'Telecom: back from the Dead' screamed the headline of the lead story in the June 25 issue of Business Week. The article goes on to tell the story of how 'the $900 billion industry has roared back to life' seven years after 'the worst collapse to hit a U.S. industry since the Great Depression'. The surge in video and music traffic on the Internet, the rapid take-up of broadband and the hefty investment in building out high-speed lines and networks have turned around the fortunes of the telecoms industry, argues Business Week.

The article reminds me of another piece in a leading business weekly. In September 2005 The Economist front cover carried a picture of telegraph poles and wilting telephone lines stretching into the distance under the headline 'How the Internet killed the phone business'. The article inside claimed that the rapid take-up of VoIP services was in the process of destroying telecoms operators. The piece speculated that VoIP would reap even greater havoc among mobile operators because such a higher percentage of their revenues still come from voice services.

So, what are we to make of these very different takes on the impact of the Internet on the telephone business? Have the fortunes of telecoms companies turned round so much in the 20 months between the publication of these two articles to justify the difference in tone? Maybe both articles are right? Perhaps the Internet can be seen as being both a negative and a positive for telecoms operators? Or maybe we're talking about different types of telecoms operators.

Since the publication of The Economist piece VoIP has continued to grow at the expense of PSTN operators. In France close to 25% of all (fixed) voice traffic is now IP.

But the death of the telco has proved wildly premature. Operators such as France Telecom have responded to the threat of VoIP by launching their own Internet telephony services. People in North America or Europe are as likely to buy a VoIP service from their incumbent telco as broadband ISP or independent VoIP provider. In the meantime many VoIP providers have fallen by the wayside. Vonage, which came to prominence two to three years ago, has become a marginal player, its share price having fallen to $3 compared with its May 2006 IPO price of $17.

Telcos are now looking to a new triple play business model of telephony (or VoIP), broadband and IP television to counter the threat from VoIP providers. Many are investing billions of dollars taking fibre closer to the curb and converting their networks to IP to lower opex and as a platform for bringing new services to their customers.

Disruption is undeniably impacting telecoms operators but we are a long way from the doomsday scenario portrayed by The Economist.

Meanwhile the Internet has gone from strength to strength. Over the last 20 months video usage has exploded because of the user-generated content phenomenon.

Entertainment companies, which didn't quite know what to make of the worldwide web two to three years ago, are now throwing their considerable resources at using the Internet as a platform to deliver content.

But is this necessarily a positive development for telecoms operators?

For those telecoms companies which sell high speed lines for the Internet, the explosion of Internet video has been a huge boon. Much of the spare capacity installed before the technology bubble burst has now been used up. New capacity is needed and prices are rising.

But what about the companies that operate fixed and mobile networks and provide services to the end user? Has the Internet been all good for them?

The market for broadband connectivity is booming. North America is nudging 50% household penetration. There were 275 million broadband connections globally at the end of 2006, a 27% increase on end-2005. But operators have so far failed to develop revenues from services that are delivered over the Internet. Many are investing in IPTV but only a handful of operators - PCCW in Hong Kong, France Telecom and Belgium's Belgacom - are generating significant revenues.

The impact of the Internet is still to be felt on mobile operators. Only with the launch of HSDPA and EV-DO services have speeds been fast enough to make mobile Internet viable (although email has been possible for some time over 2.5G networks).

But this does not mean to say that mobile operators have been ignoring the Internet. For the last five years mobile operators have been attempting to build new revenue streams from entertainment and information services. The Internet has been perceived as a threat to this strategy so operators have tended to make it difficult for their customers to access the worldwide web.

However, a sea change has swept over mobile operators in Europe and Asia over the last six to nine months. The Internet has become an opportunity rather than a threat. Mobile operators now want to associate themselves with the big Internet brands such as Google, Yahoo!, MSN and YouTube. They have started to offer flat-rate mobile data plans that mirror fixed-broadband pricing approaches.

So, are we any closer to taking a view on whether the Internet is killing telcos or bringing them back from the dead?

(Financial) market sentiment has clearly shifted towards taking a positive view of the Internet. All the talk in 2005 and 2006 was about the disruptive influence of the Internet and IP technologies. But in 2007 the term disruption has begun to look a little passé. Sure, there is disruption but operators - or so the argument goes - can compensate for this by providing a gateway to the Internet (mobile operators) or moving into the TV business (fixed operators).

But sentiment often changes. For the time-being Internet brands and telecoms operators are making all the right noises about partnerships. The standard line from Internet companies is that the mobile business is too complex - in terms of the relationship between the device, the operator and the end-user - for them to offer services independent of the operator. But in the longer term will Internet companies start to offer over-the-top services that compete with operators? Will the arrival of WiFi (and mobile VoIP) devices accelerate the decline in mobile voice prices, revenues and margins?  In the fixed-line business there is no guarantee that IPTV services will be successful. And if they are not, the inevitable slowdown in broadband sign-ups and intensifying competition will put operators under more pressure.

Both the Economist and Business Week articles reflect the sentiment towards telecoms operators and the Internet at the time that they were written. The Internet is profoundly changing the telecoms landscape and has forced operators to diversify away from their core business. But it is still too early to say whether one view will, ultimately, prove to be more accurate than the other.