Financial crisis has hit network investment: ITU
Telecom carriers have been cutting back on network spending since the global financial crisis and face a possible “major shortfall” in investment, the ITU has warned.
The crisis has made credit needed for network improvements more scarce, and some carriers were “canceling or postponing their investment plans,” the UN agency said in a report on the impact of the crisis on the industry.
A number of telcos, such as AT&T, had reported cuts in capex of 10%-15%, the ITU said.
The ITU said the difficulties in finding funds threatened to derail investment in next-gen broadband networks, and warned of a possible “major shortfall in the investment needed to bridge the gap between demand and capacity, a shortfall that the financial crisis will only exacerbate.”
It called for “alternative sources of finance, in particular from governments, although it also predicted that operators would turn to vendor-financing deals as well. “There is growing pressure on governments to help finance some of the NGNs currently being built or planned,” it said.
“Many European governments have advocated the need for new IP-based network platforms, and may experience difficulties in allowing them to be postponed, due to the financial difficulties of hard-pressed commercial operators.”
The funding issues were unlikely to be resolved until the banking sector is recapitalized. The financial difficulties faced by the private sector could add to pressure for government intervention in the financing of national backbone infrastructure.
The ITU also noted that mobile operators were better-placed than fixed-line players to deal with the new environment because of the greater flexibility in their cost structure and the benefits of fixed-mobile substitution.