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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.

Paul Budde

See also:

Global – Analysis – Telecommunications Industry

Global – Analysis – Markets and Forecasts

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Most European mobile operators have acknowledged that to deal with the fierce competition for voice traffic and the consequent collapse in voice revenue they must promote mobile data use among consumers and take advantage of the new 3G/HSPA networks which have been built out across the continent during the past two years.

A number of avenues are open to these operators, yet consumers remain a cautious and fickle lot, and have shown continuing reluctance to take advantage of mobile broadband, which is still perceived as an expensive indulgence. One solution for operators is to mimic fixed-line pricing models by offering a flat data rate for their HSPA services. That such a business model can be successful is partly due to the growing maturity of the HSPA market, as well as the increasing range of HSPA devices (more than 250 currently available), and the realisation among operators that charging consumers by data volume is a non-starter.

The slow consumer shift away from negativity began with the launch by 3 Group of the X-Series in partnership with Skype, Sling Media, Yahoo!, Nokia, Google, eBay, Microsoft, Orb and Sony Ericsson. The service (initially launched in the UK in December 2006 with roll outs across Europe during 2007) allows customers to make unlimited calls from their mobile using Skype, watch home television via their mobile using Sling, access home PCs remotely using Orb and have access to the Internet and messaging services from Yahoo!, Windows Live Messenger and Google. The X-Series is priced like fixed line broadband, with a fixed fee on top of the basic subscription, and as such is based on a completely different economic model than that of most mobile operators, overturning the traditional telephony model of charging per minute, per message, per click, per event and per megabyte.

Current pricing models for flat data packages are in the region of €20 per month. The model does not cannibalise operator voice income: the €20 per month is on top of voice services, while very few people use the technology for VoIP. As such, the operators simply receive additional new revenue for the data service. In Sweden, both 3 and Telenor have claimed a quadrupling of traffic since their deals were launched in April 2007. The country’s HSPA networks are among the best in Europe: 3 will have completed its HSPA network upgrade from 1.4Mb/s to 3.6Mb/s in Stockholm, Gothenburg, and Malmö by August 2007, and eventually plan to deliver 7.2Mb/s. TeliaSonera belated woke up to the possibilities of HSPA in April 2007 when it began HSPA trials in parts of Stockholm and Gothenburg, also providing speeds of up to 3.6Mb/s. Elsewhere, faster speeds are already a reality: in March 2007 Ericsson was contracted to expand mobilkom austria’s WCDMA/HSPA uplink networks in Austria, Bulgaria, Croatia and Liechtenstein. The enhancements will allow uploads at up to 1.4Mb/s and downloads at up to 14.4Mb/s. In Vienna, where the system was rolled out in February 2007, mobilkom austria subscribers have the fastest mobile broadband speeds available in Central and Eastern Europe.

Of course operators try to protect their revenue sources where possible. In the UK, where one in three UK adults own an Internet-enabled mobile phone, T-Mobile’s Web’n'Walk aims to increase data usage and revenue, though the company has adopted a usage policy that prohibits VoIP, Instant Messaging, file sharing and media streaming over its service. Similarly, Vodafone in June 2007 introduced a pricing model which charges different amounts for mobile bandwidth depending on the application: between 0.5MB and 14.5MB per day is free, after which the charge is a penny for every 5KB used. Most users fall below the 15MB limit, yet Vodafone excludes VoIP and peer-to-peer services (P2P) from the offer, billed separately at £2 per MB. P2P is defined as including instant messenger services, text messaging clients, and file sharing.

Operators have also emphasised social networking services to boost data usage and revenues. In May 2007 Vodafone launched its YouTube service in the UK and introduce flat-rate data pricing so that users pay the same amount for Vodafone live! content and off-portal services. The scheme hoped to address the stagnation in Vodafone live! Use: although there are some four million users in the UK the walled garden approach has limited further take-up. Orange similarly planned to offer its customers access to the Bebo Internet social networking site on their mobiles, a move which would intensify the operator’s competition with Vodafone which has a deal with the rival social networking site MySpace.

Another option is to capitalise on the popularity of music downloads, a market particularly strong among the youth. Telenor in Sweden is the first operator in Europe to develop a flat-rate mobile phone music service to compete with Apple’s iPhone. In partnership with Omnifone, the MusicStation service allows mobile users to download as many music tracks as they want for €2.99 per week. More than 30 operators in Europe, Asia and South Africa have also signed up to the service, which can be used by about 75% of phones currently on the market. Revenue generated by MusicStation is split between operators, music companies and Omnifone.

The lesson from these developments is clear: introducing flat-rate schemes for mobile data services has resulted in sharp increases in usage, allowing operators to rake in a set sum from a far larger number of subscribers rather than a large sum from a limited number of largely business users. As long as the networks can cope with demand, this will be the mainstay of future payment models. Attempts to slow this development, such as by placing restrictions on P2P data transfers, can be expected from operators which try to control the market from their perspective, but the consumer-friendly model will win in the long term.

See also:

Europe – Mobile Market – 3G;

Europe – Mobile Market – Mobile Data;

Europe – Mobile Market – Overview & Statistics.

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Back in March, the venue for the Australian Netherlands Roundtable in Amsterdam was the impressive new headquarters of Cisco in the Netherlands. They hosted the event while Cisco Australia hosted the lunch for the delegates.

Cisco plays a key role in advising governments around the world on issues such as e-government, e-health, e-education and so on. They have also published a range of interesting background papers, so it has been good to have them as an active participant in both last year’s and this year’s events.

Nicola Villa presented an interesting paper at the Roundtable, based on the former US president Bill Clinton’s Global Program. The program aims to show to the emerging countries western ways to create economic development without harming the environment. A range of programs, in which Cisco also participates, are now under development.

Sixty per cent of Cisco’s carbon emissions is generated by air travel. The company has set a target to decrease this by 20% within the next 18 months, replacing it with videoconferencing and telepresence. It has built telepresence studios, amongst other places, in Amsterdam and Sydney, and these will be the venues for the next Netherlands-Australia encounter when we do the follow-up program, bringing together digital media experts together from both countries.

Cisco is also promoting the program in the wider community. Once good broadband networks are in place a number of options become available:

• Teleworking, telepresence
• Traffic management with RFIDs installed in cars (trialed in Singapore)
• Public transport, connecting buses and taxis and showing their location
• Municipality CO2 emission reduction (smart meters)

….. in general terms, creating smart communities.

Cisco has selected three cities to develop such programs and has built showcases that can be used – not just in emerging economies but also in western society. They have selected three western cities around which to build examples:

• Amsterdam, based on its emerging FttH network
• San Francisco, based on the wireless network it has under development
• Seoul, based on its combined fibre and wireless infrastructure

In such smart cities it will be easier to bring information to people (on-demand and profiling) as opposed to the current situation, where people are brought to the information. This will require the development of digital media policies that support these changes.

Paul Budde

For more info see: www.clintonglobalinitiative.org

PS 1. We are currently conducting a carbon emission survey at BuddeComm and we will report back to you on that as soon as we have the results of this.

PS 2. We are currently involved in facilitating the discussions on smart grids; making the electricity grids more intelligent which will save energy as well. For more information see:

Global – Broadband Power Line – Smart Grids

Australia – Broadband Power Line – Smart Grids

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I will update you on the developments of smart grids, based on my three seminars from last week, at the Roundtable on Thursday 7th of June

Theme: Infrastructure developments in Australia
Cost: $425 per person (ex-GST)
this includes morning/afternoon coffee and lunch
Venue:The Observatory Hotel, 89-113 Kent Street, Sydney
Booking: Online registration
orTelephone: 02 4998 8144 Email: pbc@budde.com.au

The telecoms developments in the utilities market have gone full circle.

In the 1980s the utilities started talking about Demand Side Management, looking at telecoms facilities to provide more utility applications – initially for the utilities themselves, but with an option to provide this to customers also.

As a matter of fact, the origins of this technology date back to 1896!

With the deregulation of the telco market, many utilities around the world became successfully involved in the telecoms market, especially those companies who stayed close to their core business and made their infrastructure and/or their excess telecoms capacity available on a wholesale level.

Utilities saw the development of BPL out of the narrowband power line communication (PLC) technology as an opportunity to explore potential new opportunities. However, delays in standardisation, the relatively high cost of hardware, added to the fact that moving further into the broadband access market was completely outside their core business, put a virtual stop to new deployments over 2006/2007.

But with global warming finally hitting the political agenda, and the fact that generation and the use of electricity accounts for 40% of all carbon emissions, serious reasons now exist for the utilities to revisit their total operation.

There has been a global underinvestment in utility infrastructure. It is dumb, outdated and in desperate need of an upgrade. The latest development is the concept of smart grids – an intelligent IP overlay over the electricity grid, with sensors and other equipment. This will allow utilities to much better manage their network, limit electricity loss, prevent outages, loadshed and provide customers with in-house information and tools (smart meters) to better manage their own energy use.

In addition, utilities will be able to reduce their carbon emissions, which will offer interesting opportunities on the carbon trading market. Perhaps this reason alone will see a rapid deployment of smart grids around the world.

And so we have come full circle – bringing telecoms (now broadband) back into the core of the utility business.

BPL, fibre optic, wireless and mobile can all be used to link a smart grid backbone to customers’ premises – and, yes, this network also offers opportunities to sell excess capacity (on a wholesale level) to other telcos and ISPs.

But the core business will be a smart grid for their core electricity business.

Paul Budde

See also:

• Australia Broadband Utilities
• Global Broadband Utilities

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Following the launch of 3G services by a third operator last month, Egypt’s mobile market is likely to see explosive growth over the next three to four years. With mobile tariffs already among the lowest in the world, operators will seek to distinguish themselves from the competition by introducing new services, which could also have an accelerating effect on the already fast growing Internet and broadband market. Development of the fixed network has slowed but is likely to see a shift towards wireless technologies, following the first successful WiMAX deployments in the country.

Along with a major update of its series of Egypt country and sector reports, BuddeComm has released a new special report ‘Egypt – Telecoms Market Statistics & Forecasts’ which contains key statistics and scenario forecasts for the country’s fixed-line, mobile, Internet and broadband markets for the years 2010 and 2015.

See also:

Egypt – Telecoms Market Statistics & Forecasts;

Egypt – Key Statistics and Telecommunications Market Overview;

Egypt – Convergence, Broadband & Internet Markets;

Egypt – Mobile Market – Overview & Statistics.