The vast reform of the EU’s telecoms regulation currently underway takes place in an international context of growing communication, where the internet and its major players dominate. Communicating through the net has become a convenience, a daily activity, even an addiction. The EU and its telecoms operators must therefore prepare themselves for a “transition from voice to connectivity,” according to Julien Salanave, director at the European Audiovisual and Telecommunications Institute (IDATE). “Today, 40% of time spent online is used for communication,” specifies the expert. These trends should stand out more over the next five years, through high speed connections and the erosion of classic services, such as voice.

De facto, mobile telephony, the engine of growth for the European industry for many years, is losing ground. This was true before the European Commission’s initiatives aiming to lower the mobile termination rates (billed by one operator to another to transport a call between networks) and international roaming (prices of calls and messages when abroad), notes the IDATE’s analysis. The mobile market is saturated - almost 112% penetration, according to the Commission’s figures - and fiercely competitive.

This is why experts are a little pessimistic regarding mobile services: with Skype (software providing free internet telephone calls) entering the market, the same thing is happening to them as to fixed telephone five or six years ago with the rise of the mobile phone. Except that this industry is quicker to react, following the example of American operators (Verizon, AT&T and T-Mobile USA), which have introduced a flat rate, an unlimited number of calls per month at a fixed price. However, “we do not see mobile operators leading European growth in the coming years as they have done in the past,” says Salanave.

The sector must find its success elsewhere, and firstly in the high demand for online communication: e-mails, forums, instant messengers, blogs, etc. Operators can also improve consumer services, encourage them to call more, extend the scope of connection to sensory networks or machine-to-machine connections. Internet users are also watching more and more videos online, both personally and professionally. There is certainly no lack of opportunities.

“Today, people communicate more through this type of online tool than through telephone.” But how to turn that into a business? The problem is that services such as YouTube, bought by Google, and instant messengers like Microsoft’s MSN Messenger, are completely controlled by internet giants, and telecoms operators do not have a significant share in the market. The same can be said for blogs: until now, telecoms operators have not penetrated this market “while there are huge opportunities,” assures Salanave.

THREE MODELS

In sum, telecoms operators have every interest in specialising. According to IDATE, there are three models. British Telecom in the UK or Sprint in the USA, for example, in addition to having good cost effectiveness, have the most developed infrastructures, offer connections and let competitors access their networks to develop other services. This is a dream for new entrants to the market. These same new entrants, who constitute the second model, want to focus on services, sometimes targeted. This is the case with 3G in the UK and E-Plus in Italy. They function more or less like Skype, which does not have the burden of infrastructures. And then there are the former monopolies, which are mostly concerned over retaining their model - their infrastructures and own services - and investing in new high-speed networks, such as fibre optics.

But, generally speaking, all the operators must continually improve their cost effectiveness. And here, the EU regulation is more often accused, by incumbent operators, of impeding investment capacity, while new entrants praise and demand it due to its competitive virtues. In reality, investments have increased slightly, from €47 billion in 2006 to more than €50 billion in 2007, according to the Commission’s data. If they have increased uninterrupted for five years, the low growth can be explained by the fact that mobile telephony, as mentioned above, has reached a certain limit. However, it is true that the sector’s growth is clearly slowing down: +1.9% in 2007, according to the Commission, against 2.4% in 2006, 3.4 % in 2005, 5.2% in 2004 and 6.2% in 2003 (IDATE’s figures).

Experts are a little pessimistic regarding mobile services 

Failing at convergence

Fixed and mobile telecoms operators, cable operators and satellite companies do everything to be competitive. This is ‘convergence’. Fixed mobile telephony does mobile even if it didn’t have networks to begin with. Mobile operators are trying to compete with fixed telephone with fixed and mobile offers. And cable operators are entering the telephony market with fixed voice services online. Changes mainly due to the spread of broadband and strong competition from cable operators in certain countries - Belgium and the Netherlands - as well as access that new entrants have to the incumbent network’s local loop, implemented in France, for example. But there are also failures and half-failures, such as internet TV. Fixed operators tried to develop it, but revenue is not high enough: consumers were not going to pay to see the same thing as on traditional TV, and having exclusive content is expensive. Same thing for the impact of cable of telephony. In the two countries where cable is most developed - the USA and the Netherlands - its impact on telephony is marginal. The success of convergence between fixed and mobile is also relative: the sole advantage for consumers is having both services in the same package at a lower cost, but there are strong competitors, such as Skype, free for its users, and “affordable for fixed and mobile phones throughout the world,” assures its website.