Broadband World Forum, in denial, the meltdown and developing regions
The IEC’s Broadband World Forum, held this year in Brussels, is a major event for equipment manufacturers and operators – fixed and wireless alike. Year after year, this IEC (International Engineering Consortium) event brings together the latest and best developments in the broadband universe – technology, applications, services and a bit of content.
The importance of the event to the sector can be gauged by its keynote speakers: Scott Alcott, the Forum Chair and the Executive VP of Belgacom- the show’s official host company; Didier Bellens, President and CEO of Belgacom; Ben Verwaayen giving his first public address as Alcatel-Lucent’s new CEO; John McMahon, President and Managing Director, Europe, of Sony Pictures Television International; Ericsson’s President and CEO Carl-Henric Svanberg; and Julio Linares, Telefónica’s COO.
Operators from the world over were there, of course, looking for whatever competitive advantages broadband services could bring them. Broadband drives a range of video-based services – IPTV was everywhere – that operators hope will raise their ARPUs. Equipment suppliers are counting upon this to drive their business – they pray that video will drive growth for years to come.
Still, the spectre of a teetering economy hung over the show. There were many smart people there, operators and suppliers alike, and many had to know in their hearts that the financial meltdown would hurt everyone. But everyone soldiered on, seemingly untroubled by the gathering forces of darkness. I expect the markets’ quickening slide in the two weeks since the show have changed the, ‘it won’t hurt us’, attitude of so many of those at the show.
Since then, the meltdown has accelerated and brought to the surface the waste products of a system long polluted by unintelligible securities derivatives, largely uncontrolled short selling, unprincipled distortion of the ‘everyone has a right to a home’ principle and the economically incomprehensible posturing of ideology-driven politicians.
I spoke at the show with many heads of companies, CTOs, heads of marketing and other pivotal figures of the sector. Save for a few, all spoke in glowing terms of their companies’ visions of the future – all were ‘in denial’. I wonder how many secretly feared for their jobs.
Abdelkrim Benamar is Alcatel-Lucent’s Vice-President Business Strategy & Market Planning Solutions for Europe, Africa and Asia and one of the few who seemed to really grasp today’s realities. Benamar knows the world’s developing regions well.
During our meeting he described a particularly compelling vision of some of the opportunities and challenges that the sector faces. He spoke of emerging markets and, odd as it might seem to those who know little about emerging markets, it is one of the scenarios that I expect will hold up best in the post-meltdown world.
Mr Benamar cited OECD statistics that showed strong growth in ‘south to south’ investment and the belief of some analysts that this will soon overtake traditional ‘north to south’ capital flows. Mr Benamar’s subsequent analysis was based in good part upon this assumption. This means that cash-rich investors from regions south of Europe and the United States – many of them recent success stories in the south’s emerging economies looking to put their capital to work – will soon be the biggest sources of FDI (foreign direct investment).
There are many reasons to believe that during the overall economic slowdown we are likely to see Mr Benamar’s scenario hold, especially in the near future, and an increasingly larger portion of the funds available for FDI spent in emerging economies. If for no other reason, more of the FDI will come from emerging economies; it will come from investors whose cash was earned in these economies and know their potential. These investors live in emerging markets themselves, know that money can be made there, have faith in long-tail consumers and know the time is ripe to take advantage of the inevitable explosion of demand in these markets.
It will take a while before prices in the developed economies adjust to the new realities, so low-cost emerging markets – if they can quickly upgrade their infrastructures and provide a trained workforce (the biggest ‘if’) – will be able to capture a growing portion of the world’s markets.
Although economic problems in other parts of the world tend to drag developing economies along, the growing use of ICTs in these regions might well tip the table, slide some of the bigger economic crumbs into their hungry mouths, and permanently fatten their economies. In more stable, proactive, developing economies the meltdown might well have a number of long-term – even short and medium term – positive effects.
This does not mean countries such as India – just one example – will not suffer; everyone will, but the newly created and empowered middle class, the highly competitive new companies and the world-class entrepreneurs in the emerging economies will not just sit back this time. They are hungry and accustomed to succeeding in difficult conditions. Instead of just handling the outsourced needs of the developed economies, the energy that made them succeed will go into growing their own markets and those of other developing economies. South to south investment, and marketing, will drive a new sort of expansion. The expansion will be uneven, often painful. This time, the economic development of these countries will not be driven predominantly by raw goods and manufacturing, but by ICTs and intellectual capital.
There will be lasting differences in the world’s markets when all is once again stabilised and the competitive playing field will be more level than ever before.
The recently created pool of middle class jobs – the muscle of the newly emerging economies was built upon the credit-fuelled expansion of western service economies. The new middle class cannot be sent back down. Desperation, preparation and imagination have long driven new companies to success and none of these ingredients will be lacking. Expect surprises.
Mr Benamar sees a fundamental shift in investment within the telecom sector; the increasing dependence of major suppliers upon capital expenditure in emerging markets to drive their businesses and maintain profitability. This is likely to continue in the AM (after-meltdown) world, since little of economic consequence can be done without information and telecommunications technology. Even though budgets will be cut, this is not the dot.com bust. Industries will be investing a greater part of their remaining budgets in ICTs to cut operating expenses in other areas and sharpen their competitive edge.
Long-term presence – real local history and experience – in emerging markets, Mr Benamar predicts, will be decisive for both large suppliers of services and equipment and their clients. Local technical competence will be at a premium; the current pool of well-trained technical personnel is just too shallow for sustained expansion. Programmes such as Alcatel University and a number of other company sponsored high-level training programmes can provide a decisive edge for sponsoring company and local economies alike.
The new technological ecosystem that Mr Benamar foresees in emerging markets – ecosystems that extend upward from the end-user through the service provider to the manufacturer or original service developer – will depend heavily upon services that enable the end user. The availability of content and applications that meet local needs, the availability of a first-class access infrastructure, economies of scale and affordable end-user equipment, all stressed by Mr Benamar, will be increasingly important in the after-meltdown world.
Stephen Scholz, Nokia Siemens Network’s CTO, spoke to me of the challenges facing the industry. He expects traffic to grow one-hundred fold in the next seven to ten years. The good news is tempered by the fact that revenues will stay flat and operators, manufacturers and service providers alike will face huge difficulties reducing costs to maintain profitability. Operators will have to build capacity to handle the enormous volumes expected and at the same time drop costs by going to flat architectures, full optical fibre access and either LTE or WiMAX wireless depending on the market.
He agrees that many operators might well become gigantic bit-pipes operating on razor-thin margins.
Considering the relentless acceleration of the meltdown since the event, I – and the entire sector – would like to know what sort of world we really will be living in. Try as we may, it is hard to deny the world has changed in the last few weeks and harder still to predict where it all will lead.
The next issue of Connect-World Global will be published early next month. This edition of Connect-World will be widely distributed to our reader base and, as well, at shows such as: Mobile World Congress (16-19 February 2009, Barcelona)and CTIA Wireless (April 1-3, 2009 Las Vegas)
The theme for this issue will be The information society 2015 – corporate responsibility and digital access for sustainable development..
The World Summit on the Information Society, WSIS, established a number of goals for the year 2015. Providing the world’s peoples with access – to connect the world’s people in even the remotest regions, its schools, governments, research centres, libraries hospitals and health centres, cultural centres, museums, post offices and archives – was the primary goal. One of the most important goals set by the WSIS calls for a world where, “more than half the world’s inhabitants have access to ICTs within their reach,” by 2015. The WSIS also called for, “ensuring that all of the world’s population have access to television and radio services”.
Providing digital access, as a way to achieve sustainable development, to half the world’s population within a decade is a grand ambition. It will take a mighty effort. Governments, international organizations and non-governmental organisations – NGOs, can do part of the job, but far from all of it. Much of this mighty effort will depend upon the world’s business enterprises. To complete this mission, new technologies, new hardware and software, new applications and content, manufacturing genius, financial resources and logistics that only private enterprise can efficiently provide, develop, deploy and manage will be needed.
What is corporate responsibility in this context? What can, and should, corporations do, then, to help achieve the ambitious WSIS goals? What are they already doing? How can businesses participate? Why should they participate? What will be the rewards and the costs? Is corporate responsibility – corporate participation in the building of the Information Society – good business? These are the questions Connect-World will ask global leaders.
Global 2008 Media Pack; Click here