Wireline Infrastructure: Awaiting Broadband Push

IPTV deployment among service providers in India may see a spurt in demand for wireline infrastructure. According to a study by ABI Research, total subscribers for IPTV may exceed 120 mn by 2010 with Asia Pacific constituting roughly 47% of the total subscribers worldwide. China and India are seen as major markets. This technology offers customers services such as Video-on-demand (VoD), interactive TV, etc. and is fuelling the next level of telecom industry revolution.

TRENDS
According to Research and Markets, the dynamics of wireline service are changing and these fastest changes in the market dynamics also create new revenue opportunities for service providers, including managed services, IP telephony, as well as QoS and SLA offerings. To take advantage of these opportunities, service providers will need to either acquire resources to provide a wide range of services in order to avoid reliance upon shrinking individual service silos, or develop strategic relationships and partnerships.

According to infrastructure service providers, the main trends are follows:

According to a study by ABI Research, total subscribers for IPTV may exceed 120 mn by 2010 with Asia Pacific constituting roughly 47% of the total subscribers worldwide

Change in technology platform-xDSL
Tough competition from OEMs with bundling of product solutions and services
Price erosion
Consolidation of services-voice, data and video convergence

Demands from operators

Cost efficient network up gradation solutions
Looking for lowering Capex and Opex
Higher revenues per subscriber

Cost is a killing factor
Wired networks take substantial time in installation and roll out targets may have to undergo changes. Also, wireline infrastructure requires space and more equipment as compared to wireless, but it is considered safe from a security and reliability aspects. Ethernet cables, hubs and switches may be cost effective. The total cost of wireline infrastructure deployment and the management of the same, and the apt return of investment should be a consideration for telecos.

Optical networking market topped $3.2 bn in Q4 2006
Best performance since Q1 2002

Alcatel has outdistanced the competition with a new high of $659 mn in sales for 20.1% share (24.2 % combined with Lucent). Huawei (12.7%) captured second place with strong results in China and EMEA. Annualized share for Alcatel-Lucent was 23.1%, followed at a distance by Huawei at 11.3% and Nortel at 9.5%, according to Ovum-RHK which announced its preliminary analysis of fourth-quarter 2006 results for optical networking equipment vendors.

In 4Q 2006 revenues for the segment were up 6% versus 3Q 2006 and up 10 % versus the year-ago quarter. 4Q 2006 revenues were $3.2 bn, up 10% versus 4Q 2005 and up 6% versus 3Q 2006.

Alcatel-Lucent became the first vendor to control over 20% of the $11.9 bn annual optical market. Revenue for the company was up 5% sequentially and up 2% year over year due to Alcatel's extremely strong performance in EMEA, most notably in WDM. Huawei posted a 42% revenue increase over 3Q06 (23% over 4Q '05) in what is traditionally a strong quarter for this competitor. Huawei's showing in EMEA and China was particularly strong.

Spending in the North American market slid below $1 bn for the first time since 4Q '05 due to a pullback in spending from some of the largest buyers, most notably AT&T and its merged or merging entities-including Cingular and BellSouth-and Verizon.

Vendors with dependence on these large North American carriers (e.g., Lucent, Siemens, and Tellabs) tended to fare worse than average in the quarter. Spending in EMEA was particularly strong in the quarter, topping $1.1 bn and outdoing expectations due to strong sales of multiservice SDH, metro WDM, and multi-reach (backbone) WDM gear. Vendors with good coverage across EMEA (e.g., Alcatel, Ericsson, and Huawei) tended to fare better than average in the quarter.

Spending in the North American market underperformed expectations and recent results, dropping below $1 bn after three quarters above that mark. The North American spending decline was the result of a pullback from AT&T (Classic, SBC, Cingular, and BellSouth) and Verizon, and negatively affected all vendors strong in those accounts, including Lucent and Tellabs; only Fujitsu Network Communications weathered the quarter with a slight decline despite its exposure.

"The pause in spending in North America at the end of 2006 contrasted with strong performance in the other global markets, particularly Europe and China. The ON spending outlook for 2007 is good, particularly for metro and multi-reach WDM gear, multiservice aggregation products, and core switching gear. Advanced Ethernet features are highly sought-after by buyers of all three types of devices, and vendors are responding with ever-more-capable products. Global spending is being driven by bandwidth growth across a spectrum of broadband wireline and mobile applications, with video services growth representing huge upside to optical vendors," said Dana Cooperson, vice president, Optical Networking and Practice Leader, Network Infrastructure Ovum-RHK.

Though, wireline is not a written-off technology yet, costs are still a big issue. Wireline majors suggest the following to improve quality/cost efficiency:

Use of right products in the wireline network to avoid DSL impairments and achieve required data rates
Qualification of existing copper network before providing DSL services to ensure better QoS
Maintain statistical data on health of the copper network to improve quality
Understand your copper network, do a broadband suitability assessment by using xDSL testers with copper line qualification capabilities.
Relevant training of installation and maintenance staff in the OSP.

Broadband
Wireline sector may show positive signs if we could match the growth figures of broadband penetration in the US and China, though broadband can run on wireless technologies as well. The year 2007 is the year of broadband in India. Considering the 2006 figures, according to industry players, the task of achieving the government's target may take more time. The number of broadband subscribers (with a download speed of 256 kbps or more) was 18.17 lakhs subscribers at the quarter ending September 2006 registering a growth of 15.95 % over the previous quarter.

Broadband can be offered on cable TV too, but because of poor state of infrastructure, not many players are entering this section. The main reason for the poor wireline infrastructure quality is because around 75% of the network is old with poor joints and thin cables. These networks may not be able to handle ADSL to its maximum capability without reconditioning. The final quality of broadband which will have a telling impact on the wireline infrastructure growth will depend on quality of last-mile infrastructure, relevant content, etc.

The government has already decided to offer the best - in terms of both quality and volume-broadband connection to masses in India and both private and public telecos may be relooking at the wireline phones. For wireline business, the government will continue to become a major customer for wireline infrastructure providers. Apart from BSNL and MTNL, they also cater to telecom network infrastructure needs of utilities like railways, oil and gas, power, etc.

Baburajan K
baburajank@cybermedia.co.in