Increasing Broadband Internet Penetration
In the OIC Member Countries
39
Figure 11: Difference in scale economies between local and global operator
Source: Telecom Advisory ServicesWhen this occurs, the global operator achieves a cost advantage vis-à-vis the local player,
which can be leveraged to gain more price flexibility. Beyond economies of scale, global
players achieve learning curve benefits by focusing on a single region. In general terms,
regions tend to share similar demographics, and certain aspects of regulatory frameworks. The
first factor allows a global carrier to replicate market strategies with minimal customization
costs (e.g. similar products, similar distribution channels). The second aspect – common
regulatory frameworks – facilitates the development and implementation of approaches to
deal with local laws and government policies.
The advantage of global players vis-à-vis local players is more noticeable in mobile than in
fixed broadband. Fixed broadband is more influenced by “local” factors (e.g. cost of operations
and maintenance labor, topographic characteristics) than mobile broadband. Nevertheless,
fixed broadband technology is still affected by certain economies of scale and learning curve
factors. On the scale side, the possibility of obtaining better prices for the acquisition of
equipment still favors the global player. On the learning curve side, global fixed broadband
players still command an advantage when it comes to the opportunity of sharing product
development expertise and best practices. Examples of these benefits will be provided when
analyzing the strategies of global players active in the OIC Member Countries (presented in
chapter IV).
The advantage of regional focus has been a key driver of gradual concentration of global
players on specific regions of the world. Global operators are deployed across countries
through country-focused operations, but following a regional focus. For example, Orange is
focused on Europe, Africa and the Middle East, MTN is focused on Africa, while Telefonica is
focused on Europe and Latina America (see table 7).
Global Operator
Local
Economies
of Scale
Subscribers
Unit Cost