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By Cindy Payne, Managing Director
Asia-Pacific Connections Pte Ltd

January 2003

 

According to the International Telecommunications Union (ITU), in 2001, Asia-Pacific emerged as the largest telecommunications marketplace in the world. Between 1991 and 2001, the number of telecommunications subscribers in Asia-Pacific increased from 122 million to 712 million, representing 36% of the world's total. And unlike telecommunications markets in the rest of the world, the Asia-Pacific telecommunications market shows no signs of the malaise that has afflicted other more-developed telecommunications markets. According to recently released research from international research firm, International Data Corporation (IDC), the telecommunications services marketplace in Asia-Pacific (excluding Japan) will be valued at US$137 billion by the end of 2003. Growth will be driven by deregulation and pent-up demand for telecommunications services from less-developed countries throughout the region, especially in the up-and-coming economic powerhouses of China and India.

The U.S. Department of Commerce reports that China is now the world's largest telecommunications marketplace, both in terms of network capacity, as well as the number of subscribers. By the end of 2001, Chinese telecommunications carriers had made an aggregated investment of US$32 billion in telecommunications infrastructure, an increase of 15.3% over 2000. This investment helped generate subscribers, whilst the revenue from related services totalled US$43.2 billion in 2001. By May 2002, China had 220 million fixed-lines, of which only 29% were subscribed; and 240 million mobile networks, of which only 13% were used. So China still has ample capacity to fulfil its unabated consumer demand.

ITU confirms that China leads the world in mobile users and is second only to the U.S. in fixed-line penetration. Providers of fixed-line services include China Telecom, China Mobile, China Unicom, China Netcom, Jitong, China Railways Corporation and ChinaSat. Of these, only China Mobile and China Unicom are licenced to provide mobile services. China Telecom is by far the dominant carrier – in 2000, it had a turnover of US$10.4 billion, boasting 53% of China's telecommunications-industry revenue.

China plans to make the 2008 Beijing Olympics a showcase for the country's IT and telecommunications infrastructure. To that end, it is investing heavily in 16 major information communication and technology (ICT) projects to ensure visitors receive a rich and personalised experience during the Games, with minimised language barriers. Major projects include:

  • The provision of key digital and data centres
  • Wireless networking and systems management
  • Optical networks
  • 2G/2.5G/3G-compatible mobile systems
  • A fully commercial CDMA network (at the moment China's dominant networks are GSM-only)

India's population exceeds 1 billion people and, according to IDC, its 37 million fixed-line telephone network is the one of the largest in the world. However, fixed-line penetration in the subcontinent remains remarkably low – at only 3.7%. India opened its market to private competition in the early 1990's, but the incumbent carrier, Bharat Sanchar Nigam Ltd (BSNL), still remains the dominant carrier, owning over 32 million lines, with an annual growth rate of 23-24%. Other players in the fixed-line market include MTNL, Tata, Bharti and Hughes. In the mobile marketplace, competition has resulted in price wars that have significantly damaged the market. In 2000, India had 17 mobile operators with 42 networks; however, after a series of mergers and acquisitions, only 16 players remain – with the dominant players being the BPL-Bhirla-AT&T-Tata alliance, Bharti-Singtel, Hutchinson and Reliance.

By 2010, India plans to ensure that fixed-line telephone penetration will increase to 15%. To meet this goal, India will have to invest in its telecommunications infrastructure to the tune of an estimated US$106 billion. According to the National Association of Software and Service Companies (NASSCOM), this investment will include a wide range of communications services like cellular, Internet, radio trunking, global mobile personal communication by satellite (GMPCS) and other value-added services.

Over the last five years, there has been mounting concern that developing countries, which lack the resources to benefit economically from ICT, will be further marginalised by the Internet revolution. In India, this is a major issue – with NASSCOM reporting that the country's US$13.5 billion IT industry is highly dependent on the outsourcing of IT functions from U.S.- and European-based enterprises. Infrastructure bottlenecks – such as lack of bandwidth, low-speed leased lines and slow servicing – are threatening India's IT growth. NASSCOM has warned that if India does not make these planned infrastructure improvements, it could lose at least 30% of its target IT export market in the coming years.

Part of the reason behind the steady growth of Asia-Pacific's telecommunications market is that most of the markets are manufacturing-based, export-oriented economies. The global move towards using electronic Supply Chain Management (e-SCM) technologies to reduce inventory cost and decrease time to market is forcing Asia-Pacific to invest in upgrading the IT and telecommunications infrastructure across the region to ensure regional competitiveness in the global economy.

According to ITU, Asia-Pacific carriers have remained viable and profitable largely because they have avoided the crippling debt that European operators assumed, whilst vying for third-generation (3G) mobile licences in a painfully competitive bidding process. In addition, the strategic importance of the ICT industry to the region's well-being has meant that governments have frequently kept their stakes in the incumbent telecommunications operators – either through partial or full ownership – thus ensuring the focus remains on development, rather than on shareholder value or short-term profit.

IDC reported in October 2002 that within the traditional data-networks-services marketplace, leased circuit, frame relay, DDN (only in the Peoples Republic of China), ATM, x2.5 and ISDN technologies reign supreme. Leased circuits will continue to dominate, followed by DDN (due to the sheer size of China's telecommunications market) and frame relay. The data services market has traditionally been an area of consistent revenue for service providers in the region and IDC projected it to be valued close to US$10 billion at the end of 2002, an expected year-on-year growth of 5%. However, new technologies including wireless, PSTN, VoIP, IP-VPN and broadband infrastructure and related services are expected to drive growth going forward. Broadband services alone grew 146% in 2001, leading to the emergence of Metro Ethernet Internet access and the provision of managed-wireless-LAN services throughout urban areas across the region. As broadband-penetration rates increase and users grow more dependent on wireless devices, both IDC and ITU believe there will be a definite trend away from fixed-line, towards mobile communications – especially in the less-developed countries where fixed-line infrastructure cannot accommodate demand.

 

All articles copyright © Asia-Pacific Connections, all rights reserved.  Use of these articles for publication or any other reason requires prior written consent from Asia-Pacific Connections.

By Cindy Payne, Managing Director
Asia-Pacific Connections Pte Ltd

March 2003

 

Asia-Pacific became the epicentre of the telecommunications industry in 2001 when the region emerged as the world's largest telecommunications marketplace. Today, the region is home to more than one third of all telephone subscribers and is the only region to have grown significantly in the last decade – adding more than one new telephone user every second. According to research analysts, International Data Corporation (IDC), Asia-Pacific's telecommunications services market (excluding Japan) will be valued at US$137 billion by the end of 2003. Growth in the telecommunications market will be driven by the increasing use of mobile-data and wireless services across the region, as telecommunications operators seek to promote these services to make up for increasingly flat fixed-line services revenues.

By Cindy Payne, Managing Director
Asia-Pacific Connections Pte Ltd

February 2003

 

India is currently the fourth-largest economy in the world, thanks to global demand for its information technology (IT) and software services. According to a well-known local industry association, the National Association of Software and Services Companies (NASSCOM), India's IT market was valued at US$13.5 billion at the end of 2002. NASSCOM and McKinsey & Company agree that India's IT industry will reach US$87 billion by 2008, driven by both local and foreign demand of IT services, software products and e-business initiatives. The Indian government expects that by 2008, the sale of software and IT services will contribute over 7.5% of India's overall GDP, with IT exports accounting for 35% of India's total exports. Between now and 2008, India's IT industry is expected to create more than 2.2 million jobs, attracting foreign-direct investment in the range of US$4-5 billion.

By the late 1990's, India realised the importance of leveraging its nascent information-communication-technology (ICT) industry and established The National Task Force on IT and Software Development, and the Ministry of Information Technology. IT tax and tariff liberalisation policies followed, paving the way for venture-capital investments, which totalled US$1.1 billion at the end of 2002.

There is no doubt that the main driver of India's software and IT services industry is its large pool of English-speaking technical talent. However, to continue to be a player in today's knowledge economy, India needs to further educate and train this massive workforce. With the second-largest population of English-speaking professionals in the world – trailing only the U.S. – India is focused on further developing its IT training. The government is continually expanding and upgrading training facilities across the country. Currently, there are over 1,832 educational institutions and polytechnics enrolling more than 67,785 computer software professionals annually. Today, India boasts the largest number of certified software companies in the world.

India's large English-speaking, highly educated and low-wage talent pool has also helped to establish India as one of the fastest-growing outsourced call-centre services markets in the world. According to research analysts, International Data Corporation (IDC), India's call-centre services industry is expected to grow from US$277 million in 2001 to reach US$1.59 billion by 2006. Growth in India's call-centre services market will be driven primarily by overseas demand as India does not yet have the spending power to support an in-country call-centre industry. Key multinationals that have already sited call-centres in India include GE Capital, HSBC and Standard Chartered Bank.

International research firm, Gartner Dataquest, recently conducted interviews with 917 U.S.-based companies – each with 1,000 employees or more – to gauge their interest in offshore IT services. Though only 5% of the interviewees indicated they currently use or plan to use offshore resources in the next year, demand for such services is expected to steadily grow over the next five years. Of those companies that are already outsourcing IT services, India is by far the country of choice. Across the board, the top offshore services include: enterprise-application integration (EAI); applications outsourcing; packaged-application implementation and integration; and maintenance services. Presently, Indian software and IT services companies export to 102 countries – 62% of this revenue comes from North America, 24% from Europe, 4% from Japan, and 10% from the rest of the world.

According to the latest NASSCOM-McKinsey Study, the IT Enabled Services (ITES) segment is expected to be valued at US$17 billion by 2008, representing 19.5% of India's IT sector. ITES covers manpower-based services delivered over telecommunications networks or the Internet. These are mainly back-office operations including:

  • Accounts
  • Financial services
  • Call centres
  • Data processing
  • Digital-content development and animation
  • Engineering and design
  • Geographical-information services
  • Human-resource processing
  • Insurance-claim processing
  • Legal-database processing
  • Payroll processing
  • Remote IT maintenance

Since much of India's IT industry is built on services delivered over telecommunications networks or the Internet, a well-developed telecommunications infrastructure is a prerequisite for the sector's further growth. According to IDC, India's 37 million fixed-line telephone network is one of the largest in the world. However, teledensity in the subcontinent remains low – at only 3.7%. According to NASSCOM, India's IT industry suffers from infrastructure bottlenecks – including lack of bandwidth, low-speed leased lines and slow servicing – which are threatening India's IT growth. To ensure that India reaches its full potential as an IT and related services outsourcing hub, it will have to invest an estimated US$106 billion in its telecommunications infrastructure. A wide range of communications services are needed including cellular, Internet, radio trunking, global-mobile-personal communication by satellite (GMPCS) and other value-added services. In the meantime, NASSCOM warns that if India does not make these massive planned infrastructure investments, it could lose as much as 30% of its target IT export market going forward.

 

All articles copyright © Asia-Pacific Connections, all rights reserved.  Use of these articles for publication or any other reason requires prior written consent from Asia-Pacific Connections.

By Cindy Payne, Managing Director
Asia-Pacific Connections Pte Ltd

April 2003

 

Asia-Pacific carriers and service providers are turning to convergent networks to offer integrated services to trigger revenue growth. Business models have shifted from just offering new voice and data services in new marketplaces to merging distinct technologies and/or devices into unified solutions, or services to meet customers' overarching business requirements. The region has emerged as the worldwide leader in convergent voice, video and data services over Internet Protocol (IP) networks, with large deployments in China, India and Korea. Innovative companies are deploying such systems for key Asia-Pacific enterprises and service providers, such as Ernst & Young and China Unicom. These solutions uniquely meet client needs by providing training and other communications across geographically distributed organisations, whilst reducing travel costs and increasing operational efficiency. The integration of voice, video, and data traffic on the same network also enables IT departments to reduce network-management needs – translating into streamlined budgets and reduced expenses.

According to International Data Corporation (IDC), the ongoing need to provide convergent services will drive the growth of the Asia-Pacific (excluding Japan) IT services industry at a compounded annual growth rate (CAGR) of 21% to reach US$37.8 billion by the end of 2006. Convergence is fuelling an array of integrated-communications applications – including customer-relationship management (CRM), call centres, e-learning and integrated messaging – all of which enhance business productivity and efficiency. Application service providers, application managers and systems-infrastructure service providers are reaping the rewards of outsourced IT services and processes, both at the desktop and network levels.

Convenient access to convergent services via a ubiquitous and always-on infrastructure is driving the growth of Asia-Pacific's telecommunications services sector. Asia-Pacific is now the world's largest and most dynamic telecommunications marketplace – with 36% of the world's subscribers propelling related services revenues to US$137 billion (excluding Japan) this year. In addition, unlike telecommunications markets in the rest of the world, Asia-Pacific shows fewer signs of the malaise that has afflicted other more developed telecommunications markets. Asia-Pacific's telecommunications growth is being spurred by deregulation and previously constrained demand for telecommunications services from the less-developed countries throughout the region, especially in the up-and-coming economic powerhouses of China and India.

IP telephony is a next-generation technology that is changing the way people communicate; thereby, reshaping the business landscape. Through the unification of voice and data networks, IP telephony enables all types of communications – wired and wireless voice, video and data – to run over a single network. For example, at the FIFA World Cup 2002 Korea/Japan™, where the world's largest convergent network was built, FIFA estimates that IP telephony saved the organisation more than US$200,000 on telephone bills and networking costs over the month-long event. IDC reports that regional revenues from IP value-added services amounted to US$267 million in 2002, but will grow by 34% CAGR to US$1.2 billion in 2007.

IDC reports that the convergent mobile-devices market in Asia-Pacific (excluding Japan) is currently worth US$800 million. By 2005, Asia-Pacific is expected to emerge as the largest market for convergent mobile devices. The ubiquity of PDAs, Internet-enabled mobile phones and household appliances is causing a surge in consumer usage of unique IP addresses. Home networking, video streaming and P2P applications – like online gaming, file sharing and online music – are also examples of how multiple devices can share a single connection, but require separate IP addresses for applications. Service providers across Asia-Pacific are facing IP-address-scarcity issues related to the proliferation of mobile communications in the region.

The previous version of the Internet Protocol, IPv4, provided approximately 4 billion IP addresses; thereby, limiting the number of individual devices that could connect to the Internet at one time. IPv6, on the other hand, is a new protocol that increases the pool of IP addresses and can scale to virtually limitless numbers of users and Internet appliances. Increasing demand for ubiquitous and always-on connectivity in Asia-Pacific is forcing early adoption of IPv6 networks. The governments of China, Japan and Korea have already announced plans for large-scale IPv6 deployment. In Japan, several service providers who offer commercial IPv6 services and equipment makers, such as NEC, have been shipping IPv6 products for some time.

IDC projects that the escalating need for network convergence will also increase the value of the network-consulting and integration-services market in Asia-Pacific (excluding Japan) to reach US$1.28 billion by the end of 2003. This market is expected to grow at a 16% CAGR to reach US$2.3 billion by 2007. The region's largest network-consulting and integration-services market is China, which is currently valued at one-third of the regional market. By 2007, China will have outpaced the rest of the region, representing almost half of the region's network services market value. China's network-services growth is being fuelled by the country's continuous economic expansion. Companies entering China require a plethora of network-infrastructure services as they set up and expand across this massive geography. Meanwhile, companies already in China are feeling the squeeze to upgrade their networks to keep pace with the competition. Finally, the deregulation of the Chinese telecommunications market is allowing new players to enter the market; thereby, further driving demand for network consulting and integration services.

In order to be able to invoice their customers for the delivery of these next-generation wireless services, the carriers and service providers are demanding convergent-services-billing software. IDC estimates that the Asia-Pacific telecommunications-billing-solutions market will reach US$527.4 million this year, with wireless billing being one of the key drivers of growth. Asia-Pacific is expected to be the world's fastest-growing wireless services market for the next five years, advancing the region's billing market to a value of US$913.4 million by 2006. In order for service providers to deploy powerful and integrated billing and customer-care support systems, billing providers must overcome technological challenges and network bottlenecks. IDC suggests these imperatives include:

  • Replacing legacy 2G operations support systems (OSSes) with 3G IP OSSes
  • Differentiating the usage collection for voice and data services
  • Exploring third-party wireless content settlements and compensation
  • Implementing real-time and pre-order rating of content services
  • Ensuring service-delivery validation
  • Understanding the billing requirement of the service providers

Asia-Pacific solutions providers are already rising to these challenges with vendors like Convergys – the leader in convergent billing solutions – working with carriers, like China Unicom Guangdong, to offer software to support growing networks and overcome legacy-system limitations. These innovative solutions provide real value to growing regional service providers and carriers, by reducing time-to-market and related expenses, and improving return on investments on managed resources.

Governments across Asia-Pacific are pushing to further develop convergent-network infrastructures in a bid to improve affordable access to Internet services and arrest the widening of the digital divide – the economic gap between those with access to computers, communications and the Internet, and those without. Governments are working with carriers and service providers to meet the need for telephone and Internet access, especially in rural areas across the region. In addition, they are looking to fund and develop regional Internet exchanges, which will ultimately result in more affordable Internet bandwidth links, whilst promoting local-content development and cross recognition of certification authorities. According to IDC, Asia-Pacific's (excluding Japan) Internet access revenues will grow from US$8.5 billion in 2002 to reach US$24.4 billion by 2007. By then, Asia-Pacific is expected to have 116 million Internet subscribers.

Since most of the markets in Asia-Pacific were late to develop their telecommunications networks, they have been able to avoid many of the pitfalls suffered by their western counterparts and leapfrog to next-generation technologies, like convergent networks, to provide innovative and compelling services and solutions at affordable prices. Mobile customer-relationship-management (mCRM) solutions, mobile marketing, and location-based/wireless services are just a few examples of enterprising services being driven by next-generation networks in the region. However, in order for Asia-Pacific vendors and service providers to share their technological advancements with the rest of world and become true thought leaders in the global economy, Asia-Pacific governments must enforce global standards and rules – like the new ITU-approved H.264/AVC video compression standard – and adopt security standards and protocols to benefit enterprises, carriers and service providers alike.

 

All articles copyright © Asia-Pacific Connections, all rights reserved.  Use of these articles for publication or any other reason requires prior written consent from Asia-Pacific Connections.