Asia's Internet Hiccup
The dash to make room for your online business
By Henry Hamman
At a time when the price of most commodities seems to be in free fall, there's one item that
remains in high demand - the virtual commodity called bandwidth. Bandwidth is the capacity to
transmit data and has become the essential commodity.
Access to bandwidth is a vital route to electronic wealth creation. That's why, even in a period of
economic crisis, work is continuing on a massive upgrade in the international fiber-optic networks
between Asia and the rest of the world.
Fiber-optic cable is the most efficient means of adding bandwidth. Even a decade ago, a single
fiber-optic cable about the size of a pencil lead could carry more than 10,000 standard telephone
conversations. The recent introduction of techniques that split the light spectrum permit quantum
leaps in fiber-optic bandwidth capacity.
But Asia is currently suffering from what the industry terms a capacity drought that threatens the
ability of companies to cash in on the Internet boom and to take advantage of the increased
productivity that comes from broad access to corporate data. New cables are urgently needed
since no new trans-Pacific capacity, for example, has been added since 1996, even though
bandwidth demand has exploded.
Efforts are being made, however, to end the drought. According to one authoritative industry
estimate, the period 1998-2001 should see a $6 billion investment in undersea fiber-optic
systems with Asian connections. At least eight new submarine cables are either under
construction, nearing completion or in the advanced planning stage.
A study by the U.S.-based telecommunications company Pioneer Consulting predicts that the
1998-2001 period will see the laying of almost as much new submarine cable in the Asia-Pacific
region as during the previous eight years. By 2002, Southeast Asia, China and India will account
for 27 percent of the world's submarine fiber-optic network.
Among the advanced projects are four trans-Pacific systems that are scheduled to come into
service late this year or in the first months of 2000.
But bringing bandwidth to the shores of Asia is not enough. The harder part of delivering
bandwidth comes on land. This is a two-part problem. First, there's the need to build the
terrestrial trunk lines that connect city to city. Even more problematic is getting high-bandwidth
connections delivered to the small to medium-size businesses that cannot afford to plug directly
into the trunk line.
However, work is under way across Asia to build the networks that will be needed if the continent
is to prosper in the information economy. China has been on a fiber-optic binge in recent years,
adding 200,000 kilometers of cable between 1996 and 1999. To date, the total length of Chinese
fiber-optic lines is estimated at about 1 million km.
Japan - the biggest consumer of bandwidth in Asia - continues to add to its fiber-optic network.
Last November, for example, 11 railway operators in the Tokyo region agreed to link their existing
fiber-optic networks and start a telecommunications business.
Japan's Ministry of Posts and Telecommunications wants to build a major new network to link
the nation's schools in a $6.9 billion project. And in December, a joint venture between Marubeni
Corp. And M2-Global Communications to build a 1,200-km network linking Tokyo, Osaka and
Nagoya was announced. The new network is to connect to undersea cables that will link these
cities to the Americas and Europe in a direct fiber network.
Malaysia announced in 1995 that it would move into the forefront of the bandwidth revolution with
its Multimedia Super Corridor (MSC). At the center of the project is to be a high-capacity
fiber-optic backbone. More than 160 companies - both local and foreign - have been approved to
participate in the project. But the fiber-optic network is still under construction.
South Korea, too, continues to invest in its fiber-optic backbone. The country has signed an
agreement with Lucent Technologies of the U.S. to expand capacity on a national route linking
Seoul with Kwangju and Pusan. The project will increase capacity to 40 gigabits per second.
Less-developed Asian nations are entering the fiber-optic age, too. Vietnam has a 2.5
gigabit-per-second fiber cable that links the country from north to south, while Mongolia has
granted a contract for the construction of a fiber-optic backbone, to be completed by June 2000.
Last October, Kazakhstan's state telecommunications company signed a preliminary agreement
with Siemens of Germany to construct a network of 9,666 km. The project will connect the
country's regional centers and be a link in a terrestrial cable between Southeast and Central Asia
and Europe.
In India, the government monopoly on telecommunications services ended last June when Bharti
Telenet opened a competing service in Madhya Pradesh state. The new service uses a 1,000-km
fiber backbone that is to be expanded to 3,000 km, covering the whole state. In February, the
U.K. company WorldTel and the government of the Indian state of Tamil Nadu announced an
agreement to build 10,000 Internet access centers over the next four years. The centers will be
linked by a WorldTel fiber-optic network. WorldTel is to invest about $100 million in the project.
But even as fiber-optic cables snake across Asia, telecommunications providers are faced with
another challenge. The high cost of fiber is such that it makes little sense to bring fiber cables
directly to most business sites or to residential customers.
In the West, where the demand for bandwidth has been high for years, that problem persists.
Now, North American telecommunications providers have started to switch to a new technology
called Digital Subscriber Line (DSL), which is supposed to deliver fiber-like bandwidth over
existing copper wires. Some companies have begun offering a service that makes the final link
via microwaves. For now, though, this sort of connection makes economic sense only for
business.
In the developed countries of Asia, DSL and local wireless links offer reasonably cost-effective
solutions. But for countries such as Cambodia, where even a basic telephone service is almost
nonexistent, making the leap to a bandwidth economy is too daunting to contemplate at present.
Using satellite links is not a viable solution because satellite bandwidth capacity is much smaller
than cable.
Unfortunately, the penalties for insufficient bandwidth will continue to grow as more of the world's
commerce moves onto the Internet. The switch to e-commerce allows even small businesses to
act like big, international ones.
In the U.S., a part-time businessman established his own tiny book-selling business that looks
as impressive on the Internet as book-selling giant Amazon.com. This tiny entrepreneur's
monthly overhead is equivalent to the cost of one Amazon.com share, yet he can undercut
Amazon.com and make a profit.
For countries that want to participate in the information economy, there's no such thing as too
much bandwidth.
Copyright © 1998 ASIA INC. All rights reserved.
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