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European Bandwidth Boom Emerges
Carriers deploy loads of fiber in Europe, drastically reducing prices and
increasing options.
Kate Gerwig, tele.com
It's the bandwidth buffet that European users have waited too long to enjoy.
As deregulation takes hold in Europe, providers are building or stitching together networks to route
around the incumbents and offer cheaper services.
At least a dozen European- and U.S.-based service providers have announced plans to build
pan-European networks in the past 18 months. These are designed to take advantage of increasing
amounts of international traffic and offer lower prices to businesses and consumers now that
regulated pricing is becoming a thing of the past.
Whether they are laying fiber or buying from another company, service providers are banking on the
idea that customers want to buy services from one provider or a tightly integrated joint venture. BT
(London), MCI WorldCom Inc. (Jackson, Miss.), Viatel (New York), Colt Telecom Group PLC
(London), PSINet Inc. (Herndon, Va.), and KPNQwest (Amsterdam) are racing to complete their
pan-European fiber networks.At the same time, Concert, the AT&T-BT alliance, will turn up its
international network for AT&T and BT's 300 biggest multinational customers later this month in 22
cities in 17 countries, Concert CEO David Dorman said Monday at Telecom 99.
To extend its own European network, Global Crossing Ltd. (Hamilton, Bermuda) said Monday that it
will acquire Racal Electronics PLC (Bracknell, U.K.) for $1.65 billion. "This gives us a very complete
footprint in the U.K., more than 200 cities," Global Crossing founder Gary Winnick said. "It also
gives us a very big presence to add on to our pan-European network."
The new Euro-competitors are banking on the idea that customers want to buy from one provider
that can offer end-to-end network services, giving them one-call customer service and network
management for problems anywhere on a global network. This shift is nothing short of seismic, says
U.K.-based consultancy Ovum Ltd. (London), as the European telecom industry moves from a
demand-driven market where bandwidth is scarce and expensive to a supply-driven model where it is
plentiful and cheap.
Any bandwidth glut on Europe's horizon would be on land, not undersea, and only for the short term,
says David Neil, analyst with the Gartner Group Inc. (Stamford, Conn.).
"Talk to any of these companies building networks, and they're all building between the same 12 to
15 cities," Neil says. "There's a lot of bandwidth in the ground right now, but all on the same
routes." Add dense wavelength-division multiplexing (DWDM) to the mix, and the fiber capacity can
be stretched even farther. Most European enterprise customers expect to increase their bandwidth
needs by 300 percent to 600 percent in the next three years, says Neil: "Some companies are
talking about 800-percent increases, all driven by data and particularly the Internet."
Viatel chairman, president and CEO Michael Mahoney said Monday at a Telecom 99 panel
discussion that the availability of low-cost bandwidth will actually increase demand, adding that
today's networks can't handle advanced bandwidth-eating applications like videoconferencing and
streaming video.
"The whole history of the convergence of the IP and the telecommunications industry would lead us
to believe that corporate demand will increase rather than decrease as bandwidth becomes cheaper
and value-added applications come along," Mahoney says. A recent study from The Yankee Group
(Boston) noted that European corporate networks today are where U.S. corporate networks were a
full 12 years ago, Mahoney said. "We see no reason why this should be the case, other than what
has been until very recently the scarcity and high cost of cross-border and domestic bandwidth."
A little more than a year ago, a 2-megabit circuit between Paris and London cost Viatel $40,000 a
month wholesale. "I suspect that many corporate customers in those countries are still paying
similar rates," Mahoney says. The same circuit from a new competitor like Viatel now costs less
than $3,500 a month today under a one-year contract.
Wolter Lemstra, Lucent Technologies Inc.'s vice president for marketing and business development,
says the ease of using the Internet is creating a paradigm shift. By opening up what traditionally
was a very narrow industry, the telecom industry is helping the transition to a networked economy
that runs on bandwidth. "In terms of applications that will use the capacity, I believe we haven't seen
anything yet," Lemstra says.
While the talk of European networking is of transporting data between countries and continents, the
majority of network traffic in Europe still stays in individual countries. Most midsize and small
businesses have heavier local and/or national traffic needs, but that is also changing as the demand
for global Internet content threatens to clog borders, according to Chris Lewis, research director at
Yankee Group Europe.
According to Liam Strong, CEO of MCI WorldCom International, his company's objective is to build
and manage its own local, national, pan-European and global networks, all linked by MCI
WorldCom-owned undersea cable. Known as a provider for multinational business customers and
wholesaler to other top-tier service providers, Strong says about 20 percent of the available business
market is made up of multinational customers, with major national and regional corporate customers
making up another 10 to 20 percent.
"But the balance of 60 to 70 percent of the market is made of up small and midsize business
customers. To compete in that market, you need national reach," Strong said Monday.
To that end, MCI WorldCom plans to compete in the domestic market against the incumbents and
other local carriers in countries with enough business demand. Later this year, the company will
plans to offer national services in the United Kingdom, France, Italy and Germany.
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