Telecom cutbacks could mean slower new services

With a rash of bad financial news in the telecommunication sector, observers say consumers and corporate users may find new services slower in coming, and in some cases prices may go up.

“I think probably research and development is going to be harder to justify, so perhaps some of the new products and developments will hit the back burner, or standards will slow down, so perhaps generations two and three of services will be later and with reduced scope,” said Mark Main, a senior analyst at research company Ovum Ltd., in London.

Big plans for broadband data networks and new mobile services are likely to be scaled back, and in a handful of cases prices are edging upward. Several operators have postponed the introduction of widely anticipated third-generation UMTS (universal mobile telecommunications system) services in Europe, for example, and network operators are unveiling plans to save money by sharing network infrastructure.

Providers may be slower to roll out fixed broadband services such as ADSL (asymmetric digital subscriber line) in areas where there isn’t the population density to support them, Main said.

“We might see a slowing in build out in more sparsely populated areas on the fringes of conurbations, and in countries with a more sparsely distributed population,” he said.

But there are bright spots: “Where you have a large concentration of consumers – in countries like South Korea and Japan – we’re actually seeing quite substantial take up of new services, because they’re quite easy to reach in multi-tenant dwellings. The Koreans are crazy about broadband.”

In some European countries, too, new broadband services are in full swing.

“Tele Danmark (A/S) in Denmark, Telia (AB) in Sweden, and DT (Deutsche Telekom AG) in Germany are all rolling out ADSL as if there were no tomorrow,” said analyst Lars Godell of Forrester Research Inc. in Amsterdam. “DT is the leader in terms of the absolute big numbers, and Telia and Tele Danmark in terms of the relative penetration that they have achieved. So there is a lot of activity.”

Still, consolidation in the market could end up driving up consumer prices, he said.

“You have already seen the first price increases for ADSL services, for example, in Sweden by Telia, and BT (British Telecommunications PLC) in the United Kingdom, which is not good news, because consumers are very price sensitive for broadband services.”

Any potential cost savings from over-supply in the network infrastructure market are unlikely to reach consumers, Main said.

“The biggest cost is really the human efforts of building the last mile of networks, and also the back-office, service-management side of things – billing offices and so on – so the cost of capacity is only one part,” he said.

BT, in London, can be reached at Deutsche Telekom, in Bonn, is at Telia, in Stockholm, is at Tele Danmark, in Copenhagen, is at