Why the Nordic telecoms industry remains resilient while European economies shrink
Shrinking economies are applying pressure to many industries across Europe this year. Those include manufacturing, hospitality, and even tech. It might surprise some, therefore, that Europe’s telecommunications industry has remained resilient. That’s especially true for the Nordic region. In fact, some in the industry might even go so far as to say that the pressure has increased demand for network capacity. That’s a topic worth examining.
The principle reason the industry perseveres here is cloud computing. The demand for cloud data storage and services has been rising across the world for many years now. And yet, it shows no sign of stopping. Cloud infrastructure spending increased 33% from Q2 2021 to Q2 2022. That’s because companies are not only adopting cloud for more scalable storage, they’re also using it to enable access to more advanced services. These services are becoming more complex and that complexity demands more infrastructure.
It’s important to remember that this demand is fed by consumers as well as business services. Consumer entertainment has become more data intensive. Films have become better quality. Social media applications have transitioned from text to video-first platforms. Gamers want to play more online – and stream their gameplay to their friends too. All those high-demand cloud-based services are supported by data centers and facilities, which all need connecting. Enter telecoms.
You might at this point ask: why would the Nordic countries benefit most from this trend? The traditional locations for European data centers have been within the ‘FLAP’ region – Frankfurt, London, Amsterdam, and Paris – where they were closest to the demand centers. This region has become congested though. It’s also suffered from a recent lack of access to cheap, green power. That meant global tech companies have looked out to the fringes to build their new data centers. Southern Europe and, of course, the Nordic countries provide access to (relatively) cheaper, greener energy and simpler routes across the continent. The Nordics can offer the added benefit of colder weather, which makes it easier to control the temperature of those data centres too.
The growth in demand for cloud services has initiated another trend supporting the telecoms industry in the Nordic region. Reliance on cloud means that the telecoms infrastructure connecting companies to their facilities, services, and storage has become mission critical. That infrastructure demands greater network resiliency, which involves increasing the number of routes connecting facilities to each other. Clients were once requesting one or two routes from specific locations. Now they’re asking for up to four. Network resiliency is even more important to them during periods of economic stagnation.
Service providers and customers are also trying to secure more long-term commitments. They demand the security of knowing that they can scale their cloud capacity, and therefore their businesses, far into the future. Once we only received requests for one or two year contracts. Now clients want to secure our services for 10. This adds to the industry’s resilience and gives me the confidence to expect secure growth for at least the next decade.
There’s an additional element to the industry’s current resilience that also supports my forecast of future growth. A lot of the telecommunications infrastructure that we use in Europe today was first put down around the beginning of the millennium. That means a lot of it is also approaching the end of its usable lifetime. We’ll need to replace that infrastructure, or at least update it, to maintain even current usage volumes. That has increased demand for additional routes along the backbone of Europe’s data transfer network.
Once you examine the current trends supporting the industry, it’s simple to understand the telecom companies’ continual growth. We’ll continue to see suppliers move outwards to the fringes of Europe. This will present many opportunities to the Nordic region. Providers like GlobalConnect Carrier will be in position to lead the transition.