Only strongest broadband players will survive
Reuters
26/11/2001
URL: asia.cnet.com
The telecommunications industry is bullish about fast Internet to the home, but acknowledges that economic conditions were tough and only the strongest players will survive, industry players told a conference on Thursday.
Slow European deregulation is hampering growth and many smaller companies lacking cash to see them through to profitability have gone under.
But new players with deep pockets and sound business models are still coming in, recognising the opportunity of offering television entertainment, high-speed Internet access and telephony.
The cable television market in Europe has seen US newcomers such as closely-held Callahan Associates and Liberty Media become the dominant cable TV providers in the last 18 months.
Broadband gives people access to the Internet at speeds of up to 1.5 Megabits per second, roughly 25 times faster than a standard dial-up telephone modem.
"Cable is entering its golden age. After false starts and false promises we are seeing the long-awaited arrival of the broadband market," David Colley, Callahan's chief operating officer told an Idate broadband conference here.
Smaller rivals will be taken over and "prices are right for acquisitions", he added.
Analysts recognised that cable companies are driving the roll-out of fast Internet to the home, forcing traditional telecommunications operators to follow suit with a competitive technology known as digital subscriber line (DSL) or lose sales of lucrative voice telephony to the newcomers.
Deutsche Telekom will have sold two million DSL subscriptions to German households by the end of the year, in what DT's T-Systems managing board member Jan Geldmacher said was its most successful new service launch ever.
DT aims to hook up nine million households to DSL by around 2004, bringing it head to head with Callahan and Liberty Media, which operate in the same market.
This rivalry is bringing welcome relief to the telecommunications equipment makers who said broadband Internet modems were the only remaining growth area in their depressed market.
"The access market is the only area of which we can certainly say at this moment that there is some degree of growth," said the chief executive of British optical component maker Bookham.
Serge Tchuruk, chief executive of French equipment maker Alcatel, said he sees 20 per cent growth in the broadband access market.
The industry also believes that always-on, fast Internet access will drive new media industries that offer films, music, education and other interactive services.
Broadband was needed to kickstart the struggling technology industry, analysts said.
"Most technology executives see [broadband] as the most important issue to get the ball rolling again," said Steven Milunovich, Merrill Lynch's technology strategist.
Broadband decelerates
But although broadband take-up is still growing, in key areas around the world that growth is slowing down.
In the US, the second quarter saw a 17 per cent increase in new broadband subscribers, down from 27 per cent in the first quarter as households scrutinise spending patterns. Also traditional telecommunications carriers raised their prices after young rivals had failed, Jupiter MMXI research showed.
Growth will slow further to an average 7 per cent a year until 2006 when some 40 per cent of US households have fast access either over upgraded TV cables or supercharged telephone wires.
Adoption is more sluggish in Europe, which was late to the game and has fewer TV cable connections. Only one in four homes will have fast Web access in five years' time, according to research group Strategy Analytics.
Analysis market analyst Rupert Wood warned that broadband would "never go mass market with subscription prices north of 40 euros a month". At the moment customers pay anywhere between 25 euros (in Sweden) and 80 euros (in Spain) a month. The average is 50 to 60 euros.
Warp speed
Cable companies are therefore eager to sell broadband Internet, because it generates additional revenues without hurting the TV cable business.
Telecommunications operators are in a different situation. If their DSL product is too fast, it will cannibalise their lucrative business of renting out fibre-optic lines.
Another reason operators have been reluctant to invest in DSL is their huge debt burdens that are a result of last year's over-investments.
Even if the incumbent operators are not willing to make big strides themselves, European legislation effective this year said they would have to open their networks to new competitive carriers that want to offer DSL.
The European Commission suspects some traditional operators have not co-operated, and Competition Commissioner Mario Monti said recently they were "delaying as much as they can".
Cegetel, France's largest alternative carrier, said it was aiming for 25 per cent of the DSL market in France, but was not investing in it yet, because France Telecom was not opening up its network at reasonable prices. |
