| ID Number: AV-21-5216 |
Predicts 2004: Communications Services
3 December 2003 Eric Paulak Many of the world's telecom operators will see some growth again in 2004. No big, new thing will grow the market, but many little factors will come together to plant the seeds for future capabilities.
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From 1999 through 2002, the telecommunications services market took on close to $1 trillion in debt and laid off nearly a million people. As a result, most in the market were suffering from a collective hangover in 2003. In 2004, however, we start to get over that hangover and see new revenue growth, new services and some innovation. This is not to say 2004 will be painless. Consolidation is far from over, and we expect at least one major merger in the U.S. market. Europe could witness another cross-border integration similar to Telia and Sonera, and the Pan-Asian market is ripe to start on consolidation, as its growth outpaces the rest of the world. Today's Network Services — No really new network services were rolled out in 2003, nor will any be rolled out in 2004 — just new ways of offering the old. Multiprotocol Label Switching (MPLS) continued to grow at a healthy pace in Europe and Asia/Pacific, mainly because MPLS offered price advantages. The United States, however, has been slow to adopt the new technology, because it is not less expensive. As a result, in 2004 U.S. carriers will start to make MPLS services more price-competitive with the frame relay they are supposed to replace. MPLS will be more competitive, not because it will get less expensive, but because frame relay is getting more expensive. Frame, asynchronous transfer mode (ATM) and leased-line rates went up this year, and along with most voice rates, we expect they will go up next year, as well. The Role of IP Services — In the early days of the Internet, many pundits were predicting we would put all our networks and resources on the Internet via the thousands of Internet service providers (ISPs) and Web-hosting companies that were out there. Well, with virtually no large independent hosts or ISPs left, the Internet market is not as exciting as it used to be. The only really good news for 2004 is that broadband access to the home continues to grow at a fast rate and that new pricing schemes could actually accelerate that trend in the United States. Tomorrow's Enhanced Services — We do not expect much in terms of new services in 2004, but we do expect many existing services to take on new capabilities and go from niche to mainstream. Ethernet access is one of these. Even though capital expenditure among the carriers is still low, money is being put into local fiber networks. As a result, enterprises should be able to access fiber in just about all Tier 1 cities in most open global markets, as well as in many Tier 2 cities in North America, Western Europe and the developed countries of Asia/Pacific. The other big new service is the full mainstream adoption of MPLS as the primary WAN technology. What makes this new is that most carriers will actually start to offer end-to-end classes of service and some real-time self-servicing capabilities through their customer service portals. The Future of Managed Services — With all of the moves toward containing costs over the past two years, managed network services (MNS) have really come to the forefront in the carrier marketplace, as well as with hundreds of small, third-party vendors around the world. As a result, MNS costs have gone down, and while they will not necessarily go down in 2004, greater functionality is being added to the mix. The fastest growing of the managed services is, not surprisingly, managed virtual private network. This includes a mix of network, as well as customer premises equipment (CPE)-based services. Most companies that expand their managed WAN services into the LAN will fail to see the savings or benefits they are expecting. Government's Role in Telecom — The words, "I'm from the government, and I'm here to help" are rarely heard when describing telecom regulatory policies throughout the world. Most governments remain hindrances to the growth of enhanced and broadband services, either because their antiquated regulations were designed for voice-centric worlds, or because most governments still own significant pieces of former postal, telegraph or telephone companies. Some hope exists, however, that with expected rulings by the U.S. Supreme Court, 2004 telecom policy will finally get moving again. Together, these research pieces examine the possibilities and the problems and offer advice to vendors, enterprises and investors on what to expect in 2004 and how to plan for the real growth in the market that we expect to occur in 2006. Features "Enterprise Networks Get Flexible in 2004" — As the carriers invest anew in their networks, new service capabilities will arise in 2004. By Eric Paulak "NSP Competencies Fall Short of Market Demands" — Network service providers will struggle to meet market demands during 2004. By David Neil and Katja Ruud "ISP Market Will Maintain Status Quote in 2004" — Internet service providers' business models will provide little innovation but will build increased capacity and usability during 2004. By Ted Chamberlin and Lydia Leong "Government Involvement Will be a Problem Through 2004" — Most of the world's governments are too close to telecom, either through ownership or over-regulation. By Wm. L. Hahn and Ron Cowles "Legacy Voice and Data Will Begin Their Decline in 2004" — Public switched telephone network and traditional private lines are doomed, they just don't realize it. By David Neil and Katja Ruud "2004 Telecom Service Pricing: Some Down, but Some Up" — Price increases are inevitable for voice and data services in the United States and Europe. By David Neil and Katja Ruud "Big Revenue Opportunities to Emerge for Managed Services" — Winners in this market will compete through strategic partnerships, not as individual players. By Charles R. Carr and Eric Goodness "Managed Services Will Drive Data Market" — Businesses need to reduce fixed support expenses as network complexity increases. By Charles R. Carr and Eric Goodness

| Browse Topics: Communications Services Multiprotocol Label Switching Managed and Professional Network Services Value Added IP Services Telecommunications Regulations Internet Access Services Emerging Communications Services |
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