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To: signist who wrote (13474)	5/17/1999 9:43:00 AM
From: signist	Read Replies (1) \| Respond to of 42804

(COMTEX) Analysts Foresee Radical Restructuring in Telecoms as Bandwidth Economics are Redefined; Industry Set To Consolidate As Bandwidth Becomes A Commodity BURLINGTON, MASS. (May 17) BUSINESS WIRE -May 17, 1999--Respected international telecoms analyst group, Ovum, has warned of a radical redefinition of the global telecoms landscape as the industry moves from a business model where bandwidth is scarce and expensive, to one where bandwidth is potentially plentiful and, therefore, extremely cheap. Ovum predicts that this change will invert existing pricing models and create new market structures with new types of players, as well as transforming the operational and organizational make-up of today's operators. According to Stephen Young, principal analyst at Ovum and lead author of the forthcoming Ovum report, The Bandwidth Explosion(1), "On networks around the world traffic volume is exploding, demand is growing, barriers to entry are falling, and competition is intensifying. But amidst much hype as new fibre networks light up, there is the risk of losing sight of the fundamentals of supply and demand. Increased supplies are driving dramatic reductions in price. But as prices fall, what happens to the commercial viability of the networks? Will increased supply stimulate enough extra demand to fill the networks at commercially sustainable prices?" Ovum points out that many new networks are built on the premise of 'if you build it, they will come' - i.e. increases in supply of capacity will always be filled up by growth in demand. But Ovum believes that the key issue is not simply whether or not demand will continue to grow rapidly - it evidently will. Rather, the success of many new and existing bandwidth providers will be determined by how quickly this will happen and whether or not some operators will be left with a capacity 'glut', i.e. large amounts of capacity that they cannot sell. "There is no simple answer to this," explains Young. "Bandwidth supply and demand is cyclical; temporary overhangs in supply are eventually filled up by growth in traffic, leading to more supply investment. Of primary concern to bandwidth providers is the timeframe in which this will occur, as this will determine the rate of return on their infrastructure investment. This depends not just on the demand for bandwidth, but also on the particular route, the market conditions on that route, and the number of competitors." Stock market valuations are soaring as the financial community takes an optimistic view of future prospects. But as bandwidth becomes a commodity, Ovum questions whether the economic fundamentals support this view. "In highly competitive markets not everyone succeeds," warns Young. "We anticipate a degree of consolidation as some players who have over-stretched their finances fail to meet their targets. Such players will be targets for larger organisations eager to expand their operations through acquisition." In ten years time, Ovum predicts telecoms landscapes to be characterized by: --low cost, high capacity international transmission facilities encircling the globe; surges of traffic will be readily accommodated because networks have enormous capacity and multiple routes are available --networks will be built on Internet Protocol (IP) based infrastructure rather than traditional circuit switched infrastructure; data and voice networks will be merged - voice traffic will simply be treated as packetized data --the cost of trivial amounts of bandwidth, e.g. individual switched phone calls, will be too low to justify the cost of billing each call --liberalization of national and international telecoms markets will have meant that accounting rates will have disappeared and the purchase of bandwidth on demand will be the norm --by using wavelength division multiplexing (WDM), carriers will build networks that offer unlimited bandwidth at a fixed price between any two points; distance and geography will become irrelevant factors in telecom costs and pricing. "These factors will redefine the economics of providing bandwidth because the transport of traffic will become the least expensive component of transmitting services," adds Young. "This will make bandwidth a commodity - the emphasis will move to the pricing, packaging and management of services." According to Ovum, this means that telcos will no longer be in the business of simply providing transport 'products' - carriers will not charge for minutes of use or bandwidth, rather transmission will become a cost component of a greater service. Today's incumbents will have been forced to reorganize into distinct wholesale and retail operations. Ovum warns that those who fail to adapt will not survive in the new environment. "The ultimate winners will be end users," concludes Young. "Users will have access to cheap, plentiful capacity. The successful and unsuccessful players have still to be determined, but there will be no turning to the old environment of bandwidth scarcity and artificially high tariff structures." About Ovum Ovum is an independent information technology and telecommunications analyst group, providing high quality, authoritative information and advice on key market, technical and regulatory developments. Ovum funds its own research and accepts no sponsorship from vendors or interest groups. Ovum's customer base comprises leading blue-chip organisations including suppliers, users and policy makers worldwide. Ovum has offices in Boston, London and Melbourne. (1)The Bandwidth Explosion will be available from Ovum during July. The report will provide detailed analysis of the new market dynamics, strategic recommendations and market forecasts. Note to editors: A detailed Ovum thought piece on the implications of the bandwidth explosion is available free of charge to journalists from Ovum press contacts. -0- sb/bos* CONTACT: Ovum For sales inquiries please contact: Ron Serio, senior account manager 1-800-642-6886 or (781) 272 6414 Ext. 11 rfs@ovum.com or For press inquiries please contact: Mark Kirkham, manager, North American press relations 1-800-642-6886 or (781) 272 6414 Ext.19 mck@ovum.com KEYWORD: MASSACHUSETTS INDUSTRY KEYWORD: COMED COMPUTERS/ELECTRONCIS TELECOMMUNICATIONS Today's News On The Net - Business Wire's full file on the Internet with Hyperlinks to your home page. URL: businesswire.com * end of story *