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2007 Global Telecoms - Analyses Trends and Forecasts

This annual report offers a wealth of information on the worldwide development of the Telecoms sector. It provides an insight and analysis into the trends and developments taking place in the global telecoms industry. The report provides information on the key developments in 2007, the industry as we move into 2008 and the future of Voice (in terms of Fixed, Mobile and VoIP). BuddeComm provides forecasts for the industry in 2010-2015 and analyses on the role of telecoms in a changing society. Insight into the impact of Digital Media on the industry is also included, along with an overview of the global regulatory environment. The report also explores the issues surrounding structural separation.

Subjects covered include:

  • Key developments in 2007;
  • Incumbents revenue change;
  • The industry in 2008;
  • The future of Voice (Fixed, Mobile, VoIP);
  • Telecoms predictions 2010-2015;
  • Changing societies and the role of telecoms;
  • Digital Media Analyses;
  • Regulatory overview;
  • Regulatory environment in terms of privatisation, structural separation.


All major developments occurring on a global scale relate in some way to digital media activities. To a large extent the telecoms and media industries are now being driven by the developments in this market. BuddeComm has been talking about VoIP, VoD and IPTV for many years, but traditional companies have failed to deliver these services. As a result, developments have now moved to the web where companies such as Google/YouTube, eBay/Skype, Amazon, Yahoo, MSN, News Corp/MySpace and so on are the leaders; leaving the incumbents around the world to operate in a very challenging environment.

Telcos around the world are struggling to hold onto their old revenues and prepare themselves for the rapidly converging market place. After years of cost cutting, some telcos are starting to invest again. Key issues for the players are the decline in voice revenue and the emergence of VoIP. Attempts to move into media markets such as broadband TV and far more sophisticated delivery models (triple play) is also providing the industry with plenty of challenges.

In Asia the incumbents have lost their monopoly status in their respective marketplaces, but have generally demonstrated considerable resilience in evolving new business strategies. In North America the incumbents are witnessing a trend of declining fixed-line revenues, due mostly to ongoing competition from the mobile sector and more recently from VoIP services. Revenue for most European and Latin American incumbents has also been at best stagnant during the last few years. In Africa however, fixed-line revenues are growing in the wake of an emerging Internet and broadband market, even though this continent is more than any other dominated by the mobile sector.

Despite the continuous barrage of information that voice remains a killer application, something we don’t dispute, fixed voice businesses around the world are under pressure. The basic voice business is still hugely profitable and cash generative for incumbents (and it supports their debt mountains). But this business is under pressure from a number of factors. By far the largest is competition. Downward price pressure is likely to reduce margins, and mobile calls continue to substitute calls over the fixed network. Medium term, there is still the threat of substitution by low-priced VoIP calls.

In 2007 mobile continued to steam ahead in developing markets, to the extent that early signs of market saturation became evident. In the developed world, broadband, as a facilitating infrastructure, is creating a boom in video-based applications in healthcare, education, business, media, entertainment and government. In both government and business, a mindshift is taking place as to the importance of broadband. The financial market will increasingly become involved with private equity to unlock the hidden telecoms values in this utility market.

Despite the enormous success of mobile, this segment of the market will, over time, merge into what is known as Fixed Mobile Convergence (FMC). As telecommunications networks move into content and service distribution networks, it will be broadband that will become the major infrastructure based money-spinner, both on fixed and mobile (wireless) networks. IP, once implemented on both networks - over the period between now and 2012 - will provide for a seamless integration of services delivered over these networks.

In order for the industry players to position themselves, serious structural changes need to be made to align the current businesses towards the challenges of media and IT convergence. Furthermore, there are the cannibalisation effects of VoIP and, on top that, the access models are changing, with triple play emerging as the model forward. There is now more global consensus that the real solution is structural separation, which will lead to the development of very focused, cost-efficient infrastructure operators.

You might recall that we started to call for this solution back in 2000. For a long time BuddeComm was a voice in the wilderness, with just a few supporters in the OECD. However with broadband rapidly becoming the major driver in the telco industry, there is a growing demand for new services which cannot be delivered by the telcos. In order to properly address new customer demand, horizontal business structures instead of vertical structures are required. While many telcos are reluctant to change, a need for more cost efficiencies will eventually push them to structurally separate their organisations to allow for new opportunities and challenges.

This report provides an insight and analyses into the trends and developments taking place in the global telecoms industry. The report provides information on the key developments in 2007, the industry as we move into 2008 and the future of Voice (in terms of Fixed, Mobile and VoIP). BuddeComm provides forecasts for the industry in 2010-2015 and analyses on the role of telecoms in a changing society. Insight into the impact of Digital Media on the industry is also included, along with an overview of the global regulatory environment. The report also explores the issues surrounding structural separation.

Key Highlights

In 2007, telecom industry revenue will reach around $2.3 trillion.
There will be a significant shift in revenue streams. Based on new triple play models and video based communications, new business models will need to be developed based on advertising revenues and premium subscriptions rather than on the current commodity based charges. New revenues will flow into the telecoms market from the areas of advertising and marketing, known as permission based marketing. This will be the main revenue driver for the industry in the period beyond 2010.

Telecommunications services revenue share by market - 2010; 2015

Revenue 2010 2015
Business 50% 40%
Residential 38% 30%
Permission-based - (residential) 12% 30%
Total 100% 100%

(Source: BuddeComm forecasts)
Most countries now have more mobile than fixed telephone subscribers. In contrast, less than 1% of the world’s population had access to a mobile phone a decade ago, and only one third of countries had a mobile network.

Over the last few years it has become clear that more structural separation is required. In 2007 the New Zealand government announced that it is going ahead with its plan to split Telecom New Zealand into three separate operational units to provide retail, wholesale and network services.

The inclusion of Intellectual Property into the WTO is severely hampering the flow of new ideas and information; it is attempting to control the dissemination of ideas, thus making the spread and sharing of them increasingly difficult. This is damaging the new economy. In the digital media industry we see this happening through DMR; there must surely be better ways to protect Intellectual Property.

Eventually the mobile phone as we know it today, will disappear and be replaced with a range of IP devices, which while being to able to handle voice, will predominantly be developed around other applications such as music, video, entertainment, gaming, business applications and email. For more information, see chapter 2.2.3, page 38.

1. TELECOMS INDUSTRY ANALYSIS
1.1 Key developments in 2007
1.1.1 Telcos profits and investments up again - Internet companies leading the boom
1.1.2 Convergence key driver
1.1.3 Competition not progressing
1.1.4 Industry sector analysis
1.1.5 Global telecoms equipment
1.2 Incumbents revenue change
1.2.1 North America
1.2.2 Europe
1.2.3 Latin America
1.2.4 Middle East
1.2.5 Africa
1.2.6 Asia
1.2.7 Pacific
2. TELECOMS FORECASTS
2.1 Key developments in 2008
2.1.1 Introduction
2.1.2 Developments by region
2.1.3 Other developments to watch
2.1.4 Summary: key trends and developments
2.2 The future of voice (fixed, mobile, VoIP)
2.2.1 Telephone companies - experts in negative marketing
2.2.2 The future of voice
2.2.3 The future of mobile
2.2.4 All roads lead to 4G
2.2.5 VOIP
2.2.6 Pricing strategies
2.2.7 Conclusion
2.3 Telecoms predictions - 2010-2015
2.3.1 Introduction
2.3.2 Long-term telecoms revenue trends - 2010 - 2015
2.3.3 Mobile/wireless
2.3.4 Broadband
2.3.5 Wireless versus fixed broadband
2.3.6 Regulation - structural changes in the industry
2.3.7 So where to go from here?
3. TELECOMS AND SOCIETY
3.1 The role of telecoms in a changing society
3.1.1 Economic models have changed but we haven’t caught up
3.1.2 The fallacy of Intellectual Property rights
3.1.3 People are changing, structures need to follow
3.1.4 The role of telecoms in all of this
3.1.5 Information Technology is somewhat Kafkaesque
3.1.6 The new city states
3.1.7 Good government and bad government
3.1.8 Digital media - new tools for democracy
3.1.9 Exploring aboriginal values
4. CONVERGENCE AND DIGITAL MEDIA
4.1 Digital media Analyses
4.1.1 Introduction
4.1.2 The rise and rise of the Internet economy
4.1.3 The future is digital people, not digital media
4.1.4 Convergence delivering results
4.1.5 The Internet
4.1.6 Digital content
4.1.7 Probing for demand
4.1.8 The disruptive effects of digital media
4.1.9 2007 - a new stage of growth for digital media
5. REGULATORY ENVIRONMENT AND STRUCTURAL SEPARATION
5.1 Regulatory - overview & analysis
5.1.1 Effective regulation
5.1.2 Historical overview 1999 - 2005
5.1.3 More innovative use of Universal Service Obligation is needed
5.1.4 Market analysis 2006 - 2007
5.1.5 Unbundling of the local loop
5.1.6 Open networks
5.1.7 Regional overview
5.2 Regulatory environment and structural separation
5.2.1 Key regulatory trends
5.2.2 Privatisation
5.2.3 Structural separation
5.2.4 Backgrounder
5.2.5 Virtual separation
5.2.6 Telecommunications regulations
5.2.7 Dealing with the consequences
5.2.8 The broader issues of deregulation
5.3 Structural separation analysis
5.3.1 A profitless industry?
5.3.2 Declining values - telcos need a structural change
5.3.3 Global infrastructure nearing collapse
5.3.4 The great separation debate
5.3.5 Next phase of competition
5.3.6 Disintermediation drives market size growth
5.3.7 Vertical integration - doomed to fail
5.3.8 From vertical integrated to functional organisations
5.3.9 Functional telco business model from ITU
5.3.10 Telcos - losers in the march of progress?
6. GLOSSARY OF ABBREVIATIONS


List of Exhibits


Exhibit 1 - Nextgen telecoms decision
Exhibit 2 - Examples of recent equipment vendor mergers
Exhibit 3 - Global outsource market services
Exhibit 4 - Key revenue trends - period to 2015
Exhibit 5 - A changing industry structure
Exhibit 6 - Massive restructuring is now overdue
Exhibit 7 - Some application bit rates
Exhibit 8 - Drivers of high-speed Internet
Exhibit 9 - Silicon Economics Vicious Cycle
Exhibit 10 - Vertical versus Functional Business Models


List of Tables


Table 1 - Global telecoms capital expenditure - 2006; 2010; 2015
Table 2 - Global telecoms revenues - 2006 - 2008
Table 3 - Year-on-year increases in blended ARPU - top ten operators worldwide - 2006
Table 4 - Regional market share of telecom and datacom equipment revenues - 2006
Table 5 - Selected North American incumbents - percentage revenue change - 2005 - 2006
Table 6 - Selected European incumbents - percentage revenue change - 2005 - 2006
Table 7 - Top ten Latin American fixed-line operators and annual change by revenue - 2006
Table 8 - Top ten Latin American fixed-line operators and annual change by lines in service - 2005 - 2006
Table 9 - Selected Middle East incumbents - percentage revenue change - 2005 - 2006
Table 10 - Selected African incumbents - percentage revenue change - 2005 - 2006
Table 11 - Selected Asian incumbents - percentage revenue change - 2005 - 2006
Table 12 - Selected Pacific incumbents - percentage revenue change - 2005 - 2009
Table 13 - Telecommunications services revenue share by market - 2010; 2015
Table 14 - Telecommunications services revenue share by product - 2010; 2015
Table 15 - Telecommunications services revenue share by industry group - long term scenarios - 2010; 2015
Table 16 - Mobile data revenue as % of total mobile revenue forecast - long term scenarios
Table 17 - Mobile penetration in developed and developing markets - current - 2015
Table 18 - Forecasting broadband costs over a 10-year period
Table 19 - Residential Broadband (BB) - growth predictions - next ten years
Table 20 - Forecast - wireless as % of fixed broadband - 2010; 2015
Table 21 - DSL, 1Gb/s, DWDM transmission speeds - what does it mean?
Table 22 - Digital Access Index for top 25 countries - 2005

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