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Preprints & Reprints Deeper Than We Thought Gloom and doom is currently widespread throughout the telecommunications sector. A few people are starting to sound more optimistic despite the fact major corporations are still burdened with huge debts and profit reports are few and far between. I don't like to be the harbinger of even more doom, but I think this period of telecom depression is far wider and deeper than most suspect. Not only has the world economy seen a cyclic dip, we have had the dot.com bust, NY 9/11, Enron and Anderson. Confidence in markets have not been merely shaken they have been rocked to their foundation. When you combine this with the governmental rape of the EU mobile operators to the tune of >$100Bn, coupled with the lack of bandwidth in the local loop, then it is perhaps not surprising that things may actually worse than they seem. Adding up all those operator debts and dividing by their pre-crash per-annum profits, and biasing by the continued downturn in prices, sees this misery sustained for a further 5 years or more. Corporations will stare reality in the face and still make stupid decisions. The notion that people spending an average of $50/month on their mobile phone will suddenly increase that spend by a factor of 10 when they move to 3G beggars belief. As a primary behavioural example I cite digital cameras. I am an avid digital photographer and abandoned all wet processes years ago, and so no longer buy film anymore, but my spend is about uniform in terms of batteries. What I used to spend on film, I now spend on batteries. I think this model also applies to much of IT. People have a given amount of disposal income and it is difficult to put more into the pot. If the Telecoms sector is to get more money out of each household and office it has to be taken away from some other sector. On one level it is obvious how this can be done, but it needs different sectors to cooperate and change the way they work. The music industry for example is under severe attack from Napster like services where MP3 downloads by-pass the production, sales, marketing and delivery chain. Canada, the USA and Germany, who have among the most advanced broadband programmes, have seen a 5- 15% fall in CD sales. Conversely the UK, which has no broadband programme to speak of, has seen a 5% CD sales increase. The opportunity for people to purchase music and download over a broadband connection to a PC or directly to a mobile phone encapsulating an MP3 player is obvious. Extra money is then extracted from the music that can then only survive by closing down CD production facilities and changing their entire business model. But both can win! The production and distribution costs of the music industry are drastically reduced, and the convenience of downloading will see sales rocket. All of this is reasonably obvious when we look at our now lengthy telecommunications and IT history. Without exception every single service and moneymaking concept has been exceptionally simple and almost trivial. The vast majority of telephone calls and SMS text messages constitute very little value in terms of contribution to society and progress. But for the individual the trivia communicated is important on a social level, and they are prepared to pay for it. Meanwhile in the research labs of the planet our best minds are focused on creating services for 3G mobiles that no one is likely to purchase. These include wonderful services such as being able to locate the nearest restaurant with a table free at a particular time with sight of the menu - in my view such services stand no chance. Something really trivial like building a small camera into a mobile phone so young people can take photographs of friends and transmit them from one side of the planet to the other, are far more likely to take off. With an ongoing spend on 3G that is tantamount to pouring money down the drain I can see operators being in debt for some considerable time. My personal estimate goes like this - the removal of >$100Bn by governments, compounded by >$100Bn spend on new infrastructure, plus another >$100Bn on the production of handsets, deployment, marketing and sales, will see a continued and rising debt mountain for individual operators. Some shareholder rebellion and increased competition can be expected, leading to an industry rationalisation down to a small number of large players. My guess is that only 4/5 mobile operators will survive throughout the EU. Sheer human momentum and economic woe will dictate 5 - 7 years to climb out of a huge hole the industry is now in. Monetarily and psychologically there is no escape, and in my worst moments I suspect that this once most vigorous and vital of industries has not only stalled, but has actually down-turned permanently never return to the golden days of the recent past. |