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Contents

1 Introduction

1.1 Information and telecommunications

1.2 Liberalization of the German telecommunications market

1.3. Objectives of this paper

 2 Primary data survey

2.1 Methods of the survey

2.2 Contents and structure of the questionnaire

2.3 Response behaviour

 3 Data material of the questionnaire

3.1 First complex: general attitude

3.2 Second complex: technical data

3.3 Third complex: market and competition

3.4 Fourth complex: planned changes and expected use

3.5 Fifth complex: individual data  

4 Data interpretation

4.1 First complex: general attitude

4.2 Second complex: technical data

4.3 Third complex: market and competition

4.4 Fourth complex: planned changes and expected use

4.5 Fifth complex: individual data

 5 Governmental and private activities in the market

5.1 The situation in Brandenburg

5.2 Governmental activities

5.3 Private activities

 6 Summary  

7 Literature, References


 1 Introduction [contents]

 1.1 Information and telecommunications

Changing basically the understatement of business and economic sciences, information has become one of the key factors of modern enterprises. Be it the input-, production- or outputside, the right information have to be at the right place and time.

There are two main reasons for this development: the saturation of old markets and the globalization of economic activities. Saturated markets need a sophisticated marketing basing on information and communications. For opening up new, international markets, profound information about countless important aspects are essential. Not to forget internal information within the structures of the enterprise, which are the basis for competitive production of goods and services.

The volume and variety of information is growing rapidly. The life-span in contrast is getting smaller and smaller. Immediate availability is the actual value of information as it becomes obsolete in shortest time.

Thus fast handling of high information volumes is an essential point for a successful competition in the market. The best and only way is telecommunications (TC), the transmission of electric signals.

 

The German market for telecommunications has been in a monopolistic situation for several decades. In both the eastern and the western part, it was determined by governmental influence and interests. The Deutsche Post and Deutsche Bundespost (DBP) were the only providers of telecommunications services for the public. Only after the Postreform I in 1989, economic and territorial tasks were separated. But even since the second Postreform in 1994 (convertion of the Telekom into a public company) there has still been consid-erable governmental influence due to several legal regulations and a enormous share volume held by the government.

Mainly the development of harmonization within the EU lead to the first changes. In 1987 the ‘green book’ first formulated the aim to make the european telecommunications market subject to competition. In 1993 the Council confirmed the deadline 1st January 1998 as the final date for the total liberalization of the telecommunications market. So also the German government was forced to the deregulation of the TC - monopoly in order to prevent the european market from restraints of competition.

The Telekommunikationsgesetz (TKG, July 96) is now the legal basis for important changes. It regulates the gradual liberalization of the German telecommunications market by 1st January 1998. From this time on alternative telecom-providers are officially allowed to offer their services to the public without restrictions.

Of course preparations have begun a long time ago. Several companies and institutions have developed highly complex concepts and network structures in order to profit from the first mover advan-tage. As several services for non-privates have been deregulated since 1st January 1997, competition has not to be invented by scratch.

The mobile phone market which had become subject to competition in 1991 already (licences for D1 and D2) shows the positive impacts of competition that can be expected.

The telecommunication market can be divided into three fields:

This paper tries to describe the market for telecommunications in Brandenburg and focuses on the first two fields: networks and equipment. Topical data from the business sector will be the basis of the assessment. The main emphasis will be put on the following points:

In order to have an adequate basis for a market assessment, sufficient data material is needed. The research of the TC market in Brandenburg is only in the initial state. Some official initiatives (e.g. BIS 2006, WiTECNeT et al. which will be regarded in the last chapter) are providing secondary data, but these data are highly general and not suitable for a concrete assessment of the market and its demand from the business side. Therefore I decided to collect information specifically for this project in order to be able to give statements with the help of topical primary data.

 2 Primary data survey [contents]

    2.1 Methods of the survey

During the preparation of a primary data collection decisions over the following points must be made:

As mentioned in the preceding chapters, this paper has a descriptive approach. For this kind of research, a survey is best suited. Modern marketing offers an interesting variety of contact methods. Information can be gathered by mail, telephone, internet or personal interview.

The method must of course be chosen regarding the preconditions. As the target group was the telecom specialists of enterprises situated all over Brandenburg, personal contacts seemed impossible for this survey. I supposed the high complexity of the questions and the figures concerning different fields of the enterprise to result in an additional, time intensive information process within the company. Therefore a mailed questionnaire promised the best result.

The selection of the companies that were to inquire was one of the most important points of this survey and is generally deciding over success and failure of statistics. If biased data are received due to incorrect selection of the sample, no statistical method will be able to bring corrects results in the analysis.

To receive material which provides accurate information, the sample must adequately reflect the market. As general sampling method I chose cluster sampling. This method is best suitable for a widely spread target group. The clusters were selected randomly.

The restriction to the sample unit was the size of the company.

I expected very small businesses not to have several telecom charac-teristics that I defined as essential in the sense of this survey. This is for example the at least possible need of new techniques, monthly TC costs of more than DM 500 and thus the capability to assess the market from a non-private point of view.

The sample size was mainly determined by cost restrictions. The inquired group finally consisted of 490 companies. That were all companies with more than 10 employees in seven clusters (towns and industrial areas) all over Brandenburg.

 2.2 Contents and structure of the questionnaire

Due to the restricted time capacities of the respondents, the questionnaire consisted of 2 pages only. In order to achieve a high response rate with unbiased answers, a letter explaining the intention of the survey was added.

The questions that were posed can be divided into 5 categories reflecting the main aspects of a market:

The concrete contents of the questions will appear in chapter 3 together with the results of the survey.

The structure of the questionnaire had to be held quite simple. Therefore the basis was linear, only three questions were subdivided. As the questions themselves were already rather difficult, a compli-cated structure would have prevented even more companies from responding.

 2.3 Response behaviour

The questionnaire was prepared for response by letter or facsimile. To stimulate immediate response, a deadline of 10 days was given. Two weeks after the first questionnaire a reminder was sent to 10% of the first receivers. This letter contained another copy of the questionnaire that had been marked as duplicate.

The response behaviour can be assessed in terms of quantity and quality:

The total response rate was 11,2%. This is a satisfying result for such a difficult topic with a time-intensive processing.62% of all respondents answered within the first ten days, 15% answered later but before receiving the reminder. 23% of the companies sent back the marked questionnaires and were thus caused to react by the second mailing. So the response rate of the reminder was 24% compared with the initial rate (without reminder) of 8,8%. This figure shows the efficiency of this method.

On average, the respondents answered about 90% of the questions. Those which were less answered were the extremely technical or the personal ones (e.g. turnover, telecommunications-costs). Nevertheless the completeness of the answers was impressive. One possible inter-pretation is, that the respondents answered after having decided to really want it. This is supported by the fact, that the response rate of the reminder was relatively high, the quality of the answers in contrast significantly low. Only 70% of the questions were answered correctly.

The method used to send back the questionnaire was also statistically analysed. 43,6% of the companies chose the fax machine, 56,4% the more costly way by letter.

 3 Data material of the questionnaire [contents]

    3.1 First complex: general attitude

As mentioned in chapter 2.2, the first complex comprised warming-up questions, investigating the role of telecommunications in the compa-ny. They did not ask for figures but a rather general attitude.

 

The second complex was the biggest one and consisted of several questions about the equipment and other telecommunications data of the company. The results of selected of these questions are given in the following.

  • 43% of all telephone- or data lines use the ISDN-protocol, 56% are analogous and 1% is X.25-data lines.
  • 90% of all lines are dial-up lines, 10% are fixed.
  • 70% of all companies have a telephone system, 20% of these use S2M-lines providing 30 ISDN-channels each.
  • The telephone has a share of 70% of all equipment (in pieces), cellulars 15%, computers 10% and fax machines 5%.

  • 36% of the TC-traffic stay in the region and 36% are long-distance traffic. 24% stay in the city-region and only 5% are international.

 
  • 28% of the surveyed use new applications such as videoconfer-encing, teleworking, data transfer and application sharing.
  • Of all new applications that were used in the companies, 74% were data transfer, 15% teleworking , 7% application sharing and 4% videoconferencing. Especially car dealers often use data transfer.

    3.3 Third complex: market and competition

The third complex contained questions to investigate the market structure and the competition. Most of them were about the subjec-tive assessment of the respondent, because individual opinions and feelings play a main role in the market.

  • 98% of the companies have Deutsche Telekom as operator for the terrestrial network, 55% have D1 cellulars, 38% D2, 13% e-plus. No company uses call-back services.
  • 58% of the companies regularly inform themselves about the offers of other operators and service providers.
 
  • 81% of the surveyed think that the price level of their main operator (generally Telekom) is too high and the price-performance ratio is bad.
  • The following bar chart visualizes the company`s assessment of the main operator (generally telekom) with the help of important char-acteristics: tariff system (clear tariff levels, bonuses and business-tariffs etc.), telephone supply (waiting times for the connection to the network, availability of special services and protocols) and others.

    3.4 Fourth complex: planned changes and expected use

The fourth complex contained questions about planned changes in the IT-sector of the companies. The main emphasis lay on the use of new applications such as data transfer, videoconferencing, applica-tion sharing, teleworking and the internet.

  • The companies were asked, whether and when they intend to use one of the new applications for the first time or to extend their use of them. In the year 97 12% intend to do so, 23% in 98, 59% chose ‘later’ and 16% ‘never’.
  • The companies who chose ‘never’ had different reasons. 63% think that they do not need these applications, 29% had not yet occu-pied themselves with the topic. Too expensive equipment prevents 33% and too high telecommunications tariffs 25% from the use. 
  • 74% would use or extend the use of new applications if TC-tariffs were considerably lower.
  • Of the 32% - share using internet services, 31% have only passive access, 56% additionally use email, 25% have own webpages and 38% use databases which are not free.
  • 21% of the companies intend to use internet services for the first time or to extend existing activities in 1997, 17% in 98 and 33% later. 29% think never to use such services.

    3.5 Fifth complex: individual data

The fifth and last complex of the questionnaire contained questions about individual data of the company. On the base of these data several relations were calculated.

  • of the surveyed companies count among the production sector, 31% among the services, 15% are trading companies and 4% public institutions. 
  • The average annual turnover of the companies (banks excluded due to different balance methods) was DM 11,1 million in 1996. The median was DM 4 million. The 75%-quartile was DM 8 million. The minimal turnover was TDM 420 the maximum DM 150 million.
  • The average number of employees in 1996 was 61. The median was 30 and the 75%-quartile 65 employees. 4 companies had less than 10 employees and therefore did not fulfil the restrictions of the sampling. Nevertheless their data were processed as well. The maximal number of employees was 565.
  • The services sector has the highest TC-costs per TDM turnover with DM 12,7, production has costs of DM 5,10. Trade and the public sector have the lowest costs of approx. DM 4,20 per TDM turnover each.

  • The monthly TC-costs per employee differ extremely. Trade and services reach a level of DM 66,5 and 66,4 resp., the production sector has costs of DM 49,1 per employee. The public sector has relatively low costs of DM 22,7 only.

 

 4. Data interpretation [contents]

    4.1 First complex: general attitude

Most of the companies had thought about their telecommunications conditions before the survey. But only 36% think to be TC-intensive. Therefore the problem of high telecommunications costs in proportion to other figures of the business seems not to be seen as too important.

Telecommunications is obviously regarded as an important factor for the company and nothing casual. This may also be a result of intensive marketing campaigns of the TC-companies forcing to think about alternatives and new technologies. Furthermore there are several activities from governmental side to improve competitiveness of small and middle sized companies by supporting and promoting new TC-applications.

       

    4.2 Second complex: technical data

Technical data are an important basis for the assessment of the market condition. They show the recent level of modernization and give an impression of the market volume. As in a market study the future development is more interesting, these data must be seen in relation with the two following complexes. Some figures of this complex will not be analysed in this chapter, but in relation with the following ones.

ISDN has found a very high acceptance already. The share of ISDN in the business market (43%) is considerably higher than in the market for private telecommunication. As possible causes I see:

Most of the surveyed companies have monthly telecommunications costs up to 3000 DM. Together with the data of complex 5 this shows, that the State of Brandenburg has few big companies but many small and middle size ones. Therefore operators and service providers must find more semi-professional solutions for this market.

The negative effect of little TC-costs is, that the whole market is less attractive for alternative suppliers due to a lower turnover-volume. So the positive effects of a competition are supposed not appear on the market as soon as in other areas of Germany.

The distribution of the telecommunications traffic is an important factor for the competitiveness of regional operators. The more of the traffic is made within the borders of the State, the better for local suppliers with small networks. According to the figures of my survey I estimate 75% of the traffic to run in Brandenburg. So the regional suppliers are in a good position. In chapter 5 this topic will be dealt with more concretely.

 

4.3 Third complex: market and competition

Deutsche Telekom AG has the absolute monopoly in the market. Nearly all enterprises depend on Telekom`s terrestrial network. This is the result of many years of legal protection of this monopoly. Also In the mobile telephone sector, Telekom`s subsidiary DeTeMobil (D1) is the favourite. In contrast to the whole german market, D2 has rela-tively small market share. My interpretation is, that other competitors waited too long with opening up the eastern market and Telekom was seen as the official successor of the Deutsche Post, therefore big and secure in the eyes of the people.

Nevertheless, this situation of massive restriction to competition is seen as negative by many enterprises. So 58% of them actively informed themselves about alternatives. This is supported by the feeling to pay too much, even for basic services. International comparisons (e.g. Wel-fens, 1996) underline the price-leadership of the Telekom.

As soon as alternative operators appear on the market with lower prices, Telekom will be under massive pressure from the side of the clients. But those will - especially in the State of Brandenburg - have to wait until the competitors will have extended their networks and open it to the ‘normal’ clientèle.

The assessment of the main operator (generally Telekom) shows inter-esting aspects for the coming competition. Bad marks for tariffs and reactions on complaints are weak-spots of Telekom and targets for aggressive marketing of the future competitors. Of course the improve-ment of quality must be combined with attractive prices to entice clients away.

The use of new applications shows, how susceptible the enterprises are to new developments. This is an important point, because the future market will not longer mainly consist of normal telephones. Videoconferencing, teleworking, teleshopping (tele - x - ing), the inter-net and many others will determine the success of the IT-sector.

The surveyed companies often hesitated to invest in new technologies, very often due to high prices of equipment and connections. There-fore a successful marketing is essential in order to intensify the use of modern products and services.

       

    4.4 Fourth complex: planned changes and expected use

This complex is best suitable to assess the future market volume for telecommunications networks, equipment and services.

Most of the 72% of the enterprises that do not use new applications hesitate to decide for a future investment so far. The opinion not to need such applications is the most important one. But new developments and techniques create useful features for nearly everybody. The most important task therefore seems to be to convince today`s normal users to be progressive.

Competitiveness can be ensured with improvement of quality and price and therefore efficiency only. Creating this efficiency to the enterprises must be seen as the target of the IT-branch.

Excessive tariffs of course also prevent an extended use of traffic-intensive applications. 74% of the surveyed are willing to start into the information society under the precondition of considerably lower prices. The coming competition will improve their situation. Governmental programs will extend their subsidies for SMC addition-ally. But also lower costs can not substitute the need and the recog-nition of money-worth advantages.

The internet is winning more business relevance each day. 32% of the enterprises already use this incredibly powerful medium.

But many companies miss a real use of the internet for their business. The attractivity of the Web must be improved by creating resources of local interest. German databases, partner markets and job markets

as well as many other developments are a good beginning. I expect the internet to become even more popular in the next time. This is supported by the 38% of the surveyed which intend to go online within the next two years. These facts and developments of web-speech systems causing high traffic result in the need of wide band internet links. Only by an improvement of its performance the internet will become a reliable ‘partner’ for communications.

 

    4.5 Fifth complex: individual data

With the help of individual data, correlations between several inter-esting figures can be found. Some of which shall be studied in this chapter.

A division of the IT-market into three sectors (production, services, trade) seems reasonable to me if the analysis shall not be confined to the traditional telephone market. Recently a rapidly growing impor-tance of high-tech equipment, value added services and custom-specific complex solutions can be noticed.

Especially these fields of the TC-market will become most profitable. And in the expected use of these activities, there are considerable differences between the sectors.

The services sector obviously uses much more IT than the production sector. This results from the high importance of the factor ‘information’ for these companies. Communications with partners and clients is more TC intensive too. Nevertheless the production sector plans to extend the use of IT, but with a relatively low volume. The high share of producing enterprises in the State of Brandenburg therefore leads to a relatively small market volume.

 

5 Governmental and private activities in the market [contents]

The analysis of the primary data gave some concrete facts about the market volume and the needs of the enterprises. In this chapter I want to study the constitution of telecommunications in Brandenburg more generally.

The State of Brandenburg has little economic power. The lack of big industries and poor endowment with technological know-how de-grade it to a development area in Germany.

Only 70 companies have more than 400 employees. As shown in the preceding chapter, the secondary sector has the predominance but only little needs of modern telecommunications and services. Additionally, the small budget of the State result in very low public investments in education and infrastructure.

But just economy and education usually are the driving forces behind the development and implementation of new telecommunications infrastructures and techniques. Therefore the State of Brandenburg has a significant delay in the field of telecommunications.

Most of the enterprises are concentrated in the area around Berlin and few other agglomerations. Therefore the economic structure in Bran-denburg is very inhomogeneous and in danger to become desolate in wide areas.

Private investors will not take the risk of creating powerful infrastructure for still invisible demand. If the whole State shall participate in the development of the information society and profit from its advan-tages, the government must take an active role.

This could be the creation of incentives for investors, the moderation of private activities and, as a main point, increased efforts to establish enterprises in underdeveloped areas.

 

    5.2 Governmental activities

As seen in the preceding chapter, the government must play an active role on the telecommunications market in order to create an acceptable level of infrastructure and services all over Brandenburg. This is a precondition for establishing new enterprises and thus achieving an acceptable living (and working) standard in all areas.

The effects of the IT-development on the labour market are difficult to assess. Usually the slogan teleworking promises the solution for the problem of unemployment. But to be correct it must be mentioned, that mainly the TIME-industries (Telecommunications, Information, Media and Electronics) will be the gainers of these effects. In the public sector, for the next 10 years losses of 5780 jobs are predicted due to new information technologies in the State of Brandenburg. This is more than the jobs that are hoped to be created in the TIME industries (5080) [1].

Nevertheless the government of the State of Brandenburg has recognized the importance of a rapid IT-development.

Several other States of Germany which run interesting and advanced projects can serve as partners and examples. Projects such as the Bayernnet and Hessen-media are two of them and show, that very often only the first initiative has to be taken by the government. Private investors and institutions are usually soon encouraged to act themselves.

Two of the governmental projects in Brandenburg shall briefly be mentioned to show in what ways the government tries to help the market with a small budget.

The WiTecNet-Initiative is a very good example for the moderating role of the government. Several operators such as Telekom, ESSAG and MEVAG (see following chapter) cooperate in registered society and offer some of their free capacity for special projects which shall stimu-late the development of new techniques and services. Of course, no company would do so under normal competitive conditions. But as the WiTecNet e.V. will have great influence and good contacts to the officials, nobody can afford to stay away. This initiative ‘aimes at becoming a forum for ideas, experiences and competence, giving support for the creation of the information society’ [2]. 

A second project, supported by the capacities of the WiTecNet e.V., is BIS 2006. This ‘Brandenburg-Information-Strategy’ is part of the EU- program RISI and coordinated by the State government of Branden-burg. It shall become a private-public-partnership-platform, allowing to optimize the IT resources for the economic and cultural develop-ment of the State of Brandenburg. The members of several project groups (e.g. future of libraries, regional information systems, telematics for SMC) work on projects (e.g. virtual college, Brandenburg-Online, technology transfer) to achieve this aim.

As can be seen from these examples, governmental action mainly focuses on services and information projects. The basis, cable or radio-linked networks, usually have to be created by private investors due to enormous costs. Sometimes the investors are supported by the govern-ment.

       

    5.3 Private activities

The basis for all new developments in the IT sector is telecommuni-cations. The data volumes of virtual colleges and of other complex information systems grow rapidly. Thus a precondition for the success of the transformation into a information society is a powerful TC-infra-structure.

Modern applications such as high-quality videoconferencing need wide band connections starting at 2 Mbps (Megabits per second). Virtual Reality and HDTV demand 34 Mbps under ATM and more.

Telecommunications industry therefore developed networks and protocols with capacities of 155, 622 and even more Mbps.

At the moment these volumes are not necessary for most of the busi-nesses. But they are expected to become normal in a few years. All the coming competitors of ´98 found their networks on such powerful backbones in order to be well prepared for the overlinearly growing traffic.

Until the beginning of the deregulation of the German telecommu-nications market, Deutsche Telekom was the only supplier of trans-mission lines. With the first licences for mobile phones and especially in 1996, when other suppliers were allowed to create ‘corporate net-works’ for companies and institutions, the monopoly began to melt. In 1998 also the public market will see new competitors. The big players of tomorrow are well known already: Telekom, electricity and gas suppliers (ESSAG, MEVAG), Deutsche Bahn AG and the Stadtwerke, which all own extensive networks with the necessary free capacity to enter the market.

 These and other new competitors hope to be able to break the old monopoly. First in the attractive business telecommunications sector, later on also in the private one. According to a study of EUTELIS, their chances are considerable. 84% of the surveyed companies have a positive attitude towards new providers and would change in case of better offers.

The main problem for the new competitors is the so called ‘last mile’. Generally only Deutsche Telekom has a network linking private clients; but the installation of new infrastructure for households is relatively high in relation to the expected profit. New operators therefore have to hire the ‘last mile’. Telekom`s price strategy in this field aims of course at holding the market; the development of a competitive market is there-fore alarming obstructed.

But there are also smaller companies who want to profit from this development. As the attractive areas such as Berlin and Potsdam are in the hand of the bigs, they try to get into niches. Very often they cooperate with universities and other institutions. It seems not to be pure profit thinking only, they partly work on a non-profit base.

The PRONET GmbH for instance creates in cooperation with the University of Cottbus the ‘Citynet Cottbus’, a good example for decen-tral activity. Many towns own networks that directly connect their inhabitants. Thus they are not hindered by the problem of the last mile and have very good conditions to run own, profitable networks.

Another project aiming at connecting science and economy is the BbNET. This wide band-network shall gradually link the universities of Brandenburg and most of the TGZs (Technologie- und Gründerzentren) which host young enterprises and support them with prepared infra-structures. The BbNET offers a wide range of telecommunications services and equipment as well as powerful access to the internet.

In April 1997 the Biotechnologiepark Luckenwalde was connected as one of the first members of the BbNET. 

     

6 Summary [contents]

Information and communications are important factors for the com-petitiveness of the economy of the State of Brandenburg. It can only be optimally developed using new and powerful telecommunications techniques.

The demand for TC varies among the different sectors but is assessed as rapidly growing. The market for TC equipment, networks and ser-vices has an enormous potential. The liberalization of the TC market in 1998 brings new impulses by creating competitiveness and the result-ing advantages of falling prices and quality improvement.

But the speed of the liberalization in reality must not be overvalued, as the attractivity of the market is relatively low compared with further developed States. Especially the near metropolis of Berlin entices investors away.

The survey showed that Deutsche Telekom has an overwhelming pre-dominance in the market with some negative effects. The total liberal-ization in 1998 should therefore bring positive effects for the consumers and the whole market structure. This will also remedy some of the pro-blems that often hinder the extended use of new techniques and ap-plications by the businesses in Brandenburg.

Due to considerable structural differences in the State, governmental activity is needed to care for a adequate development in the whole country. This comprises direct activities (i.e. extension of existing gov-ernmental networks), indirect activities such as creating financial pro-grams for companies in Brandenburg and the moderation of private activities.

The concrete effects of the rapid development cannot be foreseen with absolute certainty in all fields. But the competitiveness of the enterprises will be improved significantly, as faster and more concrete information can be used in the process of creating goods or services.

The global trend towards the information (and telecommunications) society offers many opportunities, everybody in the State of Branden-burg should try to profit from this development. As producer or as user.

      

7 Literature, References [contents]

 

Footnotes:

[1] 'Konzept für eine landesweite Kommunikationsinfrastruktur für die Wirtschaft in Brandenburg'. EUTELIS Consult, Ratingen 1996

[2] Dr. Dreher, ministry of economics of the State of Brandenburg in: 'Informations- und Kommunikationstechnologien im Land Brandenburg', Band 8, 1997

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