This annual report presents the latest statistical and analytical overview of Telecoms in Europe, including the twelve new European Union (EU) access countries, together with Russia, Belarus, Moldova, and the Ukraine. The report provides important data on telecoms expansion and integraion within the region, encompassing established and vital developing markets.
Telecoms markets and statistics
The European telecom market in 2007 showed a vibrancy lacking in previous years, stimulated by continuing investments in the mobile and broadband sectors. While there was little further mobile network construction, most operators have upgraded existing networks to higher-capacity HSDPA to take advantage of mobile data offerings. In conjunction with these investments, in 2008 a greater emphasis will be placed on migrating consumers to 3G services and on developing content to stimulate higher-ARPU use among consumers.
Some markets have also seen the first successful quad-play offers, either through mobile operators moving into the broadband arena or through established triple play telcos setting up as MVNOs. The review of the European Union’s New Regulatory Framework (NRF) will create further changes in the sector during 2008 and 2009. In addition, the European Commission has focussed on a range of policies which will have far reaching implications for incumbents in coming years, including proposals for a single EU telecoms regulator and measures to force structural separation on incumbents in a bid to increase competition. Structural separation will be at the forefront in a number of markets in 2008, either through incumbents themselves (Ireland) or through government and regulatory pressure (Sweden, Italy, Denmark).
Europe continues to be a prime testing ground for emerging technologies and new business models incorporating a growing range of services. Fixed-voice traffic and revenue continues to fall as mobile substitution and, to a lesser extent VoIP, take hold among consumers. Operators have thus focussed on data-rich applications such as mobile TV and Video-on-Demand. The legacy copper networks continued to be supplemented by substantial cable and fibre network deployments during 2007. Further investment in the cable sector is expected to the end of the decade following the consolidation of cable operators in key markets (the UK, Germany, and The Netherlands). A substantial increase in fibre deployments is also expected in 2008-09, principally driven by municipal involvement in providing local open-access networks.
Other key developments related to further progress towards NGNs, moving infrastructure to an IP packet-based, full service typology. In the UK some parts of the country were switched over to BT’s 21CN during 2007, while most regions will be progressively migrated to the network in 2008 and 2009. Moves by national regulators, particularly in the Netherlands, have aimed to ensure that new entrants continue to have competitive access to NGNs following the closure of legacy networks, including exchanges and Main Distribution Frames.
Europe continued to show strong broadband growth during 2007, while growth in most markets is expected to continue until the end of the decade. Growth in some of the more developed markets, such as the Netherlands and the Nordic countries, slowed as a natural consequence of high penetration rates, while consumer demand for high-bandwidth services has pushed forward investments in ADSL2+ and fibre networks. Intensifying competition in most markets has also driven down the cost of broadband access, leaving little scope for operators to reduce tariffs further. The main growth driver remains xDSL, though fibre has enjoyed an improving footprint in certain markets, notably Scandinavia, the Netherlands and Italy, as the cost of roll-outs falls and network builds are underwritten by municipalities.
In conjunction with investments in faster broadband networks, 2007 saw an increasing emphasis on triple play and quad play services. This development will be further stimulated in 2008 and coming years as network operators consolidate their competitive position through extensive agreements with content providers. IPTV packages of more than 100 channels have also become standard offers to attract and retain customers. Faster and more widespread broadband networks have expanded the reach of triple play to a greater proportion of the population, making the effective deployment of digital media commercially viable. With this infrastructure in place, companies can deliver innovative services which will in turn feed demand for more content.
The market for digital TV has also grown rapidly. The UK is the market leader for digital TV penetration, though countries such as Italy have also made progress following government subsidies for set-top boxes. Sweden was one of the first to complete digital switchover, in October 2007, followed by the Netherlands. Billions of Euro will be invested in this sector in coming years, and local content providers will also profit. Clearly the long-term winners will be those players who are first to offer the consumer triple play on favourable terms. National incumbents have a good starting position, since they dominate the infrastructure industry, though cable network operators also have a large subscriber base and many have been at the forefront in developing new strategies to encourage digital media.
By early 2008 about 25 of the region’s markets had exceeded 100% mobile penetration. Regulatory controls and increasing competition among network providers and from a growing number of MVNOs has lead to falling ARPU for most operators. Moving further into 2008 and 2009, the proportion of data revenue to total revenue will steadily increase: data ARPU has been resilient despite promotions lowering the price of SMS services, which alone can account for up to 90% of total data revenue. Operators have successfully focused on migrating subscribers to 3G, while GSM growth has been flat or minimal. Flat-rate data plans are beginning to take hold among operators, notably H3, and in coming years this simple business model should encourage greater use of 3G services and dispel consumer concern over high costs.
Europe remains an important laboratory for emerging mobile technologies such as Enhanced Data for GSM Evolution and High-Speed Downlink Packet Access. Countries such as Finland are in the forefront of utilising 900MHz spectrum for 3G, launching the world’s first commercial 3G network in late 2007. Many countries are assigning for mobile use spectrum released by digital switchover, a move which promises much scope for innovative services in coming years.
Data in this report is the latest available at the time of preparation and may not be for the current year.