Telco innovation threatened by delayed returns on network investment, ITU says

A “generational gap” between telcos and over-the-top service providers is threatening to stifle innovation in a “radically altered” telco sector, the International Telecommunication Union said in a new report. In a report called “The Outcomes: An Industry in Transformation” released Monday, the ITU said one of its primary observations from presentations and workshops at its October 2012 Telecom World conference in Dubai found that telcos are locked in a state of “mutual dependence” with over-the-top services as they both attempt to monetize users’ data consumption by driving up data use through free content and services. “ut it is the OTTs who are currently growing revenue through monetizing end-user data, whilst network operators face hefty investments in next-generation infrastructure to cope with increasing demand,” the report said. The ITU said the “disconnect” between telco and over-the-top revenues is “enforced by the cultural and generational gaps” between the two types of services in an increasingly Internet-based communications world. “The timescales for investment, product life cycles and business models are dramatically out of sync; policy makers and regulators are often unaware of the extent of transformation within the industry; and development is in danger of being stifled or delayed beyond market viability,” it said. The report said telcos continue to have a “considerable arsenal of advantages” to leverage new business models in the years ahead, including their network infrastructure and their existing relationships with consumers. It said telcos could benefit by separating their network access and service delivery businesses, which would allow them to stick “to their core competency as a utility, offering a neutral network for external service and content providers.” Telcos could continue to offer other services, such “customer relationship management” as value-added services to wholesale clients, or could run separate operating divisions that offer retail services. “Dividing access and content pricing models encourages flexibility and innovation in network and services usage,” the report said. “Moving from the voice model of charging per minute to a system based on bits and usage better reflects the nature of network traffic and captures the value of the bandwidth.” The ITU said there is an “important disconnect” between telcos’ up-front costs to build out and deploy next-generation wireless and fibre networks, and the “long- to mid-term return on investment” they will see on those networks. It said this disconnect called for “new thinking” on infrastructure, financing and regulation models, “including challenging the assumption that the best way to ensure market development is by enabling competition.” It said that oligopolies “or even government-sponsored monopol,” could be required to maintain network investments in some markets. “If broadband is accepted as a critical national infrastructure, government has no alternative but to make deployment a strategic priority to ensure universal access where private sector investment is not commercially viable,” it said. —With reporting by Danika Grenier at dgrenier@thewirereport.ca and editing by Nick Kyonka at nkyonka@thewirereport.ca

Telco innovation threatened by delayed returns on network investment, ITU says

Broadcast | February 13, 2013

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Telco innovation threatened by delayed returns on network investment, ITU says

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