Does the US (or EU) Matter Anymore?

In the not-so-distant past, any non-American equipment vendor with pretensions to being a global player wanted above all else to crack the toughest market of all: the U.S. of A.

Meeting the incredibly complex requirements of a typical large U.S. telco RFP was usually too much even for the larger vendors. And it wasn't much different for U.S. vendors entering Europe, where they found that the vaunted single market was far from complete.

Yet despite the difficulties, these were the two markets that really mattered. Even as recently as 1999, the U.S., Canada, and the EU collectively accounted for nearly half of all fixed telephone lines, and well over half of all cellular telephone lines. Go back to 1992, and almost three quarters of all fixed lines were in the EU and North America.

How far we have come since. A review of International Telecommunication Union (ITU) stats for the most recent year, 2007, paints a compelling picture. In 2007, the proportion of fixed lines in North America and the EU had fallen to less than one third of all lines worldwide. And on the wireless side, the picture is more striking still: The non-American/European group now accounts for nearly 80 percent of wireless lines -- against less than half in 1999, and less than one quarter in 1992.

And this present trend is likely to become even stronger in the future. Take fiber to the home (FTTH): By the number of connections, this market is dominated by Asia -- and it will continue to be, so far as we can tell, for as long as there is an FTTH market to serve. Asia initiated the market, and Asia, by virtue of its size and breakneck economic development, will continue to dominate it.

Small wonder that the world's fastest-growing equipment vendor, Huawei Technologies Co. Ltd. , shows little interest in the U.S. market; or that so many of the new global telcos are growing largely on the back of investments in developing countries. Orange (NYSE: FTE), Telefónica SA (NYSE: TEF), Telia Company , and Vodafone Group plc (NYSE: VOD) are among those whose recent growth is based almost entirely on acquired properties in the developing world.

For strategists at both telcos and vendors, the core strategic truth of the new century is that the center of gravity in telecommunications has already shifted away from the U.S. and Western Europe to Asia and the developing world, will continue to shift to those regions, and is never going to shift back. The companies that deal best with this new reality are more likely to prosper than those that don't.

— Graham Finnie, Chief Analyst, Heavy Reading

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