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If 2000 was the year that the bubble burst, then 2001 was the year the telecom boom ended. During the calendar year, telecommunication companies announced some 470 000 job cuts, with the manufacturing sector particularly hard hit. Shares plummeted, fortunes were lost and several famous names teetered on the edge of bankruptcy. Suddenly, opportunities that could not be resisted a year earlier could no longer be afforded. Licences to provide third-generation mobile services that were valued in terms of billions of dollars at the height of the boom in 2000 could hardly be given away in 2001.

But although the reaction of the financial markets suggests an industry in crisis, the actual performance of the sector was not really so bad. Shipments of new fixed lines fell by around a third and new mobile users added fell by around a fifth (see Figure opposite). But in both cases, the performance in 2001 was actually better than that of 1999. The Internet also grew, but at a much slower rate than in the past. The problem was that 2000 was such a good year for the industry, it was hard to maintain the momentum, especially after the tragic events of 11 September 2001.

Part of the reason for the slowdown in 2001 was the scale of past success. Many parts of the world are approaching saturation in fixed-line users and mobile. The growth is shifting away from developed economies to the developing world. For instance, China alone accounted for more than half of all new fixed lines and a quarter of new mobile subscribers added. Africa, too, has added more mobile subscribers since the start of 2000 than in the decades that lead up to the turn of the millennium. The telecommunication operators and manufacturers that have suffered most are those that have not invested outside the developed nations. The competition to reach the last five per cent or so of potential users that do not use telecommunications in the developed world is much more intense than for the fifty per cent that are still unserved in the developing world. For instance, some 18 developing countries grew their mobile networks by more than 200 per cent in 2001 and 13 of these were in Africa. Top prize went to Nigeria, which grew its mobile network ten-fold during 2001, following the licensing of competition.

The growth is also shifting from today’s networks to tomorrow’s networks. For instance, the Republic of Korea added four million new broadband users and more than six million users of high speed (up to 144 kbit/s) mobile Internet during 2001. It leads the world in both fields. Worldwide, the number of broadband users almost doubled during 2001, with online games being the main demand driver. However, the industry is still awaiting a true “killer application” that will appeal to users beyond teenage years. New technologies, such as wireless LANs or in-car navigation devices, have also witnessed a boom. But predicting winners is a risky business and for every business venture that succeeds, several others flop.

The plight of the industry is really due to a geographical mismatch between supply and demand. For instance, across the Atlantic, there is enough submarine fibre capacity to allow every single person in North America and Europe to make simultaneous phone calls. Faced with such over-capacity, prices are tumbling and profits too. But in the developing regions of Asia and Africa, there is a lack of capacity, especially for mobile communications and Internet traffic. The broader goals of humanity, such as those expressed in the UN Millennium Declaration, will be much easier to achieve once developing countries benefit from the same ubiquity of advanced information and communication technologies (ICTs) as developed countries.

Bridging the digital divide means creating a win-win game in which both developing and developed countries profit from increased investment in ICTs. If profitable growth is to be restored after the annus horribilis of 2001, then investors must look beyond their own shores. The telecommunication industry claims to be a global one. It must now prove it.


Thanks goodness for the Internet

New fixed lines, mobile subscribers and Internet users, added each year, 1991-2001 (millions)

Source: ITU World Telecommunication Indicators Database


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Updated : 2002-10-04