Choose or lose: rethinking the service equation: thanks to falling prices of minutes and bandwidth and increasing local loop competition, the days of the full service provider are numbered. The solution? Customized wholesale services, where carriers can leverage their infrastructure strengths

Telecom Asia, Dec, 2003 by John C. Tanner

BT's Ian Pulford says telcos should look at wholesale as another channel to reach the end-user. "BT is a major pure play wholesaler in the UK," he says. "Outside the UK we tend to use the wholesale channel to underpin the BT retail operation outside the UK."

Chalmers of Reach admits that it's a dilemma for carriers who are committed to both wholesale and retail channels. "Telstra went through it in Australia--how do you create a new channel like that without cannibalizing your customer base? That said, I think incumbents have to embrace or at least accept there will always be niche players, and they could see those VSPs as another channel to reach the end-users. It's also good for them in other ways --one interesting thing if you look at a market like Japan, you see many backhaul players and local loop players making the incumbent more competitive in those segments."

Singapore Telecom touts itself as example of a telco that has made the most of mandatory loop unbundling under IDA regulations. Lira Chuan Poh, SingTel's executive vice president of corporate business, says that SingTel currently gets about 30% of its revenues from wholesale data services, and competes more on service level, reliability and customer support than price, and that unbundling rules haven't had a severe impact on its business.

"We've seen more of an impact from the oversupply of bandwidth internationally and the pricing pressure from new players coming into the market even before some of them started going into Chapter 11," Lim says.

Taking on the customers

For regional and global providers, it's almost an opposite dilemma in which the object is to avoid inappropriate treading on the retail turf of their own customers. On the other hand, as the shock of the bandwidth glut has driven many international network owners further away from a pure-play model to a wholesale/VAS blend, some have headed straight for the retail segment as well. Asia Netcom has been particularly aggressive in this respect, taking the former Asia Global Crossing's mainly wholesale business and shifting a healthy amount of resources to retail

Asia Netcom president and COO, Bill Barney, sees retail as an important part of Netcom's strategy and expects that as the regional and global fiber players sort themselves out, the survivors will follow Asia Netcom's lead.

"It's a galactic issue," he says. "You're going to have some level of consolidation, and then you're going to have guys like us who own assets and then go to the retail market. You look at a pure capacity player like a C2C or a FLAG, they're going to have to think about how they're going to survive when bandwidth is selling so cheap. I think more players will move towards an integrated model like us."

For the time being, however, it's still an issue that many wholesale customers are wary about, says Chalmers of Reach. "We don't go For the retail space because we need for the supply chain to trust us, which they won't do if we're seen as a threat," he says. "Each player in that chain has to trust the upstream provider not to go direct to the end-customers. Some upstream providers do that, and the incumbents have found that difficult to come to grips with."