Steady Growth in Data Services Amidst Intense Price-play and Bandwidth Glut

Frost: The Asia Pacific international data services market is being driven by the region’s strong economic growth, as well as its business connectivity needs backed by a stable political environment. The establishment of regional bases by multinational corporations (MNCs) in these growing economies is further fueling the demand for international data services.

Other factors contributing to the growth of this market include the expansion of Asian enterprises beyond their home markets as well as the booming Internet and broadband sector. International private leased circuit (IPLC) services remain the most popular data offering, while fast growing IP VPN (Internet protocol virtual private network) is posing a threat to traditional services such as ATM (asynchronous transfer mode) and frame relay.

Enterprises seeking convergence of voice and data networks to run bandwidth-intensive applications are driving the demand for data services. Having overcome technological maturity and security concerns, IP VPN has managed to attract subscribers of traditional data services to migrate to this technology. In relatively developed markets such as Hong Kong, Japan, Singapore and South Korea, carriers are aggressively promoting this service and mass migration is expected within the next two years.

Despite the promising growth, the Asia Pacific data services market remains price sensitive. In the wake of growing competition in a bandwidth glut environment, some service providers are offering large discounts on pricing. Taking advantage of this, enterprise customers are able to negotiate better discounts based on the duration and value of contracts.

While the international data services market in Asia Pacific is experiencing steady growth in demand, the price war due to bandwidth glut on most international routes has persisted, explains Baidya. Enterprise customers are also demanding the bundling of more value-added services.

Service providers need to focus on differentiating themselves amidst commoditized data connectivity services. Adopting a more consultative selling approach, service providers are today offering customized end-to-end solutions in every type of service and at every level sought by customers. In an effort to create service differentiation, a handful of regional carriers have introduced international Ethernet services in late 2005, which is seen as an ideal and cost-effective choice for extending enterprise customers’ domestic Ethernet circuits to other cities in the region

Asia Pacific International Data Services Pricing Analysis 2006 Publ 20060725