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Thursday, October 14, 1999 Published at 13:57 GMT 14:57 UK

Business: The Economy

Convergence: Three into one

Some say the entertainment industry will drive convergence

Nearly everyone has a telephone, most people have televisions, and more and more people have a home computer. How these three household goods converge into one is fast becoming the key to survival in the global telecoms industry.

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Telecoms, the Internet and wireless technology are all converging, requiring major investment from all players just to stay in the game. Old corporate boundaries have lost their meaning as telephone, video and Internet connections are all sent through the same connection.

[ image: Television and computing are converging]
Television and computing are converging
Convergence has been a buzzword in telecoms for about the past ten years and has provided a spur for merger activity in the sector. Even before the $129bn Sprint merger - the largest merger in the world - merger activity worth about $195bn has taken place this year.

In the converged world, mobile phones can send emails and cable tvs can receive World Wide Web pages.

The popularity of mobile phones has led many people to believe that it is here convergence will show up first.

"There is consumer awareness and a desire to take their world with them. What we are seeing is a desire for the power of the Internet to be mobile," said Jennifer Hansard of Motorola.

The process of convergence will be accelerated by third generation of mobile phones. BT and other telecom operators are working on the next generation of mobile phones that will integrate the mobile phone with the Internet.

Changing consumer habits

[ image: Will people really want to watch Eastenders on a pc?]
Will people really want to watch Eastenders on a pc?
"Convergence is about pushing content around several different conduits," Marie Wold of Deloitte Consulting said, adding "if demand for content or internet access grows and it is easily available via a television screen, then demand will grow."

Others say consumer habits will be hard to change. Do people really want to watch Eastenders on the computer and talk to our friends on television?

"The term convergence is rather nonsensical," said Peter Blakeney of IBM's media and entertainment/e-business group. "It will probably take another ten years for a realistic expectation of content being spread on multiple devices."

John Matthews, principal consultant at Ovum, believes that ulitmately demand for converged products will be driven by the entertainment business.

"If top sports events are only available on a digital interactive basis, you will pay money to get to them," he said. " You may as a result have access to online banking and email, as part of the package."

Telecoms turned on its head

Convergence is part of a broader telecoms picture, which has seen a traditionally staid industry turned on its head and cast into the free market to fend for itself.

While the UK telecom market has been liberalised for some years, the rest of Europe's monopoly operators only started to do business in a free market since the beginning of 1998.

Many have had to contend with new operators cutting in to their traditionally secure revenues from voice telephony.

The changing market can be illustrated by the fact that last year BT became the first of the big European telecoms groups to reveal that data traffic had overtaken voice on its domestic network.

"Telecom groups are not going to be providers of voice services in the future, they are going to be suppliers of information," Ms Marie Wold, head of European telecoms and media at Deloitte Consulting.

"Those telecoms operators that stand still will go backwards, things are moving that quickly," she said.

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