When the talking stops

Battling to survive, telecoms have found a new use for their networks, one that involves a cultural shift from utility provider to entertainment channel.

by by James Curtis

In the mid-1990s, UK telecoms giant, British Telecom (BT), launched an advertising campaign with the famous catchphrase: 'It's Good to Talk'. At the time, for BT and most other former state-owned telecoms networks, this was certainly true. Little direct competition delivered giant profits, and, for the time being, talking seemed to be the name of the game. But, just a decade later, telecoms companies face a drastically altered landscape.

Liberalisation of the industry has created fierce competition and plummeting prices. In the three years following the deregulation of the telecoms industry in Europe in 1998, the average telecoms incumbent lost 22% of its share of national calls and 35% of international. The bursting of the telecoms bubble in 2000 wiped more than $1 trillion off the industry's value in just 12 months. In March 2003, Deutsche Telekom reported a net loss for the previous year of $27 billion - then the biggest loss in European corporate history.

Recovering from this near meltdown, telecoms have been forced to reinvent themselves. And voice traffic alone is no longer enough to sustain them. As Peter Cochrane, former chief of technology at BT and founder of telecoms consultancy ConceptLabs, says: "The old profit margins of 16% or 22% have gone. The percentages are now single figures and they're going down. The big issue for telcos now is that all the commercial and economic forces are pushing them towards being commodity providers. As you get down towards 3% margins, there's less and less scope for survival."

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