6th Trans-Atlantic Telecom Dialog
The sixth annual Trans-Atlantic Telecom Dialog was held in New York City as part of CITI’s State of Telecom 2012 conference (see the CITI's website). The theme of this year’s edition of the gathering proposed by the IDATE DigiWorld Institute was “Facing the Over-The-Top.” Crossing the pond to participate alongside IDATE included representatives of Alcatel-Lucent, Deutsche Telekom, Orange, Swisscom and Telecom Italia. But it was the number of luminaries among us that made the event a stand-out.
What are the takeaways?
First, a clear contrast between the situations of operators on the two sides of the Atlantic. Though they are all dealing with the paradigm shift to "IP everywhere" and the migration of applications to OTT, Verizon Wireless’s and AT&T’s indicators (revenues, ARPU) are trending in the opposite direction from their European counterparts’. This momentum is riding on the smartphone boom as well as the massive success of mobile broadband (first HSPA+ and now LTE) among consumers, resulting in a steady increase in data ARPU.
The US carriers’ lead can also be attributed to their more advanced form of tiered pricing, structured mainly around data use and adapted to multiple devices (PCs, tablets, dongles, etc.). Of course, Verizon Wireless and AT&T are number one and two players in a country whose consumers generally have the choice between four or five operators, but they seem to operate largely in a separate market from the other national (Sprint and T-Mobile) and regional (Leap, MetroPCS) competitors.
However, just as in Europe, the fixed portion of AT&T’s and Verizon’s activities shows continued loss of lines and erosion of revenue. And in the sections of their territories where they have deployed fiber networks (FTTH for Verizon and FTTN/VDSL for AT&T), the Bernstein analyst considers there has been no real return on investment. The main cause of this in the United States is cable, which is far and away the dominant player in broadband and which can increase its consumer access speeds at a minimal cost. As a result, the Bernstein analyst like many other experts foresees more consolidation in the wireless market, and perhaps between major cable operators and telcos. The deal between Verizon and several leading cable companies—recently accepted by the FCC, with conditions—trading spectrum for a commitment from the telco to market cable subscriptions, is seen as the first anticipation of this next step.
With the difficulty operators are having counting on a return on their investment in NGN rollouts, we know that the Europeans are inclined to try to pool infrastructure resources, perhaps even opting for a separation regime. This topic was discussed by European speakers but not by the Americans, although plans for wholesale operators are frequently mentioned in the US mobile industry.
Expanding the scope of this transatlantic encounter, two Australians (including the minister) presented the features of the system their country had chosen: a government-led national plan for a super-fast broadband network worth nearly 35 billion USD, and the purchase of traditional operator Telstra and its infrastructure. It is hard to imagine a similar approach in the US. And while the European markets may be tempted, the macroeconomic conditions make this an unlikely option for the time being.
But the most memorable part of this Trans-Atlantic Dialog was none of these. It was the discussion of the next ITU world conference (WCIT-12) in Dubai in December. The NTIA administrator (who is also assistant secretary at the commerce department) and George W. Bush’s former ambassador to ITU sounded the charge against any attempt to change the International Telecommunication Regulations in such a way as to give ITU even a small amount of power over the Internet. Naturally this effort is targeted at countries such as Russia and China, which might seek refuge behind ambiguous security considerations. But it also applies quite explicitly to the position of the European association of traditional operators, ETNO, which decided to propose an amendment to the regulations to take into account some operators’ desire to make the "sender party" pay for certain Internet interconnections.
The Deutsche Telekom representative, ETNO’s spokesperson on this matter, did his best to relativize the impact of the proposed modification, and the ITU secretary-general, also present, reminded the guests that every idea must be discussed, and that at any rate he would seek a consensus among the members, but you get the sense that the pressure will remain over the coming weeks. Naturally, the representatives of Google/Motorola and Netflix advocated for the continuation of direct negotiations between content suppliers (or their transit operators) and telecom operators, without the intervention of governments or any kind of intergovernmental body. And AT&T and Verizon do not look like they want to align their position with their European colleagues of ETNO, although they also have reasons to lock horns with the Internet titans.
Join us as we further explore the challenges of “Telcos Facing OTT” at our next DigiWorld Summit, "Game Changers" on November 14 & 15. Visit www.digiworldsummit.com to register!
 The United States has become the unchallenged leader in LTE with first Verizon (+10 million subscribers in Q2), then AT&T, Sprint and MetroPCS.
 Bear in mind the difference in rates: while Vodafone was offering plans at just over 8 USD for 500 MB at the end of 2011, AT&T was offering a 200 MB plan for 15 USD.
 Though it is worth noting Swisscom’s innovative approach to reforming its mobile rates based on speed.
 With 33% and 31% of US subscribers respectively, for many years. It is especially interesting to note the relative partitioning of the markets between the two leaders (together), who can raise their rates, and the rest, in particular the second-tier (prepaid-focused) operators such as Leap and MetroPCS, who are lowering them.
 Cable’s share in winning new broadband subscribers leapt from 50% to more than 80% in just five years.
 AT&T’s failed attempt to acquire T-Mobile generated recurring rumors of combinations between Sprint or T-Mobile and second-tier mobile players such as Leap or MetroPCS. As we write these lines, we have just learned that T-Mobile and MetroPCS plan to merge.