Asia’s booming mobile and broadband
sectors are quietly underpinned by the region’s all-important fixed
infrastructure
The changing nature of the telecom
market has had a major impact on the approach to investment in infrastructure.
With shifting revenue patterns across the market segments and falling ARPUs on
many services, operators became considerably more selective about what they
actually invest in. Telecom operators throughout Asia have been adjusting
investment levels on the back of carefully considered investment strategies.
This has seen companies shifting business focus, looking for new ways to add
value to existing revenue streams; it has also seen a strong desire to
leverage new value from infrastructure that is already in place. This has
especially been the case with mobile network moving increasingly to support
mobile broadband services and newer generations of mobile technologies.
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The governments of Asian nations
have long recognised – some earlier than others – that there needed to be some
encouragement of private sector investment to meet the demand for the
all-important capital needed in the telecom sector. At the same time, it was
also generally well recognised that this strategy could not rely on local
investment alone, and would inevitably mean a substantial level of foreign
investment. Of course, despite this recognition, there has inevitably been
some resistance within some administrations to opening up the telecom sector
to foreign investors and as a consequence the level of ‘encouragement’ across
the region has been variable.
The initial round of substantial
investment in telecom infrastructure in Asia was in fixed telephone networks.
Over a number of decades the regional economies were progressively building
their often quite substantial fixed-line national networks. These fixed
networks were in time followed by the building of mobile networks. In many of
the developing nations of the region, the building of fixed-line
infrastructure was not far advanced before it was overwhelmed by the
introduction of mobile infrastructure. This created the phenomenon of
‘substitution’ in many of the markets of Asia (where mobile services perform
the function of the limited, or even non-existent, fixed telephone services.)
Nevertheless, despite the unevenness in disposition, fixed infrastructure has
been and continues to be an important component in the overall development of
the region’s telecom sector. Coming into 2014 there were an estimated 500
million fixed-line subscribers in Asia; this was down from a peak of around
570 million in 2009; of course, fixed-line numbers are considerably less than
the more than 3 billion mobile subscribers to be found in the region. Whilst
the fixed line numbers have gone into an overall decline, in some markets the
numbers have continued to increase. Overall, it is anticipated that the
decline will continue for a few more years before the market ‘levels off.’
As already suggested, the focus of
infrastructure building has been shifting. There has been a major push to
upgrade domestic telecoms networks to Next Generation Networks (NGNs). This
process has seen large scale investment by Asia’s leading telecoms markets in
new-generation IP-based telecommunications networks. At the same time there has
been a major surge in infrastructure building as mostly developed economies
roll out National Broadband Networks (NBNs). These networks come in various
‘shapes and sizes’ as governments work with operators to tackle the strategic
challenge of delivering high speed to the nation. Not surprisingly the NBNs
rely heavily upon fibre; in some cases it is Fibre to the Premises (FttP),
while in others it might be Fibre to the Node (FttN). And the cost varies
accordingly. Those countries that have government backing for NBN roll-out are
generally the ones that have been setting the pace.
In addition to the national
networks, international connectivity remains central to the overall
effectiveness of the region’s telecommunications services. Submarine cable
routes criss-cross the Asia Pacific area, providing both intra-regional and
inter-regional networks. This sector of the market has been characterised by
widely fluctuating supply and demand, which in turn has seen somewhat erratic
investment strategies. Submarine projects are subject to this boom and bust
market phenomena, with planned projects commonly being delayed or abandoned,
consortia being reshaped, etc. In fact, over-supply of capacity has been
common in the Asian market. More recently investments have been less
speculative and more focused on predicted growth. In the meantime, new
submarine cable projects continue being proposed and the cables installed
throughout the region. As Asia’s broadband usage surged, a major effort went
into managing the shortfall in capacity between Asia and the US. At the same
time there has been a shift away from the heavy reliance on the US as a hub
for data traffic and this has inevitably resulted in a further change in
focus.
As the demand for wholesale
services continues to rise in Asia, still driven in the short term by voice,
but rapidly being overtaken by data, there has been a boom in IP-based
services, with the volume of international Voice over Internet Protocol (VoIP)
traffic into and out of Asia having increased at a rapid rate at the expense
of the traditional International Direct Dial (IDD) traffic.
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