2006 - Crunch Year for Asia Bandwidth?
Internet bandwidth usage will surge in Asia, but the region may face an availability shortage by 2006.

Internet bandwidth usage will surge in Asia, but the region may face an availability shortage by 2006. This perspective was presented by Asia Netcom at a recent conference in Hong Kong. With 34.55% of the global Internet user base and CAGR of 41.6% through to 2008, and primary growth occurring in China and India, the prognosis is that shortages may occur by as early as next year. China is currently adding an STM-1 every two weeks.

Much rests on upgrades of plant and although a number of cables are currently considering or beginning enhancements, some have not yet made a decision. In addition, the outcome of the future of the C2C network (in which Tyco – acquired by VSNL International - owns a fibre pair) is not yet known.

Asia Netcom itself is currently connecting a new landing station at Qingdao, which will go live in March. Even before it enters into service, the company is planning to upgrade by adding a further 80 Gbps capacity.

The potential bandwidth challenge is however by no means universal and some routes still endure a fibre surplus. Hong Kong to Taiwan, and Taiwan to Japan for example, still suffer from over-capacity. One view suggests that only 60% utilisation has actually occurred across most cables in the region.

It does appear evident however, that a period of change lies ahead for carriers in the region characterised by several key features:

Pricing is complex, although lower percentage declines are occurring, and the rate of decline is slowing on the main routes, possibly by 30%, and even increasing on certain routes; India in the meantime has reached a level of stability. Pricing in Asia is also not necessarily governed by purely commercial constraints.

At the same time, traffic patterns are changing. India capacity is increasingly routed to the USA west coast, reversing traditional routing through the UK/transatlantic.

Wireless networks are being installed in cities, at a fraction of the cost witnessed even three to five yeas ago; WiMAX is clearly identified as a key opportunity.

Further change in ownership is also likely as private investors return to the market for the first time, and are likely to take possession of distressed assets over the next twelve to eighteen months.

Carriers continue to confront overall wholesale revenue declines (a view that is consistent with previous BroadGroup reports), despite an increase in the volumes of minutes, and a raft of new services, including gaming and IPTV.

Acquisition activity is likely therefore to focus on boosting customer base; consolidation where it occurs, does not remove fibre from the market.

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