ETNO is at it again. The European operators' pressure group is trying to build a case for regulatory support with a report showing that its members aren't making as much money as they think they should. By I.D. Scales.
The European Telecommunications Network Operators (ETNO) Annual Economic Report is out and it shows tough times are on the way for Europe's big incumbent telcos.
There's the recession of course - that's cast a huge shadow. There's the impact of regulatory action over text and mobile voice termination and roaming charges, which has squeezed revenues overall. And then there's underlying structural change.
Essentially the action and value in the online world (of which the mobile and fixed operators are now clearly an important component) has moved in (to the cloud) and out (to the 'handset').
As we all know the handset has become a tiny but hugely powerful computer and the 'services' are all humming in giant cloudy data centres. So ETNO's members' networks and businesses are now primarily tasked with moving data back and forth between computers (the tiny handhelds as well as lap and desktops) and those giant data centres. That's where the leading-edge services and innovation have both gone. That's where, for the foreseeable future, they will stay.
Because telcos in general, and ETNO's telcos in particular, have preferred not to respond to this trend (which has been stunningly apparent for about 5 years and discernible for 10 or even more) they are now looking at a cliff-edge in terms of revenues 'going forward'.
That's about it. ETNO's report lays out in ghastly detail what these numbers actually look like close up as the trend gathers pace.
It says the European telecom services market decreased for the third year - this time by 1.5 per cent. And there is more revenue decline on the way in 2013. Fixed telephony revenue has already dropped by 31 per cent over the last five years and subscriber lines have shrunk by 22 per cent since 2005.
Mobile is also in decline - though only by about half a per cent. That's because mobile voice and text revenue is dropping but mobile broadband is growing.
Fixed broadband revenues are also growing very strongly - up 6.5 per cent in 2011, according to ETNO.
So how are ETNO's members preparing to respond? By complaining to their regulators of course.
"The continued increase in the usage of social networking sites and other over the top applications confirms the need for new models of cooperation.
Policies for our sector need to be flexible in order to enable operators to adapt to rapidly changing realities and let new business models emerge from the markets," says Luigi Gambardella, ETNO executive board chairman.
Gambardella always has difficulty constructing a concrete sentence (see - Why a 'sender pays' Internet would be utterly wrong
). What he probably means is that OTT players are winning all the online services attention and now some of them are beginning to offer messaging and voice services that sometimes compete with carrier services. As carriers a decade and more ago built very optimistic ROI cases for their shareholders which envisaged them winning the bulk of the revenues generated on or across their networks, things have clearly gone awry. Carriers should therefore be able to develop "business models" (ways of taxing that revenue by gatekeeping the services) that claw some money 'back' for the carriers.
In fact the biggest OTTs aren't yet garnering the huge amounts of revenue that ETNO keeps asserting they are. Facebook's balance sheet and its shareholders' fury makes a rather different case.
That aside, this is really the same set of background arguments that ETNO deployed in the run-up to the upcoming ITU rule-setting WCIT in Dubai next month (see - US delegation prepares to play Whack-a-Mole at ITU meet
). There it is trying to drum up support for rules which might make 'sending network pays' one of these new business model options and the introduction of differentiated services on the Internet another.
But this report offers no concrete suggestions about the new business models ETNO has in mind. That's not its job: it's really just an extended moan garnished with a distinct whiff of entitlement. Example: "in September 2012, the consolidated market value of the five largest European incumbent operators is not even a third of Apple's value!". Note the exclamation mark!
Since September of course Apple's over-inflated valuation (these irrational exuberances happen, even to telcos as we learnt in 2000/1) has dropped back from $660 billion to $532 billion today - at one point last week it was trading 25 per cent down on its September high.
This is what life is like in the high-risk fast lane. ETNO might not like it but its members are not in this category. Their extra revenue sources must now be won the hard way - in fair competition with all the other players in the online market.
Unless they can get the regulators to change the rules of course.
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