Around the world the telecoms industry is reaching new heights, this time it includes the developed markets as well. In these countries the latest boom has just surpassed the one of the late 1990s in both profits and new investments.
We at BuddeComm are in a prime position to witness this boom because one of the first things that investment companies do at times like this is buy research reports. And, as our 2,000-plus reports cover 170 countries, 500 companies and 200 technologies and applications, we get a pretty good idea what they are interested in.
This time, of course, the boom is led by the Internet companies, but the telcos who have embraced the structural changes that the telco bust generated are also in the lift again.
Interestingly, there are significant differences between the developments in the USA and those in the rest of the world.
The two US telcos, AT&T and Verizon, have moved into the interactive entertainment world and are trying to look more like their cable counterparts. But, despite previous predictions, the cable TV companies are dominating the broadband market. This clearly shows that the Internet is very much seen as an entertainment product.
Entertainment services are mainly sponsored by advertising and this is what is driving the fibre networks and the interactive TV services they are carrying over them. However the advertising spend in the USA is often three times greater than it is elsewhere in the world, and so it would be unwise for other countries to follow the US example.
In the rest of the world broadband is developing from a broader base. While entertainment plays a key role here as well, it is the community-based networks and services – based on personalised interactive communication – that are the driving force, with regional social and economic development, healthcare and education being other major leading forces in the process.
Europe is the global leader in broadband and the case studies coming out of that region are more relevant to most other countries than those coming out of the USA.
Interestingly, however, the web-based services are predominantly led by US companies. This, in itself, is a very interesting phenomenon, as web-based developments often undermine proprietary based broadband infrastructure-based applications from the telcos and cable TV companies. For example, while proprietary-based, walled-garden IPTV is struggling to get the users’ attention, web-based video services are taking up more than one-third of all global broadband capacity.
This development is destabilising the remaining telco dinosaurs, who are still trying to build walled gardens and hold back new developments and innovations. Most people in those markets are on broadband speeds lower than 1Mb/s, which makes it impossible to participate in the innovations and new applications that are now widely used in all other developed markets of the world.
While most fixed network operators are now moving towards structural change, the mobile world is still light years behind. Their days are numbered, but they have a great incentive to hold on for as long as possible to their lucrative voice and SMS charges. The last thing they want is for VoIP and email to challenge their business models.
Nevertheless changes are underway. New wireless spectrum auctions will be needed to get this market moving. Left alone no innovative changes will come out of this industry. They keep on throwing out the biggest hype in the world and are prepared to spend millions of dollars setting up smokescreens, such as mobile TV, to try and persuade us that new innovations are just around the corner. What a farce!
New wireless broadband spectrum auctions will bring in new players from other industries such as the media and the Internet companies. However the incumbents are using everything in their power to lobby the regulators and the government not to open up that spectrum for innovative services and new business models. It is to be hoped that governments will do what best for their countries, but, again, this could be a long process, and the results could easily be watered down.
All of this doesn’t make us feel very hopeful about speedy structural changes in the mobile industry – if it can be done by 2010-2012 that would be a positive achievement.
In the meantime structurally separated infrastructure companies are doing a roaring trade, as more and more fibre is needed. The much-maligned company, Level 3, which in its heyday was working its way around the world, laying fibre (and which also went under in the telco bust) is now back in full swing and doing a roaring business. (I have reported separately on other successful fibre networks such as Pipenetworks in Australia and Reggefiber in the Netherlands.)
So the telco industry is back in favour and many financial institutions are eagerly watching this space, ready to become involved again. Fingers twitching when they see unnecessary costs and missed opportunities, they are ready to step in and do the work for the telcos if they fail to act.
We expect that this boom will continue till at least 2012-2015, so there’s still plenty of time for those lagging to jump aboard.
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