Beyond the bubble
After its spectacular crash, the telecoms industry is still picking itself off the floor. But provided it can adjust to less dizzying expectations, the business still offers plenty of opportunities, says Tom Standage
The post-bubble opportunities seem to lie in exploiting three main trends. The most visible growth area is the continuing rise of mobile phones, which have overtaken fixed-line phones to become the most widespread communications devices on earth. Their number is expected to rise from 1.3 billion today to 2 billion by 2007, and they are being increasingly used to do much more than make phone calls, providing new opportunities for wireless operators and equipment makers.
The second trend is the growth of high-speed or “broadband” internet access, which is booming in many parts of the world. This offers a valuable new market for fixed-line operators, once they have supercharged their existing telephone networks to make them broadband-capable.
A third promising area is in the corporate-telecoms market. As large firms look for ways to cut costs and move operations overseas, many are adopting new internet-based technologies that can interconnect regional offices cheaply and securely and allow voice and data to flow over the same network. Many operators are now overhauling and simplifying their tangled networks to ensure they can implement such “next-generation services” quickly and efficiently.
But all three areas involve difficult transitions for telecoms operators. The continued health of the mobile-telephony industry depends on being able to deliver data services alongside voice calls, revenues from which are flat or declining. Creating and delivering multimedia services to mobile handsets is, however, proving to be a lot more complicated than simply providing telephony. Similarly, fixed-line operators offering broadband internet connections are having to work harder to provide both data and voice services than voice services alone. And in the corporate market the operators face a new challenge: the increasing overlap between telecoms and information technology (IT). If they are to offer next-generation services such as internet hosting or call-centre outsourcing, network operators must beef up their expertise in IT or form partnerships with systems integrators.
Equipment vendors also face a wrenching transition. Mobile, broadband and next-generation services require new equipment on the edges of telecoms networks, rather than more capacity in the network core, which is where so much unnecessary investment was made during the bubble. This has completely changed infrastructure spending patterns, and equipment vendors have had to adjust.
In short, there are still opportunities in telecoms—but not where they were during the boom. The experience of the past couple of years, says Dave Dorman, chief executive of AT&T, has demonstrated that there is more to being a telecoms operator than simply owning a shiny new network. The best prospects are at the network's edges, not at its core, and revolve around providing complex services, not merely dumb capacity. The watchword now is transformation, not construction. Only by embracing this new reality will the industry find a way out of its troubles.
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