What does it mean to be a neutral supplier in the Telco market place?
by Jesper Hart Hansen

After the deregulation of the telecommunication industry in 1998, the typical picture for the Telco wholesale market in most European countries can be described as having an old telecommunication company formerly or partly owned by state – and a handful of newcomers.

A relatively new player in such a market, needs to find it’s niche or at least to have a competitive advantage that serves a need in the market, but not necessarily constitutes a threat to the incumbent companies. Neutrality may in this sense be a competitive advantage.

But what is neutrality then? Well, as a direct result of the deregulation, more players had the chance of entering the market place. But the new type of player was different to the incumbent companies, as the new players were not able to cover the entire value chain (i.e. from establishing network infrastructure to selling telephony or Internet access to the end user).

The deregulation has therefore split the value chain into more layers, where different companies are addressing different layers. A new company positioned in the lower layers will be neutral to a player in the top layers and vice versa. The incumbent companies on the other hand, embrace the entire value chain and can by definition not be neutral.

For neutrality to be defined as a competitive advantage at least two issues should be addressed:

The majority of the players, in terms of market share, should not be able to take the same position

The neutrality should not only bring along advantages to the neutral company but also to their customers

As a competitive advantage, the neutrality is relatively easy to maintain, since the incumbent companies or the market leaders cannot copy the advantage. They are by definition not neutral. They may be able to price out the neutral supplier or use other means to force the company out of the market, but the neutrality itself cannot be neutralised.

But how does the neutrality then constitute an advantage to the company and its customers? Why should a potential customer buy e.g. dark fibre or transmission services from a relatively small player just because it is neutral, when a larger and sometimes more price-competitive player can deliver the same product?

The answer to this refers to the definition of the product. If the product solely consists of e.g. a leased line with service, the customer might choose the incumbent company. But, if the product is broadened to also include strategic long-term relations, the incumbent company will in many cases suffer from being unable to deliver.

The broad product portfolio and the many activities of an incumbent company often imply that the company may act as a supplier, a customer and a competitor or any combination of the three. This makes it unfit to play the role as a strategic partner when dealing with carriers or carrier’s carriers.

A neutral supplier on the other hand may not only be able to deliver fibre and transmission, but also to step in and take the role as a strategic partner, creating more proactive and fruitful business relationships.

In today’s turbulent market, where needs for consolidating business or finding new business areas in a stagnating market are just as important as exchanging experiences, a strategic partner is more than justified.

Being neutral in the market place is therefore not just another word describing a company. It is a new opportunity for creating advantages, which may benefit you and your customers and at the same time be something not available to your competitors.