Telekom Austria Revenues Fall 2% in 2Q 2013

Telekom Austria's second-quarter revenues fell 1.9 percent year over year to EUR1.04 billion ($1.39 billion), as the operator saw sales fall across the majority of its European markets, including a 20 percent drop in Bulgaria.

That revenue decline is part of a wider problem for European service providers, fixed and mobile, namely a continuing slide in overall industry revenues. 

As has been the case for other service providers, Telekom Austria blamed competition and lower mandated roaming rates for the revenue woes. But as you might expect, lower retail prices forced by competition are causing Telekom Austria to spend more on marketing as well. 

At least so far, there appears little danger that every service provider in a particular country will go out of business as a result of the stresses. But one has to wonder about the outcome longer term. 

Many national regulators believe a minimum of four mobile service providers is necessary to preserve competition. But Austria only has three service providers, and at least with the current business model, one might argue there is "too much" competition to support all three on a sustainable basis. 

So something will have to give. Either the desire for four national operators is an unrealistic hope, and will lead to bankruptcy for most of the suppliers, or mergers must be allowed to happen, while service providers also must learn to adapt to a harsher business model in general, as well.

And though it has happened only on a minor scale historically, one must ask what happens if bankruptcy is the ultimate fate for all of the suppliers in a given country. The traditional thinking about such a problem is that telecommunications is so vital ("too big to fail") that the government would not allow it.

But what if the government cannot itself afford to take over and operate the national network? That would be a new question in most of Europe, since in the past one might have argued that nationalizing telecom again, so the government can subsidize losses, would be a viable option. 

Under today's circumstances, that is not possible, many of us would argue. 

Something very major would have to happen--serious restructuring of the retail service and operating cost model--to create a sustainable national network post-collapse. 

The point is that there would not be a government operator of last resort option, in many, if not most, instances. 

If no operator could create a viable business under competitive conditions, it is doubtful most governments could do so, either, except, some might argue, under a return to monopoly regulation. 

Perhaps some will argue that could work. In an Internet era, perhaps the purpose of a national network is simply high-quality broadband, not voice. 

Perhaps other service providers would adjust to a scenario where there is, in some countries, no such thing as universal interconnection for voice supplied over public networks. 

Maybe some countries will not have universal fixed network access, or even universal mobile access, even as a policy goal, as hard as that might be to envision. 

Maybe fixed networks will simply be abandoned, on a universal basis, in favor of some other access method, such as mobile-only or wirelss-only modes. 

The point is that telecommunications is a product like any other, supplied by contestants working in markets that are open to some amount of competition. But in other markets, failure of some contestants tends to lead to survival of a smaller number of providers. How far will regulators allow that process to proceed? 

And what if even that process fails? It is one thing to guarantee supply. There are fewer remedies for falling demand.