There’s this thing that’s been nagging my mind for quite some time that I need to get out there. I believe that Western Europe has seen a return to differentiation based on fundamental network characteristics. The last two years’ boom in mobile broadband has seen operators’ splash cash on billboards about who’s got the fastest, biggest, best coverage, etc. etc. Consumer studies we have performed confirm that the number one and two discussed topics around mobile broadband are coverage and speed.
I think it’s very natural. Most operator pushes to differentiate on VAS, apps etc. has seen very little traction nor made any huge impact. In particular now that the device manufacturers/platforms are taking care of apps, services and content the operator position is more than ever pushed back to access. There’s simply not that much room left to differentiate on anything else than price and network quality.
At the same time another major other trend is ongoing in the industry. Network Sharing. Earlier this year Orange and T-Mobile in UK announce their major agreement. Telenor and Tele2 in Sweden are pooling their spectrum and capital to modernize GSM and build nationwide LTE. We expect that this trend continues with other operators and indeed for the coming mass roll-out of LTE.
So, the paradox then; While differentiation opportunities are more or less restricted to network quality, operators still strive to share networks. What will be left?
I believe that the above point to the obvious. If sharing is a must, full consolidation will be the next step. There are several markets where we can see signs of over-establishment and 3rd-4th market players suffer financially and hurt the overall market by price wars. Other utility industries with heavy infrastructure (e.g. energy or water supply) hardly spend cash on four to five parallel nationwide infrastructures. Why should telecoms be different?