Telcos scramble for next-generation services

Telcos scramble for next-generation services

Decline in traditional voice revenues and increasing competition has telcos across Asia scrambling for next-generation services.

The falling margins in international calls has hit fixed-line carriers hard and while the market for broadband provisioning is growing, further deregulation and new market entrants have cut even those once-lucrative margins. Carriers, in response, are seriously considering value-added services running over broadband, from IP Virtual Private Networks (VPNs) and Voice-over-IP (VoIP) to videoconferencing and IP storage.

Despite industry observers predicting these areas as future battlegrounds, the current scenario is still firmly fixed on retaining voice revenues and growing broadband subscriptions.

According to IDC Asia-Pacific, traditional voice revenues from the Public Switched Telephone Network (PSTN) remain the bulk of total carrier revenues.

During 2002 in Asia-Pacific, 68 per cent of total revenue was from voice, IDC said.

Looking ahead, IDC projects PSTN revenues to remain static in the coming years for markets like Hong Kong, while others like Singapore will decline. Hong Kong saw $US1.89 billion in PSTN revenues in 2002, while 2003 will see marginal growth with revenues leveling out the year after.

“While carriers undoubtedly face pressure to grab broadband market share, carriers still have incentive to keep PSTN as a core focus,” IDC’s program manager for Asia-Pacific IP and Broadband Research, Renee Gamble, said

Meanwhile, the pressure to find new growth areas grows. In that respect, broadband remains the core area of competition and, despite the shrinking margins, there is more growth to come, Gamble said.

She noted broadband accounted for only 7 per cent of total carrier revenues throughout Asia-Pacific in 2002, with a projected 17 per cent share by 2007.

The next wave of services that providers are banking on as future cash cows all hinge on the transition to converged IP networks, and, in particular, the adoption of IP VPNs.

The latter are used primarily to securely connect office locations and provide cheaper comm­unications than traditional leased lines.

VPNs offer low-cost IP voice, video and fax communications within the same network.

The demand for videoconferencing, however, has received a timely boost from the SARS outbreak. But experts suggest this demand was unlikely to be sustained.

Other potential hotspots include Wireless LAN (WLAN) services but revenues have been hard to come by. Furthermore, lack of a clear billing model hampers progress. Due to the technology’s immaturity and lack of standardised equipment, other service providers have yet to appear.

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