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IDATE predicts European Telecoms market recovery will be a slow process
Wednesday 23 October 2013 13:55:04 by Andrew Ferguson

The UK is in the middle of its largest period of investment in fixed and mobile infrastructure for some years, but this is happening at a time when price pressures from the consumer mean that take-up of premium services (i.e. faster ones) is something people tend to think very hard about due to the effect on their monthly budget. The wider European picture is a good indicator as to whether UK levels of investment are enough to push the digital economy and provide the returns on investment that almost every consulting firm predicts as part of the various broadband improvement projects.

IDATE has over 30 years of experience in analysing the telecoms, media and Internet markets across Europe and has released a series of predictions for where the European market will be in 2025. Generally three scenarios are considered and the evolution path which is considered the middle of the road option suggests that revenue in the top 5 European markets (EU-5) will not recover to 2008 levels until 2025.

Three Telecom Services market scenarios, 2008-2025

The Three Telecom Services market scenarios, 2008-2025 (EU-5, billion EUR)

The more positive scenario depends a lot on operators adopting new and different models and adapting to the way that revenue is expected to be generated. Voice in the telecoms sector has dominated, but the all IP model is changing this, with their prediction that non-voice traffic on mobile will account for 34% of telecoms service revenue in 2025, rather than the 13% seen in 2009.

Growth of Telecoms service revenue, fixed and mobile, 2008-2025

Does this matter? Very much so, if we want to continue to improve broadband speeds and avoid the situation where other global economies become the place where new services launch and profits and jobs goto. The UK was late to the fibre party, with many smaller European countries getting their network builds underway before the economic downturn, and with the massive profits from better Internet infrastructure going to the Google and facebooks of the world, encouraging the traditional incumbent to invest in infrastructure or encourage new entrants is becoming harder.

So while the European Commission will be looking towards ways to stimulate the telecoms market, its Connected Europe Facility now has a very limited budget so is unlikely to have a major transformational effect and various regulatory changes on the table run the risk of encouraging investment money to head to more friendly parts of the world.

The question really is which model the UK will follow, and is the level of ongoing investment (both commercial and public) enough to keep pace with emerging economies. It is not just about a drive for ever faster broadband, but how that infrastructure can contribute to the economy both for the individual, small business and the Government. The driver of demand and willingness to pay for better broadband packages appears to be TV and this is also the big driver in traffic volumes for both fixed and mobile services.

These predictions could be seen as being very pessimistic, but now and then it is wise to consider the longer term view, and the DigiWorld Summit in Montpellier, France in November, which is set to focus on the digital gold mines and how value can be extracted from the digital sector will help the industry to hopefully avoid the worst case scenarios.

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