Prospects of the ICT sector in Greece

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Study of the ICT sector in Greece: Current Situation and Future Trends Deliverable 14: Prospects of the ICT sector in Greece-policy implications However, there are certain preconditions for the verification of these positive expectations. Need for structural changes in the supply side The fact that the supply side outbalances the relevant demand in a small domestic market could be helped of course by the expansion of demand. However, the scattered supply side has indeed hindered a more rapid growth of the sector. The excessive number of small ICT firms leads to an intense price competition that narrows profit margins, especially when there is lack of differentiated services and specialization, and everybody is trying to sell anything. Firms seem to recognize to a greater extent than three years ago that their “shallowness” and the limited efforts for learning should be reduced. The second generation of entrepreneurs that gradually are entering into the market and the consolidation of more concrete business practises, in combination with the flow of mergers & acquisitions and the irrevocable closure of firms that had bankrupted, will contribute to the sector’s reform. Besides, at the financial level, upturn of economic figures and a satisfactory liquidity, which releases resources and permits further actions, are supported by additional tools, such as the new law for investments and growth. The positive prospects also depend on the degree to which the firms will implement their proclaimed strategies and succeed at their goals: more innovation and differentiation, emphasis on the added value of their products/ services, utilization of their human capital, but mainly an increased effort for specialization and focus on niche markets. These niche markets already exist and are further explored in the banks sector, while it is expected to be intensified in Tourism and Shipping. They should also touch upon the Health sector, as up to now this market is underdeveloped. To the extent that these reforms and actions will show a significant progress, economies of scale are created and strategies for vertical collaboration (services, commerce) become more effective, the supply side could be more rationalized. Basic precondition for growth: Investments in infrastructures, increase of broadband and development of services and digital content Given the importance of telecommunication services for the domestic sector, the development of broadband infrastructures and the improvement of the Internet penetration are the most significant determinative factors for its growth. The substantial decrease in the cost (access and use) has created a positive climate in the market. However, a sustainable growth can be achieved only via rich digital content and many electronic services. These October 2006 Observatory for the Greek IS 38
Study of the ICT sector in Greece: Current Situation and Future Trends Deliverable 14: Prospects of the ICT sector in Greece-policy implications advanced and innovative services could support a broader demand for ICTs at two levels: first, a further expansion of the use of the current users (they are more sensitive to cost), and second, the attraction of the non-users. The improvement of Internet connectivity can prompt firms to develop more Greek digital content, a factor which could contribute to both the increase of usefulness and attractiveness of the Internet. The role of the public is important at the level of services infrastructures, digital content, and training… The actions that are planed at the public policy level towards investments in infrastructures (i.e Broadband strategic Plan) create some optimism for the future. At the same time, actions of advising/ training are drawn, in order to familiarize citizens with ICTs. Nevertheless, efforts for some additional digital content and new electronic services, which improve business transactions, should intensify. …as the private investments in broadband The main body of investments in the ICT sector stems from telecommunications. However, private investments have been limited so far, especially in broadband infrastructures. During the last couple of years, only OTE proceeded with some investments, in accordance with the needs of the Olympic Games. The “alternative” fixed telephony suppliers had not really invested in infrastructures, as the imposed regulatory actions to OTE allowed them to enjoy low prices in wholesaling, and thus “easy” profits in their retail sales. The adoption by EETT of certain motives for attracting investments shows already some positive results. The new Law for Electronic Communications, the enforcement of regulative obligations to the dominant OTE, and the cost audit, which led to a decrease by 50% of the monthly costs in shared access, constitute motives for the attraction of investments by the “alternatives” in fixed telephony. These actions, in combination with the greater clarification/ integration of the regulatory framework have led some of the most important firms in the sector to have already implemented investments in infrastructures for the development of their own core network. Thus, they will be able to provide services of added value in a more liberalized telecommunications market. The investments during the next couple of years are estimated to reach the level of 2 billions, while there is room for further increase, as the regulatory framework is finalised and reconciled with the EU’s legislation. Besides, the privately-owned core network provides more opportunities for supplying differentiated services to their subscribers and allows greater independence flexibility on behalf of the firms. October 2006 Observatory for the Greek IS 39
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Prospects of the ICT sector in Greece

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