The technology is based on the concept of yield management, which aims to sell the right product to the right customer at the right price and the right time thereby maximizing revenue, or yield. Yield management originated in the airline industry in the late 1970s as a result of increased competition and diminishing profit margins and has been successfully adopted and implemented in a variety of other industries including transportation, hospitality and manufacturing. For the network services provider, perishable assets include bandwidth, servers, switches and routers that must be leveraged as a critical step toward sustained profitable growth. In the network services delivery model, yield management produces the maximum results from these network assets by recognizing and adapting to changes in market dynamics, customer preferences, and real-time delivery of supply and demand. By definition, a regulated market is capital-intensive.
Government regulation is in response to the capital barriers that initially prevent competition.
In the post-deregulation period capital markets respond quickly because the upside potential is tremendous and the execution challenges are not well understood. As challenges emerge and the true market potential is better understood, the capital markets begin to retreat, forcing consolidation among the players. Companies emerge from the consolidation phase to operate in a market that has significantly higher cost of capital, and where success is measured on traditional metrics such as operating efficiency, return on assets, revenue growth and earnings. The telecom market is in this phase today. Growth opportunities lie in the delivery of applications and content over data infrastructures.