Access providers from every corner of Europe’s telecom industry find themselves in despair. Fixed, mobile, and interactive digital television (iDTV) operators’ businesses are all prey to some deadly combination of market saturation, towering costs, declining revenue per user, and lack of interest in new services. In a new report, however, Forrester Research B.V. (Nasdaq: FORR) contends that services that unite content with communication — what Forrester terms conversational content — have the capacity to unlock new revenue opportunities for these beleaguered firms. Forrester defines conversational content as “the union of content and communication that creates more compelling services than either one alone.”

“Market saturation, rising costs, and decreasing revenues have sent telecom operators fleeing to the promised land of content services,” said Forrester Analyst Michelle de Lussanet. “Operators all see content — from sports updates to video on-demand to streaming audio — as a way to ignite data traffic, drive minutes of use, and get a share of profitable new paid content services. But their ambitions are misguided. Content isn’t the untapped goldmine that telecom firms dream of. In fact, content is less attractive than their mainstay business of communication. European consumers devote €101 billion per year to communicating via fixed phone, mobile, and post — but their spending on all forms of content combined totals a smaller amount of €89 billion. However, Forrester believes the secret to growing revenues through content lies in blending content with communication — conversational content — to tap a bigger share of potential growth than the sum of their parts.”

Conversational content, Forrester asserts, explains why one content service flops while another becomes a hit. For instance, in Japan, 4.4 million consumers use J-PHONE’s sha-mail service to take pictures with their mobile phones and send them to friends, family, colleagues, or customers — enabling them to communicate through content they create themselves. In contrast, competitor NTT DoCoMo’s struggling M-stage services don’t enable any type of communication at all, but only offer broadcasted content that must compete with richer alternatives like TV, radio, and CDs. Equally, UK online community phenomenon Friends Reunited lets visitors find former classmates and colleagues by listing their contact details online. The Web site is the 16th most popular in the UK, with 250 million hits per month, 4.5 million registered users, and more than 3 million unique visitors in May 2002 — about 15 percent of whom pay €7.50 per year to access the contact details of others, yielding upward of €3.4 million in revenue per year.

“Conversational content will serve as the core for an array of successful new services launched by telecom operators, media companies, merchants, and startups,” de Lussanet added. “We believe that conversational content services will proliferate in three waves: 1) An explosion of services exploiting social communication like TV chat will start now; 2) a series of self-expressive services, such as personal audio and video streaming, will go mainstream through 2004; and 3) a trailing group of functional services — e.g., sending details of a concert on a Web site directly to a PDA — will gain traction after 2004.”