Asia-Pac: A world of opportunity - Industry Forum

While there is a so-called broadband capacity glut in U.S.-based networks, according to many leading analyst firms, this scenario is not necessarily true for the other parts of the world. The Asia-Pacific region, for example, has yet to reach its peak for supply or demand of broadband telecom services. It's a slow, steady growth--the region averages 20 percent annual growth for Internet services (Gartner) and 17 percent growth for long-distance minutes (TeleGeography)--and it's being impacted by the telecom downturn in the Western world.

This slow, continuous growth has produced three hot spots from a service provider and equipment vendor perspective. First, multiple pan-East Asia regional networks will begin to appear. A-P has had a lot of inbound IP traffic go back to the United States for Web access and even has to reroute its regional traffic to the United States for origination and termination. As a result, today's submarine fiber backbones between A-P and the United States still see a decent volume of traffic. The A-P countries haven't pushed strongly enough for in-region networks because of regulation blocks, lack of funds, low level of trust among countries, etc.--until now.

Regulations are lessening in many AP countries, and recently China and Japan have started a drive toward setting up cross-country free-trade zones. This could mean quick development for pan-East Asia broadband infrastructure because both government and private commercial powers now may seek to invest in network communications and e-commerce in the region. U.S.-based multinational carriers might consider a risk-sharing, joint-venture strategy with local carriers to tap this in-region network opportunity. North American-based equipment vendors could also reap the rewards of broadband development.

Some carriers and vendors may choose to remain conservative and focus just on the existing A-P to-U.S. backbone traffic. This tactic is shortsighted, however, because the backbone pie will shrink quickly if fewer end users and ISPs are hooked up online for services. The pan-East Asia network will expand the network pie to every player's benefit, allowing carriers and vendors to open up new revenue sources and make up any possible loss from existing backbone services. Flexible strategic planning is required and can pave a path for an in-country service strategy.

Second, while many U.S. Tier 1 carriers feel VoIP services aren't money makers and lack the quality they require, VoIP is already a big deal for many A-P carriers transporting both domestic and international traffic; they have no existing PSTN burden and therefore nothing to lose. Deploying new technologies such as VoIP and wireless CDMA should help boost supply and demand in the A-P region. VoIP will form a big portion of the traffic routed to the United States out of the estimated total 3 billion A-P-originated inbound minutes of use in 2002, according to TeleGeography numbers.

This could be a lucrative opportunity for the surviving U.S. Internet backbone providers. The challenge is keeping the transport and local access charges low when the VoIP traffic arrives in the United States. The backbone carriers that own local POPs in most metropolitan areas and can partially bypass the access charges may find a niche and win this game. The attraction of this business is its low risk: a carrier does not need to be global; rather, it can arrange colocation, peering or interconnection with A-P carriers that have POPs on both coasts and start from there. "Start small, focus and fill the pipe before expanding it too much" is a good strategy for survival and growth.

Third, maybe it's time for U.S-based carriers to liquidate some of their local assets. Both Global Crossing and Level 3 pulled out of the A-P market due to heavy debt and operational inefficiency. Some people may deem Global Crossing and Level 3 the losers in these deals, but they have actually helped the localization of broadband network services in the A-P region, which over time should benefit the whole market. With these deals, the AP local carriers can quickly acquire state-of-the-art long-haul network assets at an affordable price, allowing them to expand service or penetrate existing markets. The timing is perfect for buyers and sellers; U.S. carriers' short-term market exit may end up as a long-term win for some and offers the potential for re-entry. It's a change of owner but the business is still there, and will hopefully grow. Relationships will also grow. The A-P telecom market offers some quick solutions to the current stalemate of the U.S. and European telecom sectors. It's time for action.

David W. Wang is manager, carrier services, for Verizon Global Networks, Inc. (dwang@verizongni.com)

COPYRIGHT 2002 Horizon House Publications, Inc.
COPYRIGHT 2002 Gale Group