British Telecom Case Solution
Case Study: British Telecom: Searching for a winning strategy
Tuomo Summanen Michael Pollitt Judge Institute of Management
November 2002
1. Introduction
The development of the telecommunications market in the United Kingdom and the corporate strategy and development of the incumbent, British Telecom, represents an interesting object of analysis for several reasons. First, the UK telecommunications market was - along with the U.S. market - among the first telecommunications market that was deregulated in the early 1980s. Also some regulatory innovations, such as price cap regulation, were developed, and first implemented in telecommunications in the UK. Second, British Telecom was the first large incumbent in telecommunications that was privatised in the early 1980s. Third, competition in the UK telecommunications started gradually about ten years earlier than in most of the other European countries, and for a long period the UK market was, in number of competing companies at least, well ahead other European countries. However, competition evolved gradually, and had some country specific features that have affected the development of the telecommunications market, and particularly British Telecom.
1
The main question to be explored in this paper is how the incumbent, British Telecom, in its strategies utilised the early mover advantage in the deregulated market? First, the development of telecommunications market in the UK after deregulation will be reviewed, and second, the development of corporate strategies of British Telecom will be described.
2. Telecommunications market in the United Kingdom
2.1 The History of liberalisation Before its 1984 privatisation British Telecom had a legal monopoly over fixed line network operations (local, long-distance, international) and the supply of network services, most apparatus supply, and value added network services. In the beginning of 1980s the agenda was not to privatise British Telecom, but
Tuomo Summanen Michael Pollitt Judge Institute of Management
November 2002
1. Introduction
The development of the telecommunications market in the United Kingdom and the corporate strategy and development of the incumbent, British Telecom, represents an interesting object of analysis for several reasons. First, the UK telecommunications market was - along with the U.S. market - among the first telecommunications market that was deregulated in the early 1980s. Also some regulatory innovations, such as price cap regulation, were developed, and first implemented in telecommunications in the UK. Second, British Telecom was the first large incumbent in telecommunications that was privatised in the early 1980s. Third, competition in the UK telecommunications started gradually about ten years earlier than in most of the other European countries, and for a long period the UK market was, in number of competing companies at least, well ahead other European countries. However, competition evolved gradually, and had some country specific features that have affected the development of the telecommunications market, and particularly British Telecom.
1
The main question to be explored in this paper is how the incumbent, British Telecom, in its strategies utilised the early mover advantage in the deregulated market? First, the development of telecommunications market in the UK after deregulation will be reviewed, and second, the development of corporate strategies of British Telecom will be described.
2. Telecommunications market in the United Kingdom
2.1 The History of liberalisation Before its 1984 privatisation British Telecom had a legal monopoly over fixed line network operations (local, long-distance, international) and the supply of network services, most apparatus supply, and value added network services. In the beginning of 1980s the agenda was not to privatise British Telecom, but
Bibliography: Mark Armstrong, Simon Cowan and John Vickers (1994) Regulatory Reform: Economic Analysis and British Experience, London, Chapter 7 Telecommunications, pp. 195-244. BTGroup: www.bt.com 25