Incumbents as dinosaurs

The Economist has used recent events at Telecom Italia to survey Europe's incumbents. It highlights Telecom Italia's woes - slow growth in mobile, a decline in fixed-line revenues, competition and huge debts - and suggests these are common with its "dinosaur-like peers" elsewhere in Europe.

Stephen Pentland of Deloitte is quoted as saying that "the economics are not getting better,” and that incumbents can expect fundamentally lower levels of earnings.

In response, carriers have all adopted similar strategies. They have combined fixed and wireless service bundles domestically while competing with their mobile and broadband arms in external markets.

The way different carriers are looking to attack their rivals by bundling services is fascinating. I have been talking to vendors and analysts about femtocells, tiny 3G basestations serving a home which mobile operators are eyeing as a way to compete with fixed line operators while using their broadband networks to carry the traffic. Femtocells are set to appear in the second half of 2007.

The effect of all these strategies is increasing pain for the carriers as they “at last start to compete with each other”. Competition benefits the consumer, argues The Economist, while strengthening the case for carrier consolidation. Such consolidated entities would also be in a better position when negotiating with content providers. But governments will block such moves, it says, hence the "dinosaurs lumber on".