Carrier Ethernet Increasingly Important To European Wholesalers As Voice Revenues Decline

CEN Feature (Jan 29 2013) Ovum

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   Wholesale voice revenues of Europe’s leading telecommunications providers have been falling for years as a result of intense competition and regulatory pressure. The decline shows no sign of stopping or slowing any time soon, according to a recently released report by Ovum. The London-based research and analysis firm said wholesale telecom providers must offset lost voice revenues by offering higher-value non-voice services beyond the basics (such as access, capacity, and data center space), and mobile wholesale offerings.

   Despite the challenging economy, European wholesalers’ overall revenues have remained strong -- approximately $48.4 billion in 2011. Nevertheless, their voice revenues decreased at a rate of 10% from 2010 to 2011, said David James, principal wholesale telecoms analyst at Ovum. He believes the rate of decline will remain roughly the same, between 8% and 12%, for 2011 to 2012. 

   “Competition from other carriers and from over the top (OTT) voice service providers such as Skype and Google are driving down voice revenues and decreasing margin,” he explained. “TDM-based voice also is migrating to carriers’ own VoIP networks that use Ethernet or other technology for transport, so that voice revenues become data revenues.”

   However, most carriers are managing to keep their overall wholesale revenues steady at the moment. This is because they are experiencing growth in their data and mobile wholesale sectors and are taking in new revenues from new services. With no mobile division, British Telecom (BT) is feeling the impact a bit more. The carrier’s wholesale voice revenues declined 11.8% in 2011, while non-voice revenues rose just 3%.

   Carrier Ethernet will play a role in BT and other carrier’s expansion of services to make up for declining voice revenues. While none of the telcos covered in the report revealed to Ovum how much revenue they were making from their Carrier Ethernet offerings, James said he got the “feeling that quite a lot of the incumbents are being innovative” with the technology.

   “BT has a strong message there. The telco has a flexible product offering in terms of domestic wholesale Carrier Ethernet with a wide variety of connectivity options,” he said. The carrier is promoting and improving its Carrier Ethernet offerings and experiencing a lot of demand for it as a result, he added.

   Ovum’s report shows that wholesalers’ customers, and their customers, are looking for services that help them meet their changing requirements. They are asking for bundled services that work together, too. To thrive in this evolving market, wholesalers need to be more innovative and thoughtful about what they, themselves, and their customers need, said James. 

   “Demand for services like Carrier Ethernet is increasing, so it is extremely important for carriers to have it in their portfolios,” he added. 

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