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Career Handbook - Telecommunications Introduction

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Key Points of Interest:
  • Telecommunications includes voice, video, and Internet communications services.
  • Job growth will be limited by overcapacity, technological advances, mergers, and contracting out.
  • With rapid technological changes in telecommunications, those with up-to-date technical skills will have the best job opportunities.
  • Average earnings in telecommunications greatly exceed average earnings throughout private industry.

Changes in technology, government regulation, and market conditions continue to transform the telecommunications industry. Whereas voice telephone communication was once the primary service of the industry, the transmission of a variety of information, including data, graphics, and video, is now commonplace. The widespread installation of fiber optic cables, which transmit light signals along glass strands, permits faster, higher capacity transmissions than those possible with traditional copper wirelines. In addition, networks of radio towers provide wireless telecommunications services. In the previous Career Guide, telecommunications and cable and other pay television services were described in separate sections. The convergence of the services provided by traditional telecommunications companies and cable companies has led to the combination of those sections into this one statement.

Changes in government regulation introduced competition into an industry that was once dominated by a single company. Competition from outside the industry increased as cable companies and public utilities expanded their own communications networks. During the late 1990s, the growth of the Internet, advances in a range of technologies, the deregulation of the telecommunications industry, and rapid increases in demand for telecommunications services helped fuel rapid growth. Consequently, many new competitors entered the markets and built additional transmission capacity. The massive investments in additional capacity by new competitors and existing companies eventually caused supply to significantly exceed demand, resulting in much lower prices for transmission capacity. The excess capacity and additional competition led to either declining revenues or slowing revenue growth, which caused many companies to reduce employment.

The principal sector of the telecommunications industry is telephone communications. Establishments in this sector operate both wireline and wireless networks. Wireline networks use wires and cables to connect customers' premises to central offices maintained by telecommunications companies. Central offices contain switching equipment that routes content to its final destination or to another switching center. For example, switching equipment may route local telephone calls directly from the central office to their final destination; long-distance calls are routed to larger switching centers that determine the most efficient route for the call to take.

Wireless networks operate through the transmission of signals over networks of radio towers. For example, a wireless cellular telephone transmits radio signals to an antenna located on a radio tower. The signal is then transmitted through the antenna into the wireline network. Other wireless services include beeper, paging, and Internet access. Because these devices require no wireline connection, they are popular with customers who need to communicate as they travel, residents of areas with inadequate wireline service, and those who simply desire the convenience of portable communications. Increasing numbers of consumers are choosing to replace their home landlines with wireless phones.

Wireless providers plan to deploy additional technology called third generation (3G) wireless access. Conventional wireless Internet access is relatively slow, allowing cellular phones to display only limited amounts of text-based information. A 3G system allows higher speed data transmission and better Internet access. Fixed wireless service, which involves connecting the telephone and/or Internet wiring system in a home or business to an antenna, instead of a telephone line, is another source of competition. The replacement of landlines with cellular service should become increasingly common because 3G wireless will provide a level of service closer to that of landline systems.

The wireline sector also includes resellers of telecommunications services who compete with traditional local telephone service providers. These resellers lease transmission facilities, such as telephone lines, from existing telecommunications networks, and then resell the service to other customers. Other sectors in the industry include message communications services, such as e-mail and facsimile services, and operators of other communication services, ranging from radar stations to radio networks used by taxicab companies.

Voice telephone communications have long been the predominant service offered by telephone companies. With the rising popularity of the Internet, however, customers increasingly use their telephone service to transmit data and other electronic materials. The transmission of such content relies on digital technologies that use telecommunications networks more efficiently than do conventional systems. Digital signals consist of separate pieces of electronic code that can be broken apart during transmission and then reassembled at the destination. Telecommunications providers have built networks of computerized switching equipment, called packet switched networks, to route digital signals. Packet switches break the signals into small segments or "packets" and provide each with the necessary routing information. Segments may take separate paths to their destination and may share the paths with packets from other users. At the destination, the segments are reassembled, and the transmission is complete. Because packet switching considers alternate routes, and allows multiple transmissions to share the same route, it results in a more efficient use of telecommunications capacity. Voice communications are normally split up and reassembled by telecommunications companies' switching and routing equipment. An increasingly popular option for businesses, which should eventually become more common in residential communications, is called Voice over Internet Protocol (VoIP). VoIP splits up the conversation into packets in the telephone, transmitting the conversation over the Internet. The telephone has an Internet address at which it receives and reassembles packets into voice communications.

The transmission of voice signals requires relatively small amounts of capacity on telecommunications networks. By contrast, the transmission of data, video, and graphics requires much higher capacity. This transmission capacity is referred to as bandwidth. As the demand increases for high-capacity transmissions—especially with the rising volume of Internet data—telecommunications companies have expanded and upgraded their networks to increase the amount of available bandwidth.

Wireline providers have massively expanded their networks by laying additional fiber optic cable, which provides higher bandwidth and transmission speed than does copper wire. The capacity of fiber optic cables is increasing due to advances in transmission speed and improvements in technologies such as wavelength division multiplexing (WDM). Within each glass fiber optic line within a cable, WDM uses the different colors of the spectrum; each color can carry a separate stream of data, increasing overall capacity. Providers also offer upgraded service on the copper wirelines that connect most residential customers with central offices. Technologies such as digital subscriber lines (DSL) allow simultaneous transmission of voice and data communications at relatively high speeds.

Changes in technology and regulation now allow cable and satellite television providers to compete with telephone companies. An important change has been the rapid increase in two-way communications capacity. Conventional pay television services provided communications only from the distributor to the customer. These services could not provide effective communications from the customer back to other points in the system, due to signal interference and the limited capacity of conventional cable systems. Cable operators implemented new technologies to reduce signal interference. The capacity of distribution systems also has increased, due to the installation of fiber optic cables and improved data compression. As a result, some pay television systems now offer two-way telecommunications services, such as telephone service and high-speed Internet access. The high cost of building cable telephony systems has limited growth. New technologies being developed to reduce construction costs should help overcome this problem.

Cable and other program distribution is another sector of the telecommunications industry. Establishments in this sector provide television and other services on a subscription or fee basis. These establishments do not include cable networks. (Information on cable networks is included in the statement on broadcasting, which appears elsewhere in the Career Guide.) Distributors of pay television services transmit programming through two basic types of systems. Cable systems transmit programs over fiber optic and coaxial cables. Direct broadcasting satellite (DBS) operators constitute a rapidly growing segment of the pay television industry. DBS operators transmit programming from orbiting satellites to customer receivers, known as minidishes. The dishes are about 18 inches in diameter, although newer dishes that provide Internet access are slightly larger.

Establishments in this industry generate revenue through subscriptions, special service fees, and advertising sales. Pay television systems charge installation and subscription fees to set up and provide service. They also charge fees for special services, such as the transmission of specialty pay-per-view or video-on-demand programs; these often are popular movies or sporting events.

Subscription television services are widely used. In 2002, more than 80 percent of households with television sets received pay television services. Most of these customers subscribed to cable service; however, subscriptions to satellite services are growing rapidly.

Some upgraded systems facilitate the transmission of digital television signals. Digital signals consist of simple electronic code that can carry more information than conventional television signals. Digital transmission creates higher resolution television images and improved sound quality. It also allows the transmission of a variety of other information. Another feature of digital television is more channels, thanks to compression technology.

Satellite-based systems have experienced rapid growth, with more than 19 million subscribers in 2002. The growth of the satellite subscription industry stems from several factors. Prices for minidish subscriptions have dropped dramatically, and are now competitive with cable. In addition, regulatory changes allowed satellite services to begin carrying local network channels. Most recently, satellite services have begun offering Internet access.

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Data Source: Bureau of Labor Statistics, U.S. Department of Labor, Occupational Outlook Handbook, 2004-05 Edition