2011 Europe - Telecommunications Infrastructure and NGNs

Europe’s fibre infrastructure requiring consistent regulatory pressure in 2012

During the last few years Europe has made considerable progress towards building national Next Generation Networks based on fibre infrastructure. The timetable for this exercise differs between countries, but most will have completed the migration from legacy copper networks to an All-IP architecture by 2020.

Governments have duly acknowledged that socio-economic welfare and prosperity, as well as securing advantages in an increasingly globalised employment market, depend on reliable telecom services and a fast delivery platform, both fixed and mobile.

The global economic crash which began in late 2008 and has since morphed into a regional Eurozone crisis initially encouraged governments to undertake considerable public investments in telecom infrastructure under the guise of stimulus packages. Yet existing constraints on public finances have now placed greater emphasis on the private sector for future infrastructure development. To this end, the onus is firmly on regulators to develop measures which encourage investment while providing unhindered and fair access to new fibre networks.

An additional pressure on telecoms infrastructure during the next decade will emerge from national requirements to reduce carbon emissions, requiring more intelligent electricity grids managed through upgraded telecom networks.

European governments are committed to generating at least 20% of electricity from renewable energy sources by 2020 (though countries such as Germany have aimed at 30%). In conjunction with the energy sector, the concept of trans-sector synergies will also come into play; governments will be among the principal beneficiaries by utilising telecoms infrastructure to deliver – more cheaply and more efficiently – the services under their remit. Principally, these include various health, education and transport services, as well as a wide range of socially-inclusive enterprises.

Governments recognise telecoms as the key driver for extending such services and thereby closing the gap between well-served urban areas and under-served rural communities.

Revenue from the traditional markets such as fixed and mobile voice will remain under consistent pressure, as consumers adopt VoIP and Voice of Cable Broadband alternatives as well as mobile-only solutions for voice calls. Mobile voice revenue has fallen across the region for several quarters in response to regulatory measures on termination rates and roaming as well as stiffening competition from low-cost MVNOs. Prices for mobile services have fallen by an average of 11-13% annually since 2006

In conjunction with this declining revenue, consumer demand for high-end data applications and services, both fixed and mobile, is continually taxing network capabilities. This has led to the fixed-line broadband and mobile data sectors being the key drivers for telecom investment, a scenario which will be reinforced during the next decade.

The mobile sector in particular is crucial for the region’s future economic growth: the industry contributed an estimated €175 billion to GDP in 2011, employing about 1.7 million people directly or indirectly. Capex, at about 12% of revenue, is among the highest in any industry.

The emphasis on fibre networks being built by incumbents, altnets and a growing number of municipalities has gradually migrated from FttC to FttH. This reflects the declining cost of FttH builds, as well as consumer demand for faster data throughput. Although initial take-up has been slow in some markets, this is expected to increase rapidly during the next few years, with the result that the DSL sector, which has already begun to decline in some of the more fibred countries, will wither further as customers are migrated to new FttH networks.

The cable sector, which is expected to be consolidated further in 2012-13, is likely to hold its own during the next few years as customers begin to be provided with services of up to 200Mb/s or higher.

The European Union’s programme that member states provide 30Mb/s broadband to all citizens by 2013, and 50Mb/s services by 2020, has provided the impetus and momentum for regional infrastructure upgrades. It has also given the impetus for the numerous spectrum auctions, in several bands, which are needed to realise the 2020 targets. These auctions may generate up to €20 billion for European governments to 2015.

Data in this report is the latest available at the time of preparation and may not be for the current year.