In economic terms, the telecoms sector is one of Europe’s most significant, with annual turnover of around Euro290 billion. The sector also accounts for around 4% of the jobs in the EU. As a result of market liberalisation, enforced from the mid-1980s, the price of telecom services has fallen dramatically, partly through competition and partly through regulatory measures. Competition provided a much needed kick in the backsides of complacent incumbent operators, resulting in improved standards of service generally.
The current crisis presents a catalogue of problems for operators, but it should be anticipated that consumers will again be better off. For telcos, the financial crisis has increased the cost of servicing debt and will make it difficult to refinance existing debt during the next two years or so. This could have a knock-on effect on their ability to invest in those network upgrades which are debt-financed. A number of operators, as well as vendors, have responded to the current crisis with job cuts and belt tightening, including Vodafone in the UK, Sony Ericsson (culling 2,900 jobs in Scandinavia) and Nokia. These moves within companies are tempered responses, aimed at rationalising their workforce and reeling in unnecessary spend. Yet for the future welfare of Europe’s telecom infrastructure the larger picture is not as bad as it seems.
Crucially, during the current turmoil governments are being pressed to fund NGNs, generally through allocating a hefty proportion of the funds provided in national stimulus packages. Because governments are handing out public money, they are in a position to ensure that the new infrastructure is shared, thus promoting competition and improving the quality and pricing of services for consumers.
In Europe, the UK, Germany, Spain, Portugal, France, Hungary, Ireland and Finland have recently proposed legislation aimed at expanding broadband access and data rates for end-users. On the one hand, governments are keen to be seen to be doing something constructive for their citizens as a whole, rather than simply bailing out failed businesses. This will provide them with much needed credibility among the electorate. In the longer term, say five to ten years, governments are also anticipating the potential for investors and skilled job seekers who will be attracted to the ‘switched-on’ regions harbouring the best in telecoms infrastructure. The rage of knock-on benefits is almost limitless, ranging from improved entertainment services (IP-delivered HDTV and the like), to the cost-saving potential of e-health and tele-education services. These long term benefits dilute the arguments of detractors who may assert that stimulus funds would be better spent on other areas such as transportation and construction.
The effect on telecom infrastructure derived from stimulus funding will be far reaching. At the very least it will keep the telecom sector in the limelight, encouraging investor interest and providing a beacon of optimism in troubled times.
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