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Telecoms spending to decline

But broadband still to boom

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Consumer spending on fixed-line telecoms services in Western Europe is set to decline, and Ireland will see an especially dramatic fall, according to a new study.

In the report, research firm Analysys indicates that growth in TV and video services delivered over broadband will not be enough to halt the fall in the value of fixed-line telecoms services.

Analysys' forecast reveals that end-user spending on fixed telecoms services in Western Europe is set to decline to below three-quarters of a per cent of Gross Domestic Product (GDP) by 2011 - half its value in 2001.

According to Rupert Wood, main author of the report, the average decline in expenditure on fixed-line telecoms services in Europe will be 10.8 per cent. However, Ireland is expected to experience an above average decline of 15.42 per cent in nominal terms.

"The decline in Ireland is partly a result of the fact that the country is expensive in terms of telecoms," said Wood, speaking to ElectricNews.net. "In terms of voice, Ireland is characterised by high fixed-voice usage but also high average spend per fixed-voice minute. This means that there's quite a long way to come down as voice moves towards VoIP [Voice over Internet Protocol] and mobile. Despite the fact that there's still quite a lot of growth from broadband envisaged in Ireland, this won't be enough to stem the decline in itself.

"Most incumbents in Europe are now in a position to migrate some of that value to mobile and possibly to other services such as IPTV, but there isn't going to be sufficient revenue growth in these services to make up for the deficit that such firms will experience over the coming years."

The report shows that the rate of decline in fixed service spending will vary by country, but that in several countries, spend will fall by over 20 per cent over the next six years.

Moreover, expenditure on voice services will fall to just over 50 per cent of fixed service spending by 2011, due to increased use of VoIP and mobile phones.

The Analysys report also reveals that broadband take-up is continuing to exceed operator expectations. The research firm expects average household penetration in Western Europe to reach 60 per cent by 2011. Nonetheless, the firm believes that a combination of price erosion and saturation will halt real growth in basic access before the end of the decade, leaving operators looking for new ways to generate revenues from fixed networks.

"TV and video services over broadband represent the greatest hope for maintaining spend levels, but in most European countries fixed operators would have to grow impossibly high Average Revenue Per User (ARPU) on TV and video in order to compensate for the scale of losses in voice and internet," Wood said.

Copyright © 2006, ENN

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