CAREENING TO CONVERGENCE
How fixed-line, mobile, and broadband are forging a common future.
From an EIU report

Decisive conflicts in the economic battle for communications’ future will be played out this year, as consolidation pressure mounts on major telecom service providers.

Overall spending on telecommunications globally is set to outpace global economic growth – the EIU projects a 3.1% growth in global GDP – this year, with Asia and Eastern Europe leading in levels of investment. Most of the growth will be due to new mobile-phone subscribers – a trend with diminishing prospects as markets saturate. This year is likely to be the last for double-digit growth of mobile-phone shipments, according to the EIU. And, to be sure, mobile phones’ challenge to fixed line as a mode of communication seems a completed revolution. Worldwide, 23 out of every 100 people had fixed lines, whereas 35 out of 100 owned a mobile phone, in 2005. In Indonesia, the figures are 5 and 27, respectively, for 2005. By 2009, the gap will widen to 6 and 41.

The great outstanding question will be how the rise of broadband – which allows easier and cheaper installation of voice-over-internet protocol (VoIP) service – will reshape the industry. That it will further put the pinch on fixed-line telecom providers is a given. VoIP equipment is cheaper than traditional phone hardware and can easily be adopted by cable companies eager to break into voice services. Internet telephony also lowers the cost of new services, such as video calls or acquiring a second line. The sector has been pioneered by small independents in the US and Europe, but most of the world’s leading telecoms service companies have now launched VoIP services with cable companies following hard on their heels. In Asia, this development will be paralleled in those markets where broadband has reached the highest acceptance: South Korea, Japan, Hong Kong, Taiwan, and Singapore.

The fixed line providers have not taken the challenge lying down. In addition to offering VoIP services of their own, traditional telecoms are forging partnerships with mobile-service providers in an effort to make fixed-line phones as versatile as mobiles. Japan’s DoCoMo (see “A Matter of Trust”), for example, is part of the Fixed-to-Mobile Convergence Alliance, set up by some of the world’s largest telecoms. The aim is to develop devices that can operate on both mobile and fixed networks.

These are game responses. But the message on call waiting appears to be inevitable: traditional providers can only expect accelerated consolidation.