BUSAN, KOREA, September 8, 2004 – In a keynote presentation at the ITU Telecom Asia 2004 Forum today, Asia Netcom’s President and COO, Bill Barney, outlined the road to recovery and success for the telecom industry going forward.
Looking back at the history of the telecommunications industry, Barney revisited the “big picture” where, for a century, demand and supply for telecommunications services went hand-in-hand. Then, with the Internet, the paradigm shift began. With the initial explosion of Internet subscribers and the then inflated business model of online services, telcos, backed by hungry investors, rushed to build the supply infrastructure that would meet that apparent demand.
“Oversupply inevitably led to price decline which led to the bubble burst. As many players exit markets, demand also began to decline. In the wholesale market, which many of the cable operators were focused on, the situation was serious enough that many went into Chapter 11,” said Barney.
“But if you look on the retail side,” Barney continued, “demand still grew, although nowhere near the exponential rate that the first market projections indicated. While prices have declined, mainly due to changes in the regulatory environment of key hubs like Hong Kong and Singapore, the rate of decline was far from that of the decline rate in the wholesale market.”
Today, demand on the retail side is not an issue. No company today can operate without some kind of network connection – be that a simple Internet connection, or a full scale corporate WAN. Retail subscribers for broadband, mobile, wireless Internet and next generation applications such as video-on-demand, P2P services, VoIP and so on, continue to drive up traffic on the international network.
These new applications and new regulatory requirements (such as the tighter global operational requirements for the financial sector following 9/11) continue to drive up the requirement of transferring massive amount of data between markets.
According to Barney, “The key is to develop a strategy which targets that demand — When demand is high and capex is tight, go where the customers are going, not where they are leaving. Profit comes from direct retail relationships – not through wholesale…and agility is crucial.”
At Asia Netcom, the focus is to realign the business to address the market segments that are seen as having the highest growth potential, Barney said. “Technology-wise, we have focused on IP, as well as IP services, by introducing the region’s first IP VPN offering with 5 CoS,” he added.
Owning and operating one of the region’s largest IP backbones, 70% of Asia Netcom’s capex this year will be focused on the edge of its network in enhancing the scope of servicing customers, whereas, in the past, the company spent more than 90% of its money on building up the core network.
On the business side, Asia Netcom has found success in changing its sales organization to focus on the retail side, with revenue from enterprise sales now equalling more than half of its total sales, whereas more than 90% of the business came from carriers just a few years ago.
Today, Asia Netcom is in a strong position to address the key growth segments, namely IP and corporate data services. Together with its ongoing efforts to increase operational efficiencies, the company has driven down its cash burn to close to 0, from US$60 million per month just two years ago.
In conclusion, Barney assessed that “demand was never an issue for the telecom industry, but the real challenge is in bridging the gap between where the supplies are located with where customers are. That is the fundamental connection that the telecom industry needs to make going forward.”
About Asia Netcom
Asia Netcom provides city-to-city connectivity and data communications solutions to pan-Asian and multinational enterprises, ISPs and carriers. Asia Netcom operates its own pan-Asian submarine and terrestrial fibre network and the region’s leading MPLS platform powering advanced IP-based transport and networking services. Asia Netcom is wholly-owned by Chinese incumbent telecommunications operator, China Netcom. Combining China Netcom’s vast mainland capabilities and Asia Netcom’s region-wide reach, Asia Netcom is positioned to be the premier provider of comprehensive broadband network services for the Asia Pacific and to major business centres worldwide. For more information on Asia Netcom, please visit www.asianetcom.com
