Bright future for telecoms

OECD Observer

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Talk may be cheap to some, but to others it is a profitable base for business. Despite the bursting of the technology bubble in 2001, the telecommunications industry has a bright future, according to a forthcoming OECD report, Communications Outlook 2003.

From 1980 to 2001, the level of industry investment doubled. Accordingly, the growth in revenue was significant, and in 2001, reached US$878 billion for carriers with headquarters in the OECD area. This expansion was due largely to two major growth drivers: wireless communications and the Internet. Revenues from cellular mobile services were US$264.8 billion in 2001, a tenfold increase from a decade earlier. Cellular mobile revenue now accounts for one-third of all industry earnings. Though the impact of the Internet is hard to determine, it has increased the demand for fixed network access and wireless data services, both of which have increasing importance for revenues.

Such heady growth, however, hasn’t gone unchecked. Several firms with revenues greater than US$1 billion have made some rather dramatic exits from the market, including Global Crossing and WorldCom. Since 2002, leading industry players have been acting to stabilise their financial positions and are generally undertaking the necessary restructuring to compete in a new environment with increased consumer services. Pricing structures in the wireless market are likely to be overhauled, too.

The main challenge for OECD governments is to ensure that telecommunications markets remain open, so that industry competition results in further innovation. Ensuring competition and liberalisation in local access markets in particular would be a valuable step forward.

OECD Communications Outlook 2003 will be available from end of May 2003.

©OECD Observer No 237, May 2003

Economic data

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