local networks, and future technological
advancements may reduce the price of radio-based services to a point where they may become a direct competitor with the local loop (see Exhibit 9).
The expansion of telecommunications services in many countries, including Hong Kong, has come about not because of the existence of a second fixed-link network, but because of technological advances and deregulation in value-added, data, and radio-based
services, as a recent review of innovative telecommunications products and services in the U.S. clearly shows (see Exhibit 10). This pattern of innovation has been repeated elsewhere in the world. In the U.K., for example, several new services in basic local telephony have been introduced since deregulation, but this is more a reflection of British Telecom's poor service record prior to deregulation: most of these new services, such as hunting line and starline (i.e., digital exchange PABX-like services), had long been
available to users in other countries, including Hong Kong. Other new services introduced
in the U.K., such as CT2, have all been in mobile and other non-fixed-link areas that have
flourished as a result of deregulation and technological advancement.
McKinsey & Company, Inc.
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