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The Wiring - and Unwiring - of Asia

Written by  Yudan Jin
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Yudan JinIssue:Asia-Pacific II 2001
Article no.:15
Topic:The Wiring - and Unwiring - of Asia
Author:Yudan Jin
Title:President
Organisation:Marconi
PDF size:28KB

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Article abstract

For the Asia-Pacific region's commitment to ICT infrastructure buildout, the emergence of new technologies suited to regional conditions, and market liberalisation constitute reasons for optimism. Asia-Pacific seems set to become the most connected society on Earth. Today's commitment to wiring and unwiring-for a region that struggled to overcome poverty, isolation and its colonial past-represents Asia's best chance ever to leapfrog old constraints into a new age of prosperity.

 

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In the depths of the Asian Economic Crisis, Asia's four 'tigers'-Hong Kong SAR, South Korea, Singapore and Taiwan-had seen their GDP growth spiral downwards from an impressive sustained 8 per cent to a dismal 4 per cent or lower. Massive currency devaluations in Indonesia, Malaysia, the Philippines and Thailand, meanwhile, crippled local economies, while financial woes brought protesters onto the streets in Asian cities from Seoul to Jakarta. Today, that crisis looks like nothing more than a minor glitch in a region that has managed to pull off a near textbook-perfect example of a V-shaped recovery. Across Asia-Pacific's developing economies, Asian Development Bank forecasts for 2000 predicted average growth of 6.9 per cent, several points above forecast rates for the wealthy OECD countries of Europe and North America. In the telecommunications sphere, while the crisis did severely impact operators' revenues by slashing outgoing telecoms traffic from the region between 1997-1999, it happily did little to slow much-needed infrastructure buildout, with main line growth hovering steady at around 10 per cent per year, or nearly twice the world average. With strong consumer demand for ICT (Information and Communication Technology) services, new initiatives to liberalise or partially liberalise formerly highly regulated markets, and a solid commitment on the part of many governments to implement rapid improvements in national communications infrastructure, Asia-Pacific offers perhaps the best opportunities of any region worldwide for global players with broad product portfolios. Companies with extensive experience in designing and installing networks that deliver cost-effective basic services should stand in good stead in emerging markets, where the emphasis is on simple access through rapid buildout of core infrastructure. We've already seen considerable activity in this segment over the last decade, with Asia's share of world fixed lines rising sharply from 23 per cent to 33 per cent between 1990 and 2000. The Inter-national Telecommunication Union (ITU) now forecasts that strong demand for access driven by uptake of broad-band services and the addition of new lines for Internet connections could see Asia-Pacific account for up to 46 per cent of all fixed lines by the end of the decade. Facing a Digital Divide With telecommunications networks now serving as an increasingly important driver of economic development, Asia's infrastructure boom can only be good news for the people of the region as a whole. The power of telecommunications to act as a catalyst for economic development becomes even more significant when one considers that as well as being home to star-performers like Taiwan, Hong Kong SAR and Korea, the hugely diverse region of Asia-Pacific also encompasses some of the world's poorest countries-many of them small island states such as Micronesia, Samoa, Tonga and Kiribati-as well as many relatively low income countries like Laos, Cambodia, Myanmar and Vietnam. As long ago as 1984, the Maitland Commission's famous Missing Link report confirmed the close connection between a country's telecommunications infrastructure, its economic performance, and its potential for growth. Today, with personal computers now a dominant fixture of the business environment and electronic information exchange across global networks underpinning a vast and growing proportion of the world's commercial transactions, it seems safe to say that access to reliable communications services is even more important than ever before. But if the need to extend access is becoming increasingly urgent, we are fortunate that technological developments over the last decade have delivered an increasingly broad array of effective solutions that can help overcome long-standing problems, like cost of deployment or hard-to-wire terrain. Using technologies ranging from optical transmission and multi-protocol ATM and IP switching, cellular backhaul systems, fixed and mobile radio systems like Broadband Wireless Access (BWA) and TETRA, and souped-up copper Digital Subscriber Line products, a growing number of operators across Asia are working to implement innovative solutions. These solutions range from state-of-the-art ultra-high bandwidth links to tailor-made low-cost networks that mix-and-match the most appropriate technologies to bring access to a growing number of people throughout the region. Laudably, a growing number of governments now recognise the importance of ICTs to future economic growth, and are working hard to extend and enhance their networks in preparation for an explosion in new kinds of services, such as e-commerce. Witness Singapore, whose Intelligent Island programme has transformed the country into a world leader in both economic performance and digital capability; Malaysia, which is currently working hard to build the same kind of capacity through its Vision 2020 project; or China, which several years ago embarked on the most ambitious buildout of telecoms infrastructure ever undertaken, installing an astonishing two million main lines a month to reach a target telephone penetration of 30 per cent by early this century. Other countries, however, are performing less well. Nations comprising many islands, such as Indonesia or the Philippines, face enormous difficulties in wiring their countries for simple reasons of geography, as do very mountainous states like Myanmar or Thailand. Others, particularly very small nations where potential revenues from new equipment are ultimately limited by the diminutive size of their user base, simply face a chronic lack of funds and find it hard to attract the interest of investors. Still others have seen political instability drive out the foreign capital crucial to real progress in network buildout. New Technologies, New Opportunities In the relatively developed markets of Japan, China, Korea, Hong Kong SAR and Taiwan, a bustling business environment is generating strong demand for a range of broadband technologies, from fibre-to-the-home, xDSL and Broadband Wireless Access systems to gigabit optical transmission equipment like Dense Wavelength Division Multiplexing (DWDM), to ATM switches. Else-where, the focus is on getting more basic infrastructure in place, such as new lines, CLASS 5 digital switches, a Synchronous Digital Hierarchy transmission layer and new access technologies. With an addressable regional equipment market of upwards of US$20 billion, there is no doubt all major players are focusing hard on advanced markets like Hong Kong SAR, Taiwan and Korea, as well, of course, on the giant Chinese market, which alone will account for between US$5-7 billion worth of spending on new infrastructure over the next two to three years. However, it would be foolish for any vendor to overlook the strong potential that also exists in less-developed markets, where the need to develop local economies will call for the adoption of an increasingly broad portfolio of communications services, including higher end broadband systems. In hard-to-wire countries where geography precludes the widespread deployment of copper lines, cellular technology and wireless systems such as Broadband Wireless Access (also known as Wireless Local Loop) are now providing a neat and affordable solution. Indeed, with the power to offer user connections of up to 3Mbit/s, IP-based systems like Marconi's WipLL are proving extremely popular not only in more isolated regions, where they can deftly bridge difficult terrain, but also in highly urbanised areas like the central business districts of Japan's largest cities, where such systems deliver the advantage of speed of deployment and cost efficiency. But for the moment, at least, Asia's greatest step forward when it comes to 'wiring' its population has undoubtedly been the introduction of cellular telephony. Indeed, cellular wireless has proved such an efficient way of building capacity and extending access in areas ranging from remote rural communities to high-density urban zones like Hong Kong, that Asia-Pacific now carries off the laurels as the world's largest agglomeration of CDMA users and second largest GSM user base. With growth continuing unabated, the ITU forecasts that Asia-Pacific could account for half the total world market for cellular services by 2010. The region's four tiger economies, along with Japan and Cambodia, already boast more mobile subscribers than fixed-line users. Many more countries are set to join them this year, with even economies particularly hard-hit by economic woes and political turmoil, such as Indonesia, continuing to report annual mobile growth in excess of 100 per cent. As in many countries in Europe, prepaid services also continue to act as an important driver of growth in many parts of Asia, with the Philippines, now ASEAN's largest total mobile market, reporting that more than 80 per cent of all cellular network access is now made through prepaid airtime call cards. 3G Frenzy The phenomenal success of Japan's i-Mode, meanwhile, has generated strong hopes for a rapid adoption of mobile Internet services across the region. NTT DoCoMo will launch the world's first large-scale commercial third generation (3G) mobile network on 1 October this year, with other Asian operators expected to follow suit shortly thereafter. However, it's worth noting that the only serious 2G competitor to i-Mode-Wireless Application Protocol (WAP)-has been enthusiastically introduced by operators in markets as diverse as Singapore, Hong Kong SAR, Korea, Australia, Malaysia, Taiwan and New Zealand, only to meet with generally disappointing results. To date, slow access times, a lack of compelling services and high prices have contributed to tepid consumer demand. Operators will need to learn important lessons from the overall failure of WAP before the introduction of premium 3G services a year or so from now, if they are not to squander their often dearly-bought 3G spectrum on lacklustre, poorly performing products. With many countries now in the process of licensing next-generation mobile operators, the buildout of 3G networks will serve as another major driver of equipment sales throughout the region, not just in the area of cellular base stations and other wireless products, but in wireline technologies too. ATM, DWDM and other systems will be key to providing the essential high-speed 'backhaul' capacity that will enable fast 3G mobiles to interconnect smoothly and rapidly with fixed networks, including the Internet. Competition Spurs Growth The evolution of the regulatory climate throughout Asia-Pacific has undoubtedly been a major factor in Asia's rapid transformation from a technology poor to a technology rich region. Slow but steady liberalisation of national markets or particular service sectors, such as cellular telephony, has prompted the continuing expansion of private capital in the Asian telecommunications sector, brought about by the entrance of new competitors and the privatisation or partial privatisation of some of Asia's major carriers, including SingTel, Telstra, NTT DoCoMo, Indonesia's Telkom and Taiwan's Chungwa Telecom. In terms of overall liberalisation, a full 40 per cent of Asia-Pacific countries now permit competition in basic services-a very respectable figure compared with figures from other developing regions like Africa or the Arab States. In service-specific segments, the picture is even rosier, with almost two-thirds of all countries in the region now equipped with two or more cellular operators. At the same time, the region continues to witness the gradual emergence of new telecommunications regulatory authorities, which play a fundamental role in ensuring smooth transition to a competitive environment and help stimulate vital foreign investment by ensuring a fairness and transparency in the local operating environment. With many new players now clamouring for a piece of the Asian pie, some governments have found that clever legislation linking new licences to regional access obligations can be particularly effective in extending the reach of networks which have languished through lack of capital or political will. In the Philippines, for example, waiting lists of several years a decade ago have been replaced by a surfeit of capacity through licensing arrangements that compelled operators securing lucrative urban licences to also buildout network infrastructure in less profitable outlying parts of the country. Thailand's Build /Transfer schemes have also proved effective in extending access through concessions granted to foreign vendors and operators, while China is slowly moving towards liberalisation of segments of its local market, a move that should ultimately give a strong boost to domestic competition, cutting prices and increasing access. Indeed, with so many vendors and operators keen to tap Asia's exponential growth, the only cloud on the horizon of Asia's developing economies would seem to be local instability. This single factor will exert a devastating effect on any Asian nation unable to maintain an even political climate, with badly-needed foreign equity quickly drying up as investors flee to more secure markets. In Asia-Pacific, Indonesia, the Philippines and Fiji have all seen growth of their telecoms sectors grind to a halt over the last 12-18 months, as political uncertainty puts a question mark over return on investment and drives dollars elsewhere. Conclusion For the citizens of Asia-Pacific, the combination of government commitment to ICT infrastructure buildout, the emergence of new technologies better suited to regional conditions, and the gradual liberalisation of markets to allow foreign participation and local competition, together constitute reasons for optimism. With competition pushing down prices and wireless systems extending access to modern communications to many more people than ever before, Asia-Pacific looks soon set to become the most connected society on Earth. When that happens, the region's strong work ethic, solid manufacturing and agricultural base and digitally-savvy young workforce could eventually combine to make it the single most powerful driver of the global economy. For a region whose countries have struggled long and hard to overcome poverty, isolation and the remnants of a regrettable colonial past, today's commitment to wiring-and unwiring-Asia represents the region's best chance ever to leapfrog old constraints and embrace a new golden age of prosperity.

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