Telcos must look beyond fibre for network upgrades

Service orientation is the key to renewal in fixed telecoms rather than next-generation access, according to new research.

A report from Analysys argues that smart and timely investment in the core will deliver better returns than banking on success in high-bandwidth TV services.

Revenue uplift from higher-speed access will not be enough to reverse the gradual decline in wireline revenue for the typical European incumbent, the firm believes.

"The scale of the TV market is not great enough to compensate for the accelerating declines in legacy services," said Stephen Sale, co-author of the report.

"Telcos do not have a big enough differentiator in TV, and even the most optimistic average revenue per user projections for triple-play will not boost a typical incumbent's top line by more than about three per cent.

"A next-generation access strategy without rapid core transformation does not begin to address the long-term problem of rationalising a legacy of multiple network overlays."

The report stated that the network rationalisation in core and IT-transformation projects can deliver real cash cost savings, as long as operators execute transformation plans efficiently.

As more fixed and mobile operators externalise their cost bases, this cost advantage should enable fast-moving next-generation network operators to exercise more control over the core transmission market.

An operator focusing investment in core and service-delivery architecture could expect higher revenue and higher margins than one investing mainly in access within five to 10 years.

"Investment in fibre is fundamentally conservative because it is essentially a defence of fixed broadband, rather than a growth strategy, and still locates a telco's main assets in physical networks rather than service delivery capability," said Rupert Wood, co-author of the report.

"But it will not be enough to create an enabling platform that offers faster time to market because the revenue streams are too undefined.

"What operators urgently need is a clear roadmap of their own retail managed services portfolio."