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Industry News

Business Broadband Competition Will Drive Prices Down

August 1, 2002
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Deregulation and privatization has created unprecedented competition in the worldwide telecommunication market. This climate of increased competition has meant that service providers must introduce new, more sophisticated and user-friendly services at an accelerated pace, while not compromising traditional telecommunications service quality.


These needs have prompted many telecommunications service providers to choose Internet Protocol (IP)-based networks as the foundation for many of their value-added services. As a result, they hope to introduce new services at a significantly reduced operating cost while still delivering classic circuit-switched type quality and availability. These ever increasing demands require carriers to continue looking for viable solutions for business customers.

The US business market creates a significant amount of demand and revenue potential. According to Cahners In-Stat/MDR, report #BB101UB on Broadband Ubiquity, there are 11,000 enterprise businesses and 86,000 medium-sized companies. These businesses have a wide-ranging variety of telecommunications and data applications, from simple voice and Internet connections to truly next-generation applications like ASP, e-commerce and Intranets.

Among the traditional applications required by the US business market are the following:

  • Voice
  • Internet . Simple Internet access for e-mail and Web surfing applications is usually the bare minimum for businesses, along with support for Web hosting and other basic Internet services.
  • Video . Two-way video conferencing (along with related data conferencing) and one-way video for training, distance learning and other applications will certainly promote increased demand for bandwidth.
  • Data networking . Broadband access for a host of data communications applications, such as access to ATM/frame relay networks, financial network connectivity, CRM, etc., increase demand.

In addition to these traditional applications, dozens of newly developed applications are beginning to make bandwidth demands on businesses, including:

  • VPN/Intranet . Leveraging the economies of IP services, many businesses are beginning to move from legacy private networks toward IP VPN networks, both within the enterprise (Intranets) and externally (Extranets connecting a company with suppliers, customers and other organizations).
  • Converged voice (VoIP) . Using voice gateways or IP-enabled PSXs, businesses can increasingly carry their voice and data traffic over a single connection, utilizing dynamic allocation of bandwidth to use their circuits more efficiently.

The T-1, T-3 and Integrated Services Digital Network (IDSN) markets will continue to play an important role in bringing basic high speed access to the business community. The Digital Subscriber Line (DSL) services will begin to provide attractive alternatives to the more expensive high speed facilities, such as T-1 and T-3. A significant gap in carrier service offerings and cost exists between the T-1 facilities providing 1.544 Mbps, and T-3 service that offers a much higher rate of 45 Mbps, and thereby demanding a much higher pricing schedule. Where T-1 may offer a rate of $800 to $1000 per month, T-3 service rates approximate $20,000 to $25,000 per month for an equivalent distance between sites. DSL services will be able to fill the gap between T-1 and T-3 with new services offerings like G.SHDSL (high bit rate DSL), which offers data rates between T-1 and T-3 at a much lower cost.

Cahners In-Stat Group released a report in early July 2002, comparing the major access technologies in the broadband arena. For further information, visit www.instat.com/cls-ntwk.htm.

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