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Ovum: The Bandwidth Explosion

by Stephen Young and Dr Barry Flanigan

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On networks around the world, traffic volumes are swelling and demand is growing. At the same time, barriers to entry continue to fall and competition is intensifying.

Incumbents, new carriers, service providers and investors are pouring money into regional, national and international bandwidth. Stock market valuations are soaring, as the financial community takes an optimistic view of future prospects. But as bandwidth becomes a commodity, do the economic fundamentals support this? There’s one expert report that helps you to answer this crucial question:

The Bandwidth Explosion

The only report that gives you these tools to underpin your business strategy:

    1. An analysis of the new market dynamics and strategic recommendations for your business;
    2. An answer to the billion dollar question: will demand follow supply? No one else has brought supply and demand together to predict the outcome;
    3. Insights into the strategic thinking of your competitors, suppliers and customers in exclusive and revealing profiles of over 30 key players;
    4. Expertly researched forecasts to reinforce your business case – figures you can plan by.

Boom and bust in bandwidth: the new model

A new model for bandwidth provision is emerging in telecoms. Huge growth in demand is generating an explosion in supply. How prepared is your business? How confident are you of answering these fundamental questions?

    1. As new networks are rolled out, will there be a boom or bust in bandwidth?
    2. What will be the impact of the new market dynamic on prices and revenue streams?
    3. What factors are driving the demand for bandwidth, when will they take effect and what are the main barriers to take off?
    4. Buy, build or lease? What are the choices for obtaining capacity? How many bandwidth suppliers can the market support, and how will this supply be structured?
    5. How is the level of liberalisation around the world affecting the bandwidth explosion?
    6. Fat or thin? The new world order is a global division between two kinds of route: high volume with low cost and low volume with high cost. What does this mean for future investment, traffic flows, prices and revenue streams?
    7. How are new network builds being financed, and how does this influence market development?

All players involved in the bandwidth arena should read The Bandwidth Explosion to find out the answers to these, and many more questions. So if you’re a buyer, supplier, vendor, or investor, reserve your copy of The Bandwidth Explosion by returning the order form inside.

Can you ignore the bandwidth bandwagon?

In Europe, North America and increasingly in other parts of the world, barely a week passes without another announcement of new networks spanning oceans, crossing continents, hopping borders and joining regions. From gigabits today to terabits tomorrow, carriers are drawing lines on maps and investors are looking forward to spectacular returns. Suddenly, everyone wants to own a network. But as the new fibre networks light up and bandwidth becomes a commodity, are we losing sight of the fundamentals of supply and demand?

The Brave New World of Bandwidth

The bedrock of the telecommunications industry – the network infrastructure – is opening up to competition in more and more national, regional and international markets. Capacity, once provided by incumbent telcos, used to be a textbook monopoly product – supply was restricted, and prices were kept high. Now, a new breed of supplier, the ‘bandwidth baron’, has thrown away the book and is rolling out networks with massive capacity at low costs – with the promise of ever lower prices to fill the capacity. A new market model is emerging. To survive in the brave new world of bandwidth, every player in the industry must adapt. The Bandwidth Explosion takes you through the key trends which are driving the new market model. You’ll understand how:

    • The old order is being dismantled by liberalisation;
    • Data traffic is consuming bandwidth at an accelerating rate;
    • New technology is driving commoditisation as we head into the world of terabit transmission systems.

The Bandwidth Explosion is the first report to analyse the supply of, and demand for, bandwidth. The report’s in-depth examination allows you to confidently answer the questions: will there be a glut or shortfall of bandwidth capacity and, if so, when and where? Your strategic and investment decisions depend on how you answer these questions. They’re answers you will find only in The Bandwidth Explosion.

Analysis, recommendations, profiles, forecasts – all you need in one report

You’ll be able to follow Ovum’s analysis through to the report’s strategic recommendations and build our advice into your own business case. You’ll see whether the gamble by the ‘bandwidth barons’ and their investors will pay off – namely, whether the increased supply will stimulate enough extra demand to fill the networks – at commercially sustainable prices. The report’s Profiles take you into the boardrooms of companies similar to your own. You’ll gain a unique insight into their hopes, anxieties and plans so you can compare your own vision with theirs – and develop your strategy accordingly.

By reading The Bandwidth Explosion, not only will you come away with a thorough understanding of the new market dynamics of bandwidth, you’ll also be able to deploy a coherent and competitive strategy, backed up by credible forecasts and opinions that you can trust.

The View from 2009

The report’s Time Machine chapter transports you to 2009 and then shows how we got there. The experts guide you through the drivers and barriers to change, from the local loop through the growth of the Internet and mobile telephony on the demand side to the deployment of new terabit networks on the supply side.

Today’s market explained

The experts explore the current state of the market and the players involved. You’ll be taken through our market development scenarios for each regional bandwidth market so you can understand the challenges to be faced in each. In particular, you’ll see how the commoditisation of bandwidth will vary in speed between countries, presenting different threats and opportunities for your business.

Too much, too soon?

If you are in the market to build capacity, supply bandwidth, or run wholesale or retail services – the strategic recommendations in The Bandwidth Explosion will answer the big questions facing your company. Whether you are an equipment supplier, a network operator, a service provider or an investor, you will need to know the answer to questions like:

    • should service providers build their own bandwidth?
    • should carriers sell dark fibre?
    • is there a sustainable wholesale market?

You’ll also discover why ‘time to market’ is crucial, and understand why being first is not always an advantage in the market for bandwidth.

The only analysis that brings together supply and demand

Ovum has long experience in analysing and forecasting the demand for bandwidth as well as developments on the supply side. By reading both these detailed, but clearly defined, chapters, you’ll be able to predict exactly where, when and how the bandwidth explosion is occurring. Determine whether demand will soak up the sudden excess of cheap bandwidth – and where regional differences will really matter. Only by taking on board this thorough evaluation of both sides of the market, will you be able to make credible decisions about where to invest, which services to provide, and how best to provide them.

The facts and figures to reinforce your strategy

Forewarned is forearmed, and with The Bandwidth Explosion’s expert forecasts for traffic volumes and pricing, you’ll have the ammunition you need to support your strategy. Your own predictions will either be reinforced or challenged – either way, your strategy will improve, and so will your chances of developing a successful position in a rapidly changing market.

Learn what the competition is thinking and doing

Ovum’s expert analysts have conducted months of interviews and independent research with key players from both the buyers and sellers of bandwidth, including incumbents, new entrants, suppliers and regulators. Ovum has interviewed not only backbone network operators, but also city carriers, cable TV companies, mobile operators and ISPs, to understand the qualitative and quantitative factors on the demand side as well as the supply side. All our findings are released in this key chapter. You’ll find out details of business strategies, views of the bandwidth market, services offered now and strategic directions planned for the future. Our interviews with your competitors, suppliers and customers, will give you access to their hopes, anxieties and strategic thinking.

Table of Contents

A Management Summary

B Time Machine: the View from 2009

The bandwidth market in 2009. A decade of development – back from the future.

C Market overview

The current state of the market. The key players. The transition period. Market development scenarios for the local, national and international bandwidth markets. Geographical overview of the market in North America, Europe, Asia Pacific, Latin America, Africa and the Middle East

D Actions and strategies for key players

Roles and choices in the market for bandwidth. Strategic recommendations to the following types of player:

    • Global end-to-end facilities based service providers
    • Facilities based inter-continental carrier
    • Facilities based intra-continental carrier
    • Facilities based incumbent national carrier
    • Facilities based new entrant national carrier
    • Non facilities based inter-continental and intra-continental service provider
    • Bandwidth exchanges and bandwidth brokers

E Supply Side

The bandwidth supply chain. Market forces influencing change. Technology factors influencing change. The submarine cable industry. Bandwidth services. Models for supply. Financing a project.

F Demand Side

Defining the components of demand. Demand drivers. Demand inhibitors. Models for demand.

G Market Forecasts

Forecasts for bandwidth supply and demand in North America, Asia Pacific, Europe, Latin America, Africa and Middle East, specifically:

    • Outgoing traffic for countries worldwide, split by Internet, voice, corporate data
    • Bandwidth supply and demand on the main international routes.

H Bandwidth Pricing

How is bandwidth priced and packaged? Trends in capacity pricing on major routes. Future pricing trends.

J Profiles

BT Band X Cable & Wireless USA
Casema Colt ESAT Telecom
European VPN Users Association FLAG Federal Communications Commission
Fibernet Flute Global Marine
Interoute GTS Carrier Services Global Crossing
Global One Iaxis (Telemonde) InterXion
ISIS Multimedia IXC Communications Japan-US Cable
KPN Qwest Level 3 MCI WorldCom
Metro Media Fiber Networks Project Oxygen Qwest
Viatel Williams.

Appendix 1 Supply tables and maps

Major submarine cable projects and pan-European operators

Appendix 2 Forecast methodology

About the authors

Stephen Young, Lead Author
Stephen is Principal Consultant at Ovum, joining in 1996 from Mercury Communications. He has since authored a number of Ovum reports including Resale and Callback for International Telephony: Opportunities and Threats and The Rise of Cost-based Interconnect and the Collapse of International Accounting Rates.

He has carried out consulting projects for new entrants, incumbents, regulators and policy makers worldwide. Stephen was recently commissioned by a major US investment bank for a study identifying the likely winners from the liberalisation of European telecoms. Other projects include studies for two European governments to analyse the connectivity gap for broadband infrastructure. He is currently providing market, regulatory and strategic advice to a European incumbent facing the challenges of liberalisation.

Barry Flanigan, Co-Author
Dr Barry Flanigan is a Consultant at Ovum, specialising in broadband networks and services. Barry is the author of the Ovum reports WDM: Global Strategies for Next Generation Networks, SDH: The Worldwide Market, and Intelligent Networks: Competitive Advantage.

Barry is an expert in the broadband infrastructure underpinning the bandwidth explosion. He has an extensive knowledge of technology markets and commercial strategies, gained from a wide range of consultancy projects for major operators, vendors and financial institutions worldwide. Recent projects include the development of an international bandwidth strategy for an incumbent operator, an analysis of broadband infrastructure connectivity for a European government, and an assessment of bandwidth demand on major routes for two leading submarine cable companies. Prior to Ovum he worked in the optical fibre communications industry. He holds a PhD in advanced optical fibre telecommunications.

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