tele.com. 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
by John Blau. John Blau is international editor for
tele.com. He can be reached at jblau@cmp.com.
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.
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 literallybillions 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.
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