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European Research Notes |
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European Research Notes |
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Wireless/Mobile Europe
by Simone RobertsEvent
On Tuesday October 16, France's telecoms regulator ART finally succumbed to operators' pressure by slashing the up-front price tag of French 3G licenses from US$4.67 billion to just US$570 million. The one off payment will be followed by a series of payments that will be linked to 3G operator revenues.
The license life span was also increased from 15 to 20 years in acknowledgement that profitability of 3G will be realized at a slower pace than originally expected.
Market Impact
The financial markets reflected the positive influence this announcement will make to French 3G license holders. Vivendi Universal (SFR) and France Telecom, which both hold 3G licenses, saw their share prices soar by 7% and 9%, respectively. Bouygues, France's third and smallest GSM mobile operator, which declined to bid for a 3G license due to the previously high price, saw its share price rise by 10%.
The wider implications of this announcement will create fear among regulators and anticipation among other European operators. After SFR practically held ART to ransom by threatening to refuse to pay the first installment for its 3G license unless the cost was dramatically reduced, other disgruntled operators may decide to employ similar tactics to force regulators to act. More importantly, will this move encourage other country regulators to reassess the cost burden of 3G for operators?
Conclusions/Recommendations
- It is almost a certainty that Bouygues will now apply for one of the two remaining 3G licenses and a possibility that foreign operators will reassess the new entrant opportunity in France. Deutsche Telekom and Telefonica are arguably the two most likely contenders as both regard France as the biggest gap in their strategies to build pan-European mobile groups.
- Other European operators, particularly those that won licenses in auctions, should not get too excited about the possibility of 3G licenses reducing in price. It is highly unlikely that regulators will reduce license costs and risk exposing themselves to a flood of legal disputes by auction losers.
- However, the French government is to be applauded for this move and other regulators should feel pressure to act.
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Convergent Communications Europe
by Jonathan DoranTrend Summary
ISDN in western Europe finally appears to be on the decline. In Germany—the region's largest ISDN market with around 4.8 million residential and 3.3 million business subscribers as of mid-2001—second-quarter growth of ISDN channels was 3.8%, compared with 7.5% during the second quarter of 2000. In the Netherlands, first half growth was 7% compared with 17% a year before, while ISDN channel growth in Norway fell from 16% to 5% over the same period. Growth is also flattening in Switzerland, which is another strong ISDN market. Meanwhile, DSL growth has been explosive in most European markets—notable exceptions include the UK and Norway—with Deutsche Telekom having connected around 1 million ADSL subscribers by October 2001.
Market Impact
The slowdown in take-up of ISDN in traditionally strong markets reflects two closely related factors. Firstly, ADSL offers a better value proposition than ISDN by virtue of its higher speeds and "always-on" Internet connectivity. Secondly, ISDN is approaching a natural ceiling in those markets where it has flourished, with household penetration passing 20% in Germany and Switzerland and 30% in Norway. We expect residential ISDN to continue growing, albeit at a slower rate until 2003, while business ISDN take-up will start to drop off after 2002 as prices for DSL and leased lines start to fall, providing a cheaper option for small and medium enterprises.
Recommendations
- Incumbents presiding over successful ISDN markets need not be wary of cannibalizing their existing product by promoting ADSL.
- A key virtue of ISDN is its ability to provide two or three digital quality voice channels over the same line and this can be pitched as a complement, rather than as an alternative to ADSL.
- The examples of Deutsche Telekom and, to a lesser extent, KPN demonstrate that ISDN and ADSL services can be offered as a combination with each product acting as a driver for the other.
- Telcos such as Swisscom and Telenor should further exploit their ISDN successes by developing integrated voice/data services using ADSL over ISDN, rather than treating the latter as an obsolescent technology.
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Internet Strategies Europe
by Andy GreenmanEvent Summary
The UK government announced on October 16 it would introduce an emergency Act to deal with the threat of terrorism. The implications of the Act are widespread and have a direct impact on data privacy and service providers' responsibilities. At present, ISPs in the UK are prevented by the Data Protection Act from keeping detailed records of which Web sites their subscribers visit or who they send e-mail to. Under the new guidelines ISPs will be forced to keep track on their subscribers' Web habits and will be able to use this data at their own discretion.
Market Impact
This is the latest knock-on effect following the events of September 11. The Act will impact on ISPs in the following way:
Firstly, ISPs will be required to store e-mails and usage logs generated by their subscribers for twelve months, four times the current requirement. The immediate effect will be increased costs as ISPs invest in storage facilities to manage the increase in data they are expected to retain, and just who will pay is not clear.
Second, consumer may view the act as an invasion of privacy. Many consumers are already unwilling to use online banking and e-commerce because of privacy concerns.
We expect the proposed changes will be watered down in light of the current weak state of the ISP market, and the UK government's announced commitment to a wired Britain.
Recommendations
- Data privacy is a key issue in the current context of anti-terrorism, but also in the wider movement toward increased daily interaction with online information. ISPs need clear guidelines on exactly what type of information will be collected. A Code of Practice will likely be established between the government and ISPs to establish what data must be collected.
- It is unclear at present how actively the information will be used. If ISPs cannot establish how the data they gather will be used they will be unable to communicate the changes to their subscribers. It is essential that ISPs do not lose the trust of their subscribers as they try to encourage them to use more online shopping and services such as e-banking and bill payment.
- The anti-terrorism Act has compounded uncertainty surrounding the role of the responsibility of service providers in upholding data privacy and security standards. However, this is one aspect of a far larger topic that is currently being debated in Europe as part of the drafted telecom directive. We would counsel ISPs to pressure the government to provide some concrete rationale for this move, but believe they will see a considerable wait before the Act, in whatever form, takes effect.
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Wireless/Mobile Europe
by Farid YunusEvent Summary
On October 11, Nokia unveiled its latest handset—the youth targeted 5510—due to be shipped before Christmas. It features an MP3 player, FM radio, a range of games, and a full horizontal keyboard on the front. Nokia hopes this new approach will be the first step in the migration from voice and SMS toward fully integrated mobile entertainment and communication platforms.
Market Impact
Eagerly awaited, the 5510 is indeed strange, as Nokia happily admits, but what we would have preferred is inspiring. Everything in the 5510 has been done before and there is little evidence that any of the value-adding functions have successfully driven sales of other mobile devices in the past. Growth in SMS messaging has occurred without a QWERTY keyboard, and indeed if it appeals to anyone, it is the non-youth market. Faster texting and longer messages through SMS concatenation may have proven popular in focus groups, but it hard to see this overriding its greatest drawback, which is its size. Only slightly smaller than Nokia's Communicator, its runs contrary to the mantra of small is cool, and it is perhaps only high-end users who are willing to trade functionality for bulk. Add the fact that it lacks GPRS, and the 5510 is neither compelling nor future-proof, and this will probably be reflected in sales.
Conclusions/Recommendations
- We should not, however, read too much into the 5510. While on the surface it would appear that Nokia has lost the plot, the company has not reached its current dominant position without canny and well thought-out strategies. Even if the 5510 is a relatively cheap stopgap measure, with few expensive components, and designed to keep the pundits busy while it focuses development efforts on 3G terminals, this approach has some merit. The suggestion that Motorola gained market share in the third quarter due to Nokia's lack of GPRS handsets, is an illusory one. GPRS phones have not been sold in sufficient volumes to appreciably impact vendor market shares. Coincidentally, five days after the 5510 was announced, Nokia reiterated its confidence in delivering millions of 3G handsets with multimode 3G, GPRS, and GSM capabilities by end of 2002. Ultimately, even if Nokia loses the short-term GPRS battle, it may be in better strategic position to win the long-term war for 3G market share.
- That said, all vendors are currently developing 3G handsets, yet it hasn't stopped the likes of Motorola and Ericsson from releasing GPRS phones. Nokia may end up with a larger and more innovative range of 3G handsets, all with superior reliability and performance, but it will count for little if 3G networks continue to be delayed and the shelf life of GPRS is extended.
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Convergent Communications Europe
by Amy RodgerEvent Summary
Regus Business Center, the world's largest business service center, signed an agreement with Song Networks earlier in October 2001 to supply with telephony and Internet access services across the Nordic region. The agreement is worth approximately SKr 50 million (€5.38 million) over three years. Regus provides short- and medium-term office space to a range of companies worldwide.
Market Impact
This is one of the largest contracts that Song Networks has established in 2001, largely due to the current European market slowdown. However, this agreement provides a great sign of reassurance that there are still customers investing in their telecommunications networks.
The dynamic Internet access service, described as "bandwidth on demand" that Regus will use to strengthen their telecommunications service to their customers, continues the demand trend for broadband access in the marketplace.
One of the main factors that clinched the deal for Song Networks was its ability to deliver the same product portfolio throughout the Nordic region. Song Networks has the distinct advantage of owning a fiber network across this specific area, giving it the ability to provide seamless solutions on a regional scale. As more businesses look to build their presence across a number of countries, the geographic reach of a supplier will become increasingly important to these customers when selecting their service provider.
Recommendations
- Suppliers must be able to offer dynamic and flexible services, such as bandwidth on demand, to initially attract the customers' attention.
- Suppliers that own a regional network, together with customer support and services, will be at a competitive advantage in securing regional contracts.
- As the demand for broadband access services increases, buildings with connectivity already in place will prove attractive, especially for those potential tenants with a high dependency on telephony and data services. Consequently, customers such as Regus have been targeted by service providers as a revenue stream.
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Hybridization: Solution du Jour for Application Outsourcing?
smbv5n12, Report, November, by J.P. Gownder and Helen ChanTargeting SMEs with Mobile Services: Price More Important than Portfolio
wmev5n15, Report, March, by Simone RobertsApplication Infrastructure Survey: IT Adopts Internet Application Platform
aispv1n4, Report, October, by Robert PerryThe Search for Opportunity Outside of Tier I Markets,
smbv5n13, Report, October, by Michael LauricellaMobile Payments: What Are They Worth?
mcsv1n8, Report, October, by Adam ZawelResidential Broadband: Provisioning Cable Modem Service,
mesv5n14, Report, October, by Micheal Goodman,Guide to Caribbean ISP Markets 2001,
islav2n14, Report, October, by Andres BronerE-Service Builders: From Systems to Service Integrators
isapv2n10/jmsv2n11, Report, October, by Mika Omori,Back to Table of Contents
October 26 2001Web Application Performance Management: Ensuring Site Availability and Performance
An Application Infrastructure & Software Platforms Audio ConferenceOctober 30 2001
A Small and Medium Business Communications Audio Conference
Small and Medium Business IT and Data Services: Bright Light in the Gloom?November 1 2001
A Convergent Communications Europe Audio Conference
European GNS Survey and European Data Services ForecastNovember 2 2001
A Convergent Communications Asia-Pacific Audio Conference
Greater China: Charting Broadband Business Models
To Register, to Get More Information, or
for the Complete 2001 Audio Conference Schedule, Please Check Our Web PageBack to Table of Contents
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