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Top 10 telecoms trends offer better prospects

March 1, 2002

By Matthew Peach, Paris

Even on a grey January day in Paris, there are reasons to be cheerful about some of the prospects for Europe's telecoms-related industries. At the close of analyst company RHK's Startrax 2002 conference its VP of business development Leif Höglund identified 10 trends that painted a rosier picture of Europe's position, and suggested routes to improve business.

Top of his list was Europe's central position in global telecoms. "There is more cash in Europe now; there is more movement towards uniform deregulated markets, and there is government commitment towards adoption of broadband.

"Service providers and vendors here may have lagged the US during the 1990s but slower growth there is now eroding that lead. In 2000 the USA accounted for 60% of the market but, as we recover, North America will dip below its traditional 40% position."

Next Höglund considered network technologies. "Current Operational Support Systems and network management are generally poor," he said. "They often don't recognise ATM, WDM or even fibre." RHK expects the OSS fraction of capex to rise from 12% in 2000 to 23% by 2005.

RHK believes that optical module vendors are now a key channel to market. Component vendors are trying to add value to their products, but integrated optical technologies are delivering significant capacity improvements.

The shortest routes to radical cost reduction include: consolidation of components, such as tunable lasers; and manufacturing multipliers, such as cutting the cost of fibre alignment.

By 2004 all-optical cross-connects will eliminate transponders and reduce wavelength load due to shared protection. "Overall OXCs trade bandwidth for complexity," quipped Höglund.

MPLS will become widely accepted. Benefits will include improved SLAs, enhanced revenue by the deployment of more VPNs, and even a solution to problems of legacy OSS.

Höglund suggested that most European carriers offer essentially the same services and that the only distinction is on price. Thus better marketing is crucial, but there are opportunities for new types of services, particularly based on IP: The challenge is cultural rather than technical.

Voice over IP as a revenue stream is inevitable: "Voice has always been profitable," he said. Other value-added services lie in outsourced data storage.

Service costs will reduce as customers take more responsibility for their usage through set top boxes.

Last but not least, the tenth prediction was about Ethernet (and wireless Ethernet) which will become the preferred means of access and metro technology, according to Höglund.

But like the amplifier in the film Spinal Tap, no top 10 is complete without a number 11, and this is an unexpected source of revenue - government funding. He cited examples from round the world where governments are putting in money: Sweden, The Netherlands, Japan and the USA.