One of the benefits brought about by the deregulation of the telecommunications markets in many parts of Asia was that it helped spurred the wholesale industry for voice services (i.e. outbound services; calling card services; E1/TI lines; and others) and data services (i.e. leased lines; asynchronous transfer mode (ATM); frame relay; and others).
“Of course, incumbent players would still want to monopolize the market instead of allowing others to sell their services,” said Nitin Bhat, industry manager, Telecoms, Frost & Sullivan Asia Pacific.
“But deregulation of the telco market has disallowed that and incumbent players are now compelled to lease capacity to competitors. In Australia this is termed the unconditional local loop,” Bhat added.
Wholesale activities benefit both the incumbents and second-tier players.
Bhat explained: “They allow incumbents to optimize the usage of its network infrastructure … while non-incumbent players, through wholesale activities, are able to generate extra cash flow while affording more time to build the retail market.”
According to Frost & Sullivan’s recent study, the top wholesale voice services markets in Asia are Japan, Australia and South Korea while for data services, the top markets are Japan, Australia, Singapore, Hong Kong, South Korea and Taiwan.
However, when compared to Europe or the US, the market for wholesale voice services is still highly regulated even in the sophisticated markets, said Bhat.
He added that the downstream voice and fixed line market (particularly local/domestic voice service) is still highly dominated by the incumbents such as SingTel in Singapore and PCCW-HKT in Hong Kong.
Coupled with these challenges, the market for wholesale voice – which is dominated by outbound calls (60 percent) – is saturated.
According to the findings by Frost & Sullivan, Asia’s revenue for wholesale voice will see very little increase – from US$6.4 billion in 2002 and to almost US$7 billion in 2006. The wholesale voice traffic market will increase from 43.5 billion in 2002 to 64.4 billion 2006.
Faced with excess capacity, keen competition and with voice becoming just another application over the underlying network, many resellers have been forced to exit the market. This is especially prevalent in the Australian market.
The resellers that may survive the challenges better are those in Japan and Singapore.
Bhat explained: “Japan has a larger market wholesale voice services market than Australia and many resellers are able to survive by targeting niche segments within the multinationals. Singapore, on the other hand, has a competitive advantage as a hub for the region and many global service providers are leveraging its position.”
Wholesale Data Market Faring Better?
Although the wholesale data services market in Asia has more potential as compared to wholesale voice services, movements within the sector will not be as rapid as some would want it to be.
Currently, majority of the data service uptake in Asia centers around leased line – about 60 percent versus frame relay at about 10 percent, ATM under 10 percent and others at 20 percent.
Frost & Sullivan projected that revenue for the wholesale data services market will increase from US$6.1 in 2002 to about US$9.7 billion in 2006, with traffic increasing from 408 billions of bits per second (Gbps) in 2002 to 758 Gbps in 2006.
Some of the challenges faced by second-tier players in this market include incumbent’s aggressive growth in the retail data market space; competition in the reseller space; lack of skilled personnel in the reseller space; substitution of data transmission over other competing networks; excess capacity and desperation amongst cash-strapped bandwidth players; decreasing bandwidth capacity rentals; imbalances of bargaining power; and arbitrariness of pricing arrangement that impact smaller competitors.
Among the second-tier players who will have a tougher time ahead are the pure bandwidth players.
Said Bhat: “They will continue to be plagued by excess capacity, decreasing margins and falling prices resulting in tight cash flow problems if demand continues to be below supply.”
“These players are also likely to be faced with the difficulty of getting resellers. Reason being that many resellers, afraid of service disruption due to the instability of these players, are turning to the incumbents instead.”
To survive these tough market conditions, Bhat has this advise to give: “Those non-incumbent players who will continue to survive in the market will be those who are able to provide wholesale solutions rather than pure minutes or bits as well as those who are able to find a niche in the provision of wholesale services amidst incumbent’s extensive scale and scope of wholesale service offerings.”
Reprinted from asia.internet.com, an internet.com site
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