World Stage>
The World Stage -- Globalization Is Right Here And Now. And It
Grabs The Spotlight In Geneva This Month As The Industry's
Players Gather For Telecom 99.
SATURDAY, OCTOBER 02, 1999 12:19 AM
- CMP Media
Oct. 01, 1999 (LTH - CMP via COMTEX) -- Why Geneva? some might ask. Why
the hassle and expense of making the pilgrimage to a crowded Swiss city to talk
business? After all, business can be done by phone, by e-mail. Business is
increasingly virtual.
To be sure, the 200,000-plus visitors expected at Telecom 99 + Interactive 99 this
month in Geneva will hear lots about virtual networks, virtual workplaces, virtual
this, virtual that. But Telecom 99 is anything but a virtual happening.
It's about Microsoft Corp. chairman Bill Gates, Telefonica S.A. chairman Juan
Villalonga, Chinese telecommunications minister Wu Jichuan and other industry
leaders stepping up to a world stage-live and in person-to address the defining
regulatory, technological, financial and strategic issues of our time. It's about
providing a global meeting place for the people responsible for shaping the
networked economy-from the network architect and service developer to the
manufacturer and regulator.
Why Geneva? Because business is also increasingly global. Long heralded but
unrealized, globalization has arrived Telecommunications and the Internet are
entering a new stage-call it the world stage of the networked economy. For this,
the International Telecommunication Union (ITU), an agency of the United Nations,
is about the only organization with the clout, connections and support to bring
together such a diversified group of people from around the globe.
Some industry leaders have asked why they should attend and found the answer
lacking. Among the no-shows: AT&T chairman and CEO Michael Armstrong, MCI
WorldCom Inc. president and CEO Bernard Ebbers, Deutsche Telekom AG
chairman Ron Sommer. Some pundits think the ITU and its quadrennial world
telecom events are on the wane.
The future of both the organization and its showcase- and in particular, the ITU's
involvement with the Internet-could well be recast at this year's event. Does the
ITU have any role to play in governing the Internet, for instance, when such
organizations as the Internet Engineering Task Force (IETF), Internet Corporation
for Assigned Names and Numbers (ICANN, Marina del Rey, Calif.) and
Organization for Economic and Cooperation Development (OECD, Paris) seem to
occupy this space already?
Indeed, the Internet has come from being almost nowhere at Telecom 95 to
dominating Telecom 99. It has changed the model of the global carrier away from
trying to connect a patchwork of disparate networks around the world and toward
creating a seamless backbone based on the Internet protocol (IP). The Internet
has also changed the very way networks are being built: Out goes the circuit
switch, the theory goes, and in comes the packet router.
Moreover, the Internet is radically changing the way the industry does business.
Just consider the new Web-based back-office solutions that allow telco customers
to individualize their services. Or take e-commerce. Although operators, vendors
and politicians still have a range of technical, commercial and legal issues to
resolve, companies like Amazon.com Inc. (Seattle) and Dell Computer Corp.
(Round Rock, Texas) are already demonstrating how to make big bucks with
e-commerce. (If you make it through a day in Geneva without hearing the "e" word,
you need to have your ears checked.)
The Internet may top the Telecom 99 agenda, but it is an agenda crowded with
issues, from the rise of wireless data to the uneven progress of telecom
development in emerging nations. And the show is always good for surprises. In
1991, global carrier alliances were being negotiated on the spot. Many have since
faltered, and this year should produce more talk of mergers and acquisitions, as
several key players instead try to go it alone. Their opportunities to expand are
better than ever. Markets are liberalizing, bandwidth for long-distance and
international transport is becoming cheap and abundant, and advances in
compression and optical technologies promise to make bandwidth even cheaper.
For all the promise, though, life is a lot tougher today for former monopoly
PTTs-the Telecom event's traditional audience. They used to have money and time
to burn on tinkering with grand architectural schemes for new networks and
services. Now, though, the incumbents are confronted by hungry new operators
picking away at their high-margin telephony business with speed and precision,
leaving them struggling to move up the value chain and tap new revenue streams.
All in all, "it's a very interesting time for us to be having a Geneva event," says
Andrew Entwistle, principal consultant at Analysys Ltd. (Cambridge, U.K.). "There
will be much mutual soul-searching going on among the operators, a lot of
revisiting old ideas and groping for direction. They just don't seem to have much
guidance these days, especially when it comes to moving up the value chain."
In the next few pages, tele.com presents the international telecom community's
top 10 agenda items on the eve of Telecom 99.
---
Off the Table Almost conspicuous by its absence at Telecom 99 + Interactive 99
will be the issue of international accounting rates. This multibillion-dollar system
for splitting international call revenue among national carriers has preoccupied the
industry for years. It's been at the top of the agenda since Alfred Sikes,
then-chairman of the Federal Communications Commission (FCC), threw down the
gauntlet at Telecom 91 and called for sweeping reform. The system, he said,
keeps international rates artificially high and creates a cash cow for many national
carriers.
Eight years later, the issue isn't quite moot, but it isn't front and center either. For
one thing, the FCC has succeeded in hammering out a system of benchmarks to
ratchet down accounting rates. Some debate is likely over the transition to the
new benchmarks, which are based on a country's gross domestic product (GDP)
and intended to give emerging nations partial protection from the loss of important
funds for development. "The process is under way and can't be turned back," says
Stephen Young, principal consultant at Ovum Ltd. (London).
Perhaps more important, many markets are now liberalized. As competition to
terminate international traffic grows, it may ultimately make the FCC benchmarks
"academic," Young says. Some global service providers already route traffic
around accounting rates-sometimes within their own networks and sometimes by
refiling it through a country with low accounting rates.
On top of all this is a growing recognition that circuit-switched voice traffic, for
which the ITU devised the accounting rate mechanism, is being overtaken by
packet-switched data, which falls outside the accounting rate system. "Many
state-owned telcos and their governments that have lived off high settlement rates
realize the game is over," Young says. "They're being forced to bite the bullet. It
won't be easy to adjust."
---
E-World Commerce The globalization of e-commerce via the Internet isn't
coming-it's happening now. In 1998, Web sales in the United States represented
$11.5 billion, or 5 percent, of the total retail market and are now estimated to grow
to $125.6 billion by 2003, according to The Yankee Group (Boston), a
consultancy. But Europe is catching up fast. Frank Gens, senior vice president of
Internet research at International Data Corp. (IDC, Framingham, Mass.), says the
Continent should have more Internet users than the United States over the next
four years and more e-commerce ventures equipped to provide service in local
languages, with local support and local delivery services. And don't forget Asia. A
recent report by investment bank Goldman, Sachs & Co. (New York) predicts that
Asian e-commerce will generate $32 billion by 2003, compared with just $700
million in 1998. Just one problem: What's in it for telcos? "E-commerce isn't a big
driver of traffic," says Analysys' Andrew Entwistle. "But there is a very wide range
of opinion on the topic. To me, that sends a signal that something unusual,
something odd will happen in this space."
---
Global-Local Networks Global alliances are dying if not dead: Long live the fully
owned, fully integrated global carrier that offers end-to-end managed network
services. That's how MCI WorldCom's Ebbers sees it, as well as some other
CEOs burnt out on carrier alliances. Deutsche Telekom is on the prowl, for
instance. Several other "global players," the likes of Vodafone AirTouch PLC
(London), AT&T, Global Crossing Ltd. (Hamilton, Bermuda) and Nippon Telegraph
and Telephone Corp. (NTT), seem to have an insatiable appetite for geographic
expansion. Some, like MCI WorldCom and Qwest Communications International
Inc. (Denver), say it's all about control: To build and own one's own network, they
claim, is to control one's destiny. But the world is big. "A company like MCI
WorldCom can cover about 80 percent of the global telecom market by building
high-capacity metropolitan, long-distance and international networks-but they can't
cover it all," says Cathy Gadecki, a director at TeleChoice Inc. (Boston). "They will
still need to partner in areas where they don't have coverage." By comparison, the
rival joint venture of AT&T and BT is partnership-driven. It hopes to glue a web of
partners around the world to its global IP backbone. Geneva could yield some big
surprises on the global networking front.
---
Universal Is the Norm No one ever said establishing global standards is easy. Just
ask anyone involved in the standardization work on third-generation (3G) mobile
systems, in which the ITU has played a key role. The ultimate aim of the 3G
global standardization effort-laudable in its mission but incredibly difficult in its
implementation-is to achieve harmonization in air interface and network
infrastructure standards. This would mean greater economies of scale for
manufacturers and thus lower costs for users, plus the prospect of seeing some of
the first truly global mobile services. Experts agree that 3G standardization
probably wouldn't have happened without the ITU (see "Standards Face-Off," page
110). But what about the Internet? With the exception of settling the 56-kbit/s
modem dispute, the ITU has largely taken a backseat to the IETF and, more
recently, ICANN. "If you look at all the standards associated with the Internet and
IP, the IETF is by far the dominant standards body," says Bob Martin, chief
technology officer for Lucent Technologies Inc. "Still, if you look particularly at
voice-over-Internet standards, a fair amount of these have actually come from the
ITU." Perhaps all of them can work together.
--- Globo-Cop
The Internet continues to grow at a lunatic pace. Europe is expected to surpass
the United States in the number of users, servers and even peering points by
2003, putting what has largely been a U.S.-centric industry increasingly at the
mercy of global markets and regulatory trends. How to regulate the Internet is the
paramount issue confronting national governments and will draw huge attention in
Geneva, although the ITU thus far has had little impact on the debate. "The ITU
has tried to step into the Internet area as a replacement for more traditional areas
of responsibility, such as accounting rates, but this is transitional," says Derek
Nicholas, principal consultant with B&D Associates (London). "I see the ITU
playing a role that will concentrate on fast-track global technology standards and
allocation of the world's frequencies. Having said that, however, I see a growing
need for a body to solve operational disputes at a global level." Data protection,
copyrights, electronic signatures and electronic money are among many
unresolved issues. Not only that, political and industry leaders from around the
world are debating how to tackle the controversial problems of Internet taxation
(sales over the Internet are effectively tax-free) and pornography.
---
Cross-Networking In the circuit-vs.-packet debate, packet seems to have won.
Now the challenge is to make it work. "Yes, vendors have technology," says
TeleChoice's Gadecki. "No, they don't have all the bugs worked out." Some of the
big suppliers of circuit switches like to talk of coexistence. Voice will remain a
cash cow for most operators over the next several years, with more than one
billion installed circuit connections in the world, says Horst Elberl, information and
communication networks marketing president at Siemens AG (Munich, Germany),
and circuit-switched networks are still superior to packet-switched networks when
it comes to real-time connectivity, quality of service (QoS) and intelligent voice
services. "But data is overtaking voice, and operators will need to develop
mediation strategies," he says. "This transition will require a major effort on
everyone's part."
---
Data Makes its Move Four years ago, everyone in Geneva was talking about
mobile data. This year, many of them will actually be using it. Three new so-called
2.5G technologies will bridge the speed gap between the 9.6-baud transmission
speeds of second-generation global systems for mobile communication (GSM)
and code-division multiple access (CDMA) digital mobile networks and the new 3G
systems offering leased-line speeds of up to 2 Mbit/s. The first of these new
high-speed mobile data services, commercially available today, is high-speed
circuit-switched data (HSCSD), which offers ISDN speeds of 64 kbit/s. But the
launch of general packet radio service (GPRS)will occur later this year, providing
more than double the speed in addition to Internet capability. This will be followed
by enhanced data rates for global evolution (EDGE) services, offering even faster
speeds. All these technologies, designed to increase data performance, will also
boost wireless Internet services, notably the Wireless Application Protocol (WAP),
which brings Web browsing to the cell phone and other wireless devices. And
don't forget 3G systems, which promise to do all of this faster and easier and to
just about every corner of the globe.
---
The Long Last Mile "This is the last great frontier in the network that still has to be
upgraded," says Graham Finnie, a consultant with The Yankee Group Europe
(Watford, U.K.). "There's going to be a lot of money made on local access
equipment and services over the next five years." Incumbents are scurrying to
deploy digital subscriber line (DSL) technology before regulators force them to
unbundle and resell the basic elements of their local networks to let their
competitors get in on the high-speed data game and also before cable operators
upgrade their coax networks to carry bundled voice, high-speed Internet and
programming services. New entrants are also banking on fixed broadband wireless
technology to further penetrate the local loop.
---
Fiber Fill Too much? Or never enough? Depends on who you talk to. "I can't put
fiber in the ground fast enough, especially in metropolitan areas," says Vincent
Galluccio, senior vice president at Metromedia Fiber Network International
(London). Others warn that new compression technologies, optical networks and
terminals designed to use bandwidth more efficiently will decrease bandwidth
needs. One thing's for sure: "It's going to be really exciting when we can get by
the bottlenecks, especially in the local loop," says Galluccio. "People are telling
me we're going to see in Geneva the first 1-gigabit modems for notebook
computers. Now that's going to change my work habits."
---
Earth to LEOs What goes up must come down. That's not what investors had in
mind when they poured billions of dollars into two high-profile low-earth-orbit (LEO)
satellite ventures that both fell financially back to Earth this year. The bankruptcy
of Iridium LLC (Washington, D.C.). and ICO Global Communications Ltd. (London),
both of which plan global mobile satellite systems, has sent a warning signal to
their remaining rivals, such as Globalstar L.P. (San Jose, Calif.) and Teledesic
Corp. (Kirkland, Wash.). The message: Find a business case fast. That may prove
easier said than done. Many industry experts now see little need for high-cost
extraterrestrial wireless systems when much of the world is already covered by
terrestrial mobile networks whose roaming capabilities are being expanded
globally. The ITU helped these companies get off the ground but can do little to
keep them up. Suggestions, anyone?
--- A Net Loss
On the one extreme, investors are throwing literally billions at anything called
Internet. On the other, financial instability in many parts of Asia has seen capital
dry up for new infrastructure projects, and regulators have become more protective
of state-owned telephone companies. And although competition has come to
some parts of Africa and much of Latin America, a large percentage of the
population in these regions still remain without a phone, much less an Internet
connection. The cleft between the haves and have-nots in our information society
threatens to widen.
John Blau is international editor for tele.com. He can be reached at
jblau@cmp.com.
By: John Blau
Copyright 1999 CMP Media Inc.
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