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.
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.
Data in this report is the latest available at the time of preparation and may not be for the current year
Ankur Gupta, Head Marketing & Communications