Europe’s telecom winter: How an industry lost its edge — and what it must learn now to survive

For decades, Europe’s telecoms were giants.

They built the networks that powered the continent’s post-industrial revolution — copper veins turning into glass arteries, connecting hundreds of millions across borders.Then, somewhere between 2007 and 2023, everything changed. Telcos stopped leading innovation. It started following. 

The world moved to apps, clouds, and platforms. And Europe’s proud telecom industry—the very infrastructure of modern life—became invisible. Profitable, yes. But unspectacular. Predictable. Drifting.

Now, as the global economy inches into a new technological era, Europe’s telecom bubble inflates again, furtively this time, on the same hype cycles that inflated and then burst both the AI and crypto booms.

The tragedy? This bubble isn’t built on irrational exuberance. It’s built on desperation. 

The Long Fall from Grace 

Two decades ago, being a telecom executive in Europe was somewhat like being a banker in the 1980s. You controlled the pipes. You owned the customer. You sold voice, data, and dreams. Then the over-the-top revolution took place — the OTTs.

Skype turned voice into software. WhatsApp turned messaging into a free commodity. Netflix turned bandwidth into burden. Google and Meta gobbled up the advertising spend that once flowed through operator portals and WAP services.

Telcos invested billions upgrading to 3G and 4G, only to realize that every new gigabyte of capacity being added made the OTTs richer, not them.

In 2010, telecoms captured roughly 60% of total digital value created in Europe. By 2023, that figure had fallen below 20%. The rest had migrated to cloud and content platforms.

They became wholesalers to the operator’s customers’ habits, providing the rails on which others’ profit trains ride. The more they invested, the less they earned per bit.

5G: The Mirage of Monetization

When 5G arrived, it was redemption—manufactured and sold. Ultra-low latency. Mission-critical IoT. Autonomous cars. New enterprise services. The reality? A trillion-euro investment that delivered consumer speeds slightly faster than before and ARPU slightly lower.

Most European markets saw 5G adoption accelerate, yet revenue curves barely flickered. A Deutsche Telekom executive privately acknowledged: “5G was an engineering triumph and a financial disappointment.”

Enter the new discourse: if not monetization, then modernization. Telcos would digitize themselves — rebrand as tech companies, embrace AI, software-define everything, and replace old boxes with clouds.

But beneath the surface, it was all the same panic: find a new story investors would buy.

Open RAN: The False Prophet

The most seductive of those stories was Open RAN. A vision of disaggregated networks—open interfaces, diversity in vendors, unleashing innovation.

It felt revolutionary—at first. European policymakers loved the dream of less vendor dependence and a weaker Chinese grip on infrastructure. Startups emerged, alliances formed, and consultants hyped a “democratized telecom.”

But Open RAN never had much chance. The physics of radio don’t respect idealism. It was an integration nightmare behind the PowerPoint elegance of mixing components from multiple suppliers. In addition, performance lagged behind traditional systems. Operators took on risk without reward.

Then came the silent counterattack. Ericsson and Nokia—the very Nordic giants Open RAN was meant to disrupt—simply co-opted the language. They launched “open” portfolios: open enough to satisfy regulators, closed enough to retain control.

By 2024, global investments in Open RAN had dropped over 80%, and the movement collapsed back into the hands of the incumbents. The revolution had been packaged, monetized, and neutralized.

Open RAN wasn’t destroyed by bad engineering—it was outmaneuvered by good strategy.

AI and the Automation Delusion

As Open RAN faded, another savior stepped in: AI-driven networks. AI would optimize traffic, predict failures, cut OpEx, and make networks self-healing. It sounded unstoppable—and investors, burned by 5G, needed a new buzzword to believe in.

Telcos rushed to label every dashboard as “AI-powered.” Vendors sold “autonomous” orchestration platforms that were mostly glorified scripts. But facts were unforgiving: most European operators lacked the data quality, integration discipline, and cloud maturity needed for real AI.

Their networks were patchworks of decades-old systems. Feeding that chaos into a neural network didn’t produce intelligence—it produced noise. By 2025, even analysts whispered: AI might save some costs, but it won’t save the business model. The hype had outrun the math.

The Quiet Implosion

Look at the balance sheets—it’s clear. Revenues are flat. Margins are shrinking—squeezed by energy prices, spectrum fees, and wage inflation. CapEx remains punishingly high.

In 2023, European telcos spent €52 billion on capital investment—about 18% of their revenue. Hyperscalers spent less but earned far more. ARPU in Western Europe is still around €15 per month—unchanged for a decade.

Meanwhile, households spend ten times that on cloud, content, and apps. The markets know the story. Since 2015, the STOXX Europe 600 Telecom index has delivered <1% annual return. The broader tech index? Over 12% annually.

Telecom is no longer a growth story. It’s just infrastructure—vital, but commoditized.

How OTTs Captured the Value

The real disruption wasn’t tech. It was architecture. Telecoms built verticals: control everything—line, customer, billing. OTTs built horizontals: one app, infinite users, zero marginal cost.

• Video went to YouTube and Netflix—bandwidth boomed, profits didn’t.
• Messaging moved to WhatsApp—billions lost in SMS revenue.
• Apple launched iMessage—customers never came back.

Hyperscalers rode on telco infrastructure without paying fair rent. They became landlords of attention. Telcos became janitors of traffic. It wasn’t malice. It was leverage.

Telcos bargained with regulators. OTTs bargained with users. Guess who scaled faster.

Europe’s Strategic Paralysis

Europe’s telecom pain is structural. Fragmented regulation. 27 markets, 27 rules. Spectrum auctions designed to fill government coffers—not support the industry.

• The U.S. consolidated into three big carriers.
• China backed Huawei and ZTE with policy.
• Europe kept over 100 players and kept arguing antitrust.

When 5G and fiber investments were needed, everyone hesitated—then overpaid. Result? The world’s most competitive telecom market—and the least profitable.

Open RAN’s Real Lesson: Committees Don’t Build Innovation

Open RAN revealed something deeper about Europe’s telecom mindset: Too many alliances. Too many committees. Not enough conviction.

Rather than choosing a bold path, Europe tried to please everyone—governments, vendors, regulators, and operators. They produced vision papers, not real ecosystems. By the time the tech matured, the market moved on.

Open RAN became a policy talking point—not a product. AI in telecom is headed down the same path. Europe doesn’t lack ideas. It lacks the guts to act without consensus.

The Path Forward: From Pipes to Platforms

Can telecoms reclaim relevance? Maybe—but not with faster pipes.

1. Think Like a Platform

Stop selling gigabytes. Sell outcomes. Connectivity should be embedded, programmable, monetized via APIs and ecosystems—not priced like a utility.

Telefónica Tech and Deutsche Telekom Digital are moving this way. But they lack scale and urgency.

2. Rebuild Customer Intimacy

For years, operators treated customers like SIM cards. OTTs treated them like people. That’s why users love their apps—but barely tolerate their carriers.

Next-gen telecom must build emotional loyalty: transparent pricing, thoughtful design, personalized experiences.

3. Partner from Strength—Not Submission

Cloud giants aren’t enemies—they’re inevitable. Telcos must own what hyperscalers can’t: orchestration, data governance, and edge proximity.

4. Rationalize Europe’s Market

Consolidation is overdue. Too many mid-sized operators on overlapping infrastructure dilute capital and returns. Regulators must accept: sustainable competition doesn’t mean more players—it means stronger ones.

5. Redefine Success

Stop chasing ARPU. Chase margin and lifetime value. Winners will be those who know what not to invest in—like 6G hype before 5G pays off.

Lessons from the Abyss

Every bubble teaches the same story—in a different dialect.

The AI bubble showed us: compute without a business model is just expensive optimism.
The telecom bubble will show: infrastructure without imagination is just concrete.

Europe’s telcos don’t need another acronym. They need a new identity. For years, they’ve played victim to tech giants. But the truth? They stopped dreaming. Outsourced innovation. Blamed regulation.

The next chapter belongs to those who remember what they really are: society’s nervous system. If they can embed intelligence, trust, and experience into their fabric, they’ll reclaim their narrative.

If not, they’ll keep inflating bubbles—for journalists to write about when they pop. Connectivity built the digital world. But unless telcos rediscover their courage, the digital world won’t need them—just their bandwidth.