Europe's Telco Services Suffer Shrinkage
That's according to a new report from European Telecommunications Network Operators' Association (ETNO) , which found that the European telecom services market (including Turkey but excluding Russia, Ukraine and Georgia) decreased by 1.5 percent year-on-year to be worth €274.7 billion (US$351 billion) in 2011, the third consecutive year of decline.
And according to estimates from ETNO's research partner IDATE, it will shrink again this year by about 0.4 percent.
As a result of that gradual contraction, Europe's share of the global telecom services market is now just 25 percent, compared with 31 percent in 2005.
But while revenues might be in decline, network investment levels are increasing: According to the report, European-operator spend increased by 5.2 percent year-on-year in 2011 to €45.4 billion ($58 billion), compared with increases of 1.4 percent in the U.S. and in what ETNO calls "advanced Asia."
Clearly, that's not a sustainable trend -- something's got to give. The team at ETNO, though, is hoping that the much fabled "new sources of revenue" might save the day: "New business models and revenue sources will be needed in order to sustain the pace of investment required in Europe to fully realize the potential of this sector," states ETNO Director Daniel Pataki in the report commentary.
Talk of new models and new sources of revenues have been widespread for years, but while the telcos and their industry organizations continue to scratch their heads, they become ever less relevant. In the meantime, over-the-top (OTT) service consumption eats away at their revenues further and pressures them into greater network investments so that customers don't switch to rival broadband service providers.
Unless CSPs commit wholeheartedly to innovation -- in terms of business strategy, applications and networking -- these new models and new sales they endlessly pine for are unlikely to materialize. Telefónica SA (NYSE: TEF), at least, has realized that something (anything!) needs to be done and is subverting its operating model. At least it will go down fighting if it doesn't survive into the next few decades. (See Slideshow: How Does Cable Use Social Media? and Inside Telefonica's Startup Incubator.)
Its European contemporaries, however, might just wither away without so much as a whimper unless they follow suit.
— Ray Le Maistre, International Managing Editor, Light Reading