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Telecom revenue slows; T-Mobile 'un-carrier' plan deemed 'unviable'

In telecom news, telecom revenue slowed in 2014, while T-Mobile's 'un-carrier' business strategy was called out as unsustainable.

This week in telecom news, telecom revenue growth slowed in 2014, largely due to a mobile services price war, according to a report from Infonetics Research. Meanwhile, Deutsche Telekom's CEO declared that T-Mobile's latest "un-carrier" business strategy is unsustainable.

President Barack Obama unveiled new broadband initiatives to help communities, particularly in rural areas, gain access to fast and affordable broadband.

Telecom revenue growth slowed in 2014

Telecom revenue growth in the U.S. slowed in 2014, thanks to a price war among the major mobile carriers, according to the latest Global Telecom and Datacom Market Trends and Drivers report from Infonetics Research.

Both AT&T and Verizon have indicated that a mobile service price war started by T-Mobile has taken a bite out of their revenue, according to Stéphane Téral, principal analyst for mobile infrastructure and carrier economics at Infonetics, who co-wrote the report.

Global mobile service revenue grew only 0.5% in the first half of 2014. This was was largely due to declining revenue among the five largest service providers in Europe, including Deutsche Telekom and Orange, dragging down global revenue, according to the report.

Mobile data services like text messaging and mobile broadband rose in the first half of 2014 as global usage of smartphones increased. Mobile broadband services grew 26% year-over-year, which helped offset the decline of SMS revenue.

To offset the drop in mobile revenue, Enterprise networking and communications revenue growth accelerated in 2014 due to a rebound in the North American market and increasing investments in security infrastructure, according to Infonetics enterprise networks analyst Matthias Machowinski. He added that enterprise networking revenue is expected to grow in 2015 thanks to strong end-user demand in North America and the Asia Pacific region.

T-Mobile 'un-carrier' strategy unsustainable

T-Mobile's "un-carrier" business strategy, which includes data rollover and no annual service contract, may be unsustainable for the mobile services provider without a merger, according to Deutsche Telekom CEO Timotheus Höttges.

Höttges told Re/code that T-Mobile has lost money in five of the past six quarters and that it needs to spend $4-5 billion every year to keep pace with AT&T and Verizon.

Höttges said he was intrigued by the prospect of merging T-Mobile with Sprint, but the deal fell apart when U.S. regulators said they would block any deal that reduced the number of major mobile carriers in the U.S. from four to three.

Höttges said the biggest obstacle to T-Mobile's growth is the financial and spectrum resources owned by Verizon and AT&T, which may widen the gap between the carriers and T-Mobile.

"The question is always the economics in the long term... and earning appropriate money," Höttges said. "You have to earn your money back at one point in time."

Obama unveils community broadband initiatives

President Barack Obama announced a new set of broadband initiatives to aid communities in gaining access to fast and low-cost broadband.

In a speech in Cedar Falls, Iowa, last week, Obama discussed five initiatives the administration will implement, including a broadband loan program and striking down local laws that he said prohibit broadband competition.

The Obama administration is filing a letter with the Federal Communications Commission to help the administration to address laws in 19 states that "have held back broadband access and, with it, economic opportunity," according to a White House fact sheet.

The Department of Agriculture is also accepting applications for its Community Connect broadband grant program and will open a revamped broadband loan program to offer financing to rural carriers that invest in bringing high-speed broadband to underserved rural areas.

The Department of Commerce is also launching a new initiative called BroadbandUSA, which will offer online and in-person technical assistance to communities, host workshops around the country and publish guides to provider communities information on broadband planning, financing, construction and operational issues.

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