2010 European Telecommunications Infrastructure and NGNs

Europe on track for comprehensive fibre-based NGNs by 2020

During the last few years all countries in the European Union have made considerable progress towards building Next Generation Networks based on fibre infrastructure. The timetable for this exercise differs between countries, but most will have completed the migration from legacy copper networks to an All-IP architecture by 2020. The importance of this development has been made more evident since the global economic crash began in late 2008 – since then, a number of European governments undertook large financial commitments to underwrite investment in telecom infrastructure under the guise of various stimulus packages. Governments thus acknowledged that socio-economic welfare and prosperity, as well as securing advantages in an increasingly globalised employment market, depended on reliable telecom services and a fast delivery platform, both fixed and mobile.

An additional pressure on telecoms infrastructure during the next decade will emerge from national requirements to reduce carbon emissions, requiring more intelligent electricity grids managed through upgraded telecom networks. European governments are committed to generating at least 20% of electricity from renewable energy sources by 2020 (though countries such as Germany have aimed at 30%). In conjunction with the energy sector, the concept of trans-sector synergies will also come into play; governments will be among the principal beneficiaries by utilising telecoms infrastructure to deliver – more cheaply and more efficiently – the services under their remit. Principally, these include various health, education and transport services, as well as a wide range of socially-inclusive enterprises. Governments recognise telecoms as the key driver for extending such services and thereby closing the gap between well-served urban areas and under-served rural communities.

Revenue from the traditional markets such as fixed and mobile voice will come under increasing pressure in coming years, the former resulting from the VoIP and mobile phone sectors as well as from cable operators who generally include voice services within their bundled offers, and the latter from competition among mobile operators as well as regulated tariffs on termination rates. In conjunction with this declining revenue, consumer demand for high-end data applications and services is continually taxing network capabilities. This has led to the fixed-line broadband and mobile data sectors being the key drivers for telecom investment, a scenario which will be reinforced during the next decade.

Fibre networks are being built across the region by a growing number of municipally-driven programmes, as well as by a variety of alternative telcos such as Fastweb and Iliad. At the same time, many incumbent operators have shifted their network construction and upgrade programmes from FttC to FttH architectures – this requires considerably higher investment yet in the long-term is considered the only viable solution to deliver sufficient bandwidth to meet consumer demand. In the mobile data sector, most EU governments have sought to increase spectrum allocation in a bid to secure mobile broadband connectivity in areas deemed uncommercial or impractical for fixed-line operators, and so fulfil the EC’s objective of providing reliable broadband to all EU citizens by 2013. To this end, several governments have already auctioned 2.6GHz spectrum, and have allowed 2G spectrum in the 900MHz and 1800MHz bands to be refarmed for 3G services. Most licensees plan to utilise this spectrum for mobile broadband based on LTE technology – Europe’s first commercial services in Sweden and Norway at the end of 2009 will be joined by a proliferation of similar services in 2011, while analogue switchover in 2012 will enable operators to use sub-GHz digital dividend spectrum for mobile broadband as well.

The changing landscape for Europe’s telecom infrastructure during the next decade is thus based on fibre-centred fixed networks complemented by mobile networks centred on newly-released spectrum and focussed on mobile data applications and services. Investments in these areas will be crucial for Europe’s telecoms sector to prosper. The sector was worth an estimated €351 billion in both 2008 and 2009, accounting for about half of the ICT sector overall, and may be worth €360 billion in 2011. By then, perhaps 41% of sector revenues will be driven by fixed voice telephony and broadband, and 49% by mobile voice and data services, with the remainder mainly from pay TV.