Alcatel-Lucent: Europe to Become a Digital Desert

May 29th, 2012 by · 1 Comment

Thats what CEO Ben Verwaayen told Bloomberg is coming if Europe doesn’t find a way to convince its incumbents to invest more in their networks. He makes the point that European carriers are being out-spent and out-upgraded by their US counterparts, resulting in the loss of the telecommunications leadership position they had a few years ago. His prescription: reduce regulations.

Of course, Verwaayen and Alcatel-Lucent are not disinterested parties here. Increased investment levels by their main carrier customers would obviously translate into more revenue and profits for them, and perhaps allow them to shed a bit more of the baggage of the past. It’s surely true, though, that overall the European telecommunications sector has been playing defense for longer than is healthy.

But while Verwaayen talks of both wireless and wireline, surely the latter is mostly there for show. Incumbent providers in the US have also been skimping on wireline investment. The capex by incumbents is going into 4G rollouts and such right now. FTTH in the US is being carried by the likes of Google and SureWest and Sonic.net, as Verizon’s interest tails off and AT&T’s never really got started. Carriers on both continents are preparing to transition to 100G and are putting together cloud offerings, but when it comes to building new fiber networks much of the action is with the competitive operators these days.

Defending copper revenues is a thankless task and hopeless in the long run, but it’s a lot cheaper than the alternative. But I’m not sure that the proposed cure of less regulation to allow the incumbents to use their copper footprint to raise prices and gain leverage over competitive operators is going to solve the problem. It might shift things around a bit, but having more profits from older technology might not boost their appetite for investing in newer technologies that still face the same rate of return issues as before.

It looks more like Verwaayen is taking a subtle swing at net neutrality in Europe, which is the subtext here that probably has more teeth. European incumbent carriers and consumers and politicians have each been quite vocal on the subject, and not in a conciliatory way, with the Dutch recently enshrining it into law despite KPN’s current travails.  While Comcast’s efforts in the US have roiled the waters a bit, it could be that the real net neutrality battle will be fought across the Atlantic in the second half of this year.  Incumbent carriers have long warned that they need sufficient financial incentives to invest in future networks, and in Europe they’ve been demonstrating that principle of late.

Categories: Government Regulations · ILECs, PTTs · Telecom Equipment

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  • chris says:

    Its going to take competition by altnets to push the incumbents into investing, otherwise they will leach the assets in the copper for another decade and leave us in the digital slow lane. Its time Europe woke up to the fact and realise that too. 4G is not the answer, just like 3g or wimax wasn’t. The answer is fibre. Moral and optic.

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