Decline of mobile networks in Europe – no money to maintain work

Hello.

What time, such topics for discussion – European operators are looking for economic models for their own survival. Keeping the grid running becomes a problem as the cost of electricity skyrockets and the economics for the operator no longer converge. Laws that require supporting virtual operators and giving them access to the infrastructure also become a problem. Which in today’s situation can lead to a paradox – by raising the cost of services in the same Vodafone, T-Mobile, and so on, operators will not be able to immediately change the prices for services from virtual operators. The delay in changing prices can be from six months to a year, which will automatically lead to a flow of subscribers to the MVNO. And this will create an additional load on the infrastructure of ordinary operators, and will lead to exactly the same economic losses. In an article about the cost of maintaining 5G and how much electricity costs for one base station, we partially considered one aspect of this crisis. Now is the time to see what plans European operators have as they try to avoid their downfall.

The first thing we need to evaluate is the amount of losses that European operators are predicting. This will be helped by their joint statement, in which they de facto demand the abolition of net neutrality, and at the same time make American companies pay for the fact that their data is transmitted over their networks. An old story, it is constantly remembered in moments of difficulty and lack of money. Network neutrality guarantees that any operator will be indifferent to traffic, will not give priority to one company to the detriment of others. In fact, this means that the operator sells his services to the consumer when he, paying for the services, gets access to any resources and there are no preferences on the part of the operator for anyone. So, Google services open on the operator’s network in exactly the same way as the same Microsoft or Netflix. Of course, the speed of access to services and sites directly depends on where they are physically located, what is the bandwidth in the data center. On the part of the operator, the main thing here is that he does not single out favorites, he gives everyone equal conditions.

Competition between operators is at a high level, as a result, they are theoretically interested in the highest quality service. In practice, this means that each operator is trying to give the client the best connection speed with different services, the stability of the Internet. So-called joints are formed when the operator expands its capacity at traffic exchange points for specific services. In the past, European operators have tried to charge companies for this, the latter fought back, rightly believing that the prices offered are exorbitant. It was cheaper to install our own infrastructure, to bring it geographically closer to our customers. These are CDN servers and not only, which is what big corporations have been doing all their lives.

Sixteen CEOs of European operators lobbied to consider payments from US companies such as Google, Microsoft, Netflix, for the use of their infrastructure. The idea is that the latter create a high load on the networks and therefore have to pay for it! The largest operators of the old continent have united in an attempt to extort money from American corporations, the amount of the requirements was announced – a percentage of the 50 billion investments in network development that operators invest throughout the year in maintaining optics and 4G / 5G in Europe. The question remains open what percentage the largest operators wanted. I think that they basically agree on any amount.

See how the operators articulated their requirements in the joint statement: “We believe that the largest traffic generators should make a fair contribution to the significant costs they currently incur with European networks. A fair contribution will send a clear financial signal to streamers regarding data growth associated with their use of limited network resources.”.

Budgets for the development of European operators have gone to hell, as the landscape of the market has completely changed in a few months. The growth in the cost of electricity has not stopped, any forecasts are a thankless task. The need to index salaries, while there is a reduction in staff – that is, a conditional engineer now has to service 1.5-2 times more base stations and other equipment. Salary growth fits into 10-15% of the force. The cost of equipment is also growing, for example, optics have now doubled in price, and the growth continues. The cost of servers against the backdrop of market contraction, the absence of a pronounced deficit is also going up. The perfect crisis.

The response of American corporations to the claims of European operators is expected, for example, Matt Brittin, president of Google in the EMEA region, answered this with numbers: the company spent 23 billion euros in Europe last year, most of the costs fell on infrastructure. And in fact, we are talking about the fact that Google has facilitated the work of operators, reduced the burden on them. Legally European operators have no chance of winning, they are already charging their users. The question is that they need to raise prices, but they are limited by the states, the latter are balancing in every area, holding back price increases. But it is impossible to do this indefinitely, the cost of communication services is growing before our eyes. The average ARPU for the European market has already exceeded 60 euros per person, in the next year it may well rise to 90 euros. A few years ago, such a scenario would have been called fantastic; today, European operators call it mild.

The destruction of the usual world order – what awaits the operators

The disruption of Europe’s energy system also imposes significant costs on operators. The mild continental climate did not imply significant backup systems, in Europe there is no need for complex climate equipment. Everything has changed, and this summer data centers, as well as operators, faced increased wear and tear of infrastructure, equipment was on fire, air conditioners could not cope.

At the moment, the most far-sighted are calling for preparations for next summer, but the fact is that the operators do not have free funds. All resources are directed to the purchase of diesel generators, additional batteries to ensure communication in winter, to prevent network outages. European governments are considering different scenarios for the operation of energy networks, including planned outages for several hours in entire regions. The operators were not ready for this, as spare batteries were worn out, in some places they were not available at all. A review of the networks showed that the amount of investment needed to keep them running is enormous. And these are not hundreds of millions, but billions of euros that need to be found as quickly as possible. At the same time, one cannot count on the support of states, they have no money. The appearance of panic articles that communication outages are possible in winter is rather curious, you can read an example of such material (rather calm against the background of others) here.

In general, the logic of European companies is understandable – they see what set of problems threatens their countries. They are required to have uninterrupted communication at any cost, but they do not give money for this. We have to look for ways to get them without driving up prices for consumers. But here you need to remember that the data centers that serve American companies in Europe also pay taxes and create jobs. You can easily lose them, but then no solution to the problems simply shines. Total vicious circle.

I think that the first stage will be pressure on the B2B segment, the cost of corporate communications will rise sharply. Even today in Europe, the average monthly payments of corporate clients are twice as high as those of individuals. This gap will grow. At the same time, the volume of services provided by both is no different.

The next direction of lawmaking will be related to changing the laws for virtual operators, their free time is coming to an end. In fact, such operators and their subscribers will be partially deprived of their rights. How long it will take to change the legislative framework is an open question; most likely, this is a matter for 2023-2024. One day nothing will happen.

Operators are working on emergency modes of operation, turning off the mobile Internet, but maintaining voice communications, SMS (which is not so easy for modern networks). The very vector of preparation suggests that everything is already hanging by a thread, there is no margin of safety. During the pandemic, operators worked to reduce the quality of video transmitted over networks, required streaming platforms to abandon high-definition video. It is possible that something similar will be proposed again to maintain network capacity, which is lacking in most countries.

But the main question is that with an increased load on equipment and even with a mild winter, but emergency power outages, we will see mass failures of equipment, it will burn. The replacement fund of European operators is extremely limited. In a private conversation, one of the technical directors of a large European network said: “I have equipment for a month and a half, I can order new ones, but I have no money. Three years ago I had equipment for 5-6 months of work. The money will be found when the big crash happens, but it will be too late to fix things, the problems will cascade and we won’t be able to lower our check for them.” It is curious that European companies such as Nokia or Ericsson have experienced this in full measure, their sales have fallen sharply under current contracts, and everyone is saving money. For example, Ericsson is seeking permission from the Swedish government to circumvent sanctions and supply equipment to Russia, since otherwise there may be a question about the very existence of the company and its position in the market. At the moment, Ericsson is being forced to drive itself into a hopeless situation and, apparently, to consider an offer from one of the American companies, which will eventually bury the Swedish giant. It is possible that, according to the good old tradition, it will be Microsoft, which killed the mobile division of Nokia, as it was dangerous for the United States due to the lack of control from this state.

The situation with operators is only a reflection of what is happening on the market, I am sure that something similar is happening in every segment of the market. I have never seen such panic and the lack of clear, transparent decisions on the part of the operators, they simply do not have a plan for how to live in such conditions. There is no way to lay straws, the toolbox is very limited, and most people rely solely on a miracle. It seems to me that the limit on miracles has been exhausted, now only real life, and all the problems that have accumulated over the years are coming out.

I do not believe that Europe will lose its telecoms, but the most optimistic scenario suggests that the development of the industry will at least stop. And in many countries that do not support telecom, there will be a rollback: a reduction in network coverage, a decrease in the quality of mobile Internet and other unpleasant things. Which will further affect the economy, which cannot live without a strong telecom.


Source: Mobile-review.com — Все о мобильной технике и технологиях by mobile-review.com.

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