Business Strategy and Regulation Forum: Convergence and Digitalisation

Convergence and digitalisation are part of a new and important phenomenon that influences strategy and business models. There is no surprise that it attracted so much attention from so many stakeholders. David Currie, OFCOM chairman, argued in December 2003 that convergence was slowly happening at network, device, industry and regulatory levels (4th ECTA Regulatory Conference, 10 December 2003). Now, almost four years later, convergence is reality with, as industry’s norm, Quad and Triple play offers (fixed, mobile, data and TV). In the EITO 2007 Report the European Commissioner for Information Society and Media, Viviane Reding, defines digital convergence as the ‘heart of new technology revolution’ (EITO, 2007 p. 12) and notes how the ICT sector is ‘adjusting to stronger competition and digital convergence’ (EITO, 2007 p. 14).
In the telecommunication industry convergence is based on the integration of IP systems and telephony. In ICT it can be described as the integration of fixed, mobile, data and telephony networks and IT systems (e.g. IMS). An example is the application of e-commerce systems to mobile networks.
Convergence has been enabled by the decreased cost of digitalisation of products, success of Internet and increase digital systems customisation opportunities. Digitalisation permits to deliver a wide range of push and pull products, mainly designed as voice, data and video services, in an innovative, intuitive and customisable fashion and over a sole electronic communication platform. An integrated IP-based network gives diverse firms the opportunity to invest and launch flexible and timely products for a considerable lower unit cost; in this perspective economy of scale and scope is expected to be maximised, competition at retail level enhanced and value-to-customers efficiently delivered. However, our understanding of convergence should not be limited to technological convergence. As phenomenon, it expands to business models (e.g. from e-commerce to m-commerce), markets (no boundaries), services (bundles) and organisation (horizontal organisations serving different markets). For example, e-Bay acquired Skype and Pay-Pal to address two basic needs of its customers: communicate about the products and pay. Telecom Italia merged with TIM to increase efficiency, offer a complete set of communications products and upgrade its business model.