Telecommunications: understanding the dynamics of the organization of the industry

This paper focuses on the evolution of the telecommunications industry. Within the economic literature, different analytical assumptions are proposed, from a global sustainability of competition to the re-emergence of a stable oligopoly generated by a process of shakeout through mergers and acquisitions. In a nutshell, then, the understanding of the dynamics of the organization of the industry is still an open question with a multiplicity of answers. The main purpose of this paper is to clarify this timely debate, and to sustain that the organization of the industry is progressively evolving towards an oligopoly structure. The specificities of the argument developed in this paper are the following. Firstly, the paper confronts different analytical frameworks, namely mainstream and evolutionary-based, on key questions such as the successful entry and long term sustainability of new telecommunications carriers, as well as new actors such as Internet-related companies. Secondly, the paper analyses the industry as a broad system called ‘info-communications' and composed of ‘vertically-related' subsystems such as equipment suppliers, telecommunications carriers, Internet access and service providers, broadcasting and middleware groups. Thirdly, the paper analyzes past and current restructurings observed within this industry over the last twenty years, in order to infer reliable conclusions on the future evolution of this industry. Fourthly, the paper advocates that the evolution of the organization of the industry is highly connected to the characteristics of the innovative process and to the conditions of its implementation.