INTERNATIONAL PRIVATE LINE & FRAM RELAY:Strong Global Outlook

When

INSIGHT began research for the report, "Provisioning of Private

Line and Frame Relay Services: A Global Perspective," we

believed that we would find an international market-place that

was providing International Private Line (IPL) services at a

healthy rate and International Frame Relay (IFR) services

evolving and growing rapidly internationally. In fact, we joked

at times that by the time the report was finished, these

services would have been supplanted by even newer technology.

What we found is an

industry that is indeed evolving rapidly. However, the speed of

that evolution varies significantly in different parts of the

world. The array of telecom products and services available in

the US to both the business and residential consumer and the

speed with which new technology becomes commonplace can cause

the average American to mistakenly assume that their counterpart

in the far flung reaches of the world enjoys similar access.

In researching this report

we did find that the telecom infrastructure continues to be

enhanced world-wide, and IPL and IFR services are becoming

available in more locations every quarter. The inherent

complications arise, however, when crossing not only continents

and oceans, but also when navigating international

bureaucracies, and they have caused this reach to lag in certain

areas. Because technology takes longer to become established in

more remote and developing areas, both IPL and IFR services

should be with us for many years to come.

To INSIGHT’s knowledge,

no detailed market analysis of the IPL and FR industry has ever

been published. In developing our own analysis, we begin with

these assumptions:

• As the reach
  
  of IFR grows, companies will increasingly turn to it in
  
  preference to IPL.

• Growth of IPL
  
  will level off and then begin to decline over the 1999 to
  
  2004 forecast period.

• IFR growth
  
  will continue through 2004.

• As costs drop
  
  and as business becomes increasingly global, smaller
  
  companies will demand and buy IFR services. Because these
  
  companies are likely to lack the infrastructure necessary
  
  for sophisticated network management, they are more likely
  
  to purchase fully-managed bandwidth services.

International

Frame Relay

In

breaking down the overall international market into discrete

regions–Western Europe, Asia Pacific, and rest of the world

(excluding North America)–variations can be seen between

regions. While overall revenue in Western Europe is expected to

double from 1999 to 2004, the growth rate will actually decline,

consistent with the expectation that the Western European market

will reach saturation more quickly than other regions.

The frame relay market

originally rose by capturing 9600 bit/s private line, but by

now most of the customers that were attracted by the

price/speed arguments of frame relay have converted. Current

growth is thus expected to come from existing users increasing

usage and bandwidth. By the end of the forecast period, the

leading-edge customers will begin re-tooling for newer

emerging technologies, such as IP networks and Virtual private

Networks (VPNs).

Our projections for the

Asia Pacific market revenue starts at $282 million in 1999 and

tops out at approximately at just over $600 million in 2004.

We again see a decline in annual growth. INSIGHT believes that

the growth wave in this region will lag behind that of Western

Europe only slightly. Towards the end of the period, selected

segments of this market will already begin to migrate to newer

emerging technologies, such as ATM, IP, and VPN.

International

Private Line

Because

of the existing and growing infrastructure, INSIGHT sees Western

Europe continuing to lead with the largest share of the IPL

market. This leading edge, however, is also indicative of

saturation reached more quickly than in the Asia Pacific region.

Western Europe is not the

only area where digital infrastructure is being installed. Many

international carriers and consortiums have turned their sights

toward building fibre optic cables and digital switching centres

in the Asia Pacific region as well. We project that the region

will



double its revenue potential from $313 million in 1999 to over
$650 million in 2004.

For the rest of the world,

we believe that the flexibility, ease of installation, and

potentially lower cost of IFR will eclipse the growth and

penetration of IPL in those regions.

INSIGHT expects that revenues will

actually decline, due to the reality that many of these regions

are just now beginning to develop. The private nature of IPL is

inefficient given the constraints of its existing, limited

capacity of the infrastructure; frame relay by its nature can

easily share its limited capacity, allowing more customers to

use the same resource. In addition, business in these regions

tends to be conducted on a small scale globally so high

bandwidth is not always necessary. These factors make IFR a more

attractive option for companies expanding their reach in the

rest of the world.