Vertical markets represent untapped opportunities for the telecommunications industry. The objective of this market research report is to examine and quantify these opportunities in various vertical industries for the telecommunications service provider community. Insight examines 14 vertical markets in this report, segmented according to Standard Industrial Classification (SIC), a Bureau of Labor Statistics (BLS) division of economic data. These 14 vertical markets represent almost 78 percent of all workers and approximately 82 percent of the total number of establishments in the US.

Telecommunications products and services are, by their very nature, commodity products, since they exhibit little or no customization. Telecom providers recognize the commodity nature of their product when they market horizontally—offering everything to everyone, everywhere. Vertical marketing focuses on developing solutions to user problems within specific industries. In contrast, horizontal marketing provides generic “one-size-fits-all” offerings. In this market analysis report our thesis is that, with competition eating into already anemic profit margins, solution selling by vertical industry becomes an attractive way for telecommunications vendors to differentiate, and a viable way to maintain profitability and sustained growth. Four principal growth factors affect telecommunications expenditures significantly—number of employees, occupation type, size and number of establishments, and proliferation of Internet access.

With the US economy in such difficult straits, business opportunities for telecommunications providers in the enterprise market seem harder to find than ever before. According to the BLS, the employment picture is not sanguine. In April 2002, unemployment hit an eight-year high of six percent. The number of people unemployed for 27 weeks or longer rose 142,000 to 1.6 million in May 2002; the highest number in eight years. As of September 2002, the Federal Reserve Open Market Committee forecasted real gross domestic product growth in 2002 to be at 2.3 percent, well behind the growth rates of other major economies.

Telecommunications and Vertical Marketing

For 2002, Insight found that the majority of service revenue (89.6 percent of carrier local and long distance business wireline revenue) is still attributable to voice: a commodity. Moreover, enterprise customers perceive very little differentiation among the telecom providers. The mergers that swept through the industry in 1999 and 2000 blurred the conventional sector boundaries between carriers and seemed to emphasize the intention of every carrier to eventually market horizontally. In the mind's eye of the enterprise telecommunications manager, the telecom carrier has no perceived specialization and no locality; carriers are generalists operating in national and international markets. Once the enterprise customers starts thinking that providers are selling a commodity service, then purchase decisions revolve around price alone.

The benefits of vertical marketing can be immense ...

Total Wireline Market
Business vs. Residential Wireline Market
Business Expenditures in Vertical Markets
Wireline Data vs. Voice Markets
Wireline Data Expenditures in Vertical Markets
Markets: wholesale, financial, insurance, real estate, professional, communications, durable manufacturing, health care, retail