Carriers have been warned not to bet the farm on high definition TV services as a way of reversing the revenue decline in the fixed line market.

Instead, analysts have advised European operators to keep their focus on investment in core and service delivery architectures, creating a clear roadmap for their own managed services portfolio.

Stephen Sale, analyst at research house Analysys, thinks that too many operators are putting all their eggs in the HD TV basket, and argues that the revenue uplift from higher speed access will not be enough to reverse the gradual decline in wireline revenue for the typical European incumbent.

“The scale of the TV market simply isn’t great enough to compensate for the accelerating declines in legacy services,” Sale said. “Telcos do not have a big enough differentiator in TV; even the most optimistic ARPU (Average Revenue Per User) projections for triple play will not boost a typical incumbent’s top line by more than about 3 per cent, and an NGA strategy without rapid core transformation does not begin to address the long term problem of rationalising a legacy of multiple network overlays.”

Analysys believes that investment in the core network and IT-transformation projects can deliver real cash cost savings, enabling fast moving Next-Generation Network operators to exercise more control over the core transmission market.

“Investment in fibre may look radical, but it’s fundamentally quite conservative because it’s essentially a defence of fixed broadband, rather than a growth strategy, and because it still locates a telco’s main assets in physical networks rather than service delivery capability,” said Rupert Wood, principal analyst at Analysys. “But it won’t be enough to create an enabling platform that offers faster time to market – the revenue streams are too undefined.”

Wood claims that the opportunities to deliver novel business services on the back of the new service functionality are greater than in the consumer multimedia space. “Within a five-to-ten year timeframe, an operator focusing its investment in core and service-delivery architecture could expect both higher revenue and higher margins than one investing mainly in access,” the analyst said.