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Survey of World Telecommunications (41): Leaping the barriers - Value-added services
By MONICA HORTEN
1034 words 7 October 1991 Financial Times London Page XX English (c) 1991 The Financial Times Limited. All rights reserved
MANAGERS OF international data networks have battled for years with
the administrative nightmare of dealing with several different
telephone network operators (PTTs). They get forms and bills in several
languages and currencies, and the difficulty of matching delivery times
for service on a line between two or more countries causes many a
headache.
According to Mr Stuart McLean, chief operating officer of Barclays
Network Services, what they want is an improved service from the
carriers which takes away the administrative burden. The ideal would be
a one-stop shopping service, where a single operator would carry a
company's cross-border data traffic and provide connections to local
offices.
Mr McLean also believes that a single bill should be provided in one
currency, and that there should be one point of contact to report
network faults. 'Some routes today consist of 11 carriers. I want to
deal only with one,' he says.
In response to similar demands from large multi-national
organisations worldwide, several companies, including PTTs, are setting
up one-stop shopping services. However, there are some firmly
entrenched barriers in the telecommunications regulations of most
countries, which make it hard to get such a new concept off the ground.
Even under the most liberal telecoms regimes such as the UK, the
regulations permit third parties only to offer services if they add
value to the basic line provision. In other words, they must do
something extra to the data, not just transfer it from point to point.
The traditional value-added network operators such as GE Information
Services, the IBM Information Network or BT Tymnet, have based their
business on transporting specific types of computer data, such as IBM's
systems network architecture. They are also trying to build up a
business in inter-company electronic messaging, especially electronic
data interchange, which is designated as the future standard for basic
trading documents such as orders and invoices.
A newer concept is 'bandwidth broking', where the value added
supplier will sell network capacity - the bandwidth - and will manage
the traffic flow. This network management is sufficient to count as
'value-added' and get around most regulators.
The leading bandwidth broker is Infonet, founded by the US-based
Computer Sciences Corporation, and now owned by a consortium of PTTs.
But the next 12 months will see the setting up of several more
bandwidth broking services.
AT&T, the US telecommunications company, has been quietly
building a Europe-wide network; it now has nodes in seven countries and
four customers signed up. Its rival long-distance operator, US Sprint,
this year won a contract to provide pan-European data services for
Unilever, the household goods manufacturer. And one of the smaller US
players, World Communications (World Com), a subsidiary of Swiss firm
Tele Columbus, has also just taken its first steps into Europe,
offering a transatlantic managed service.
There is a view that bandwidth broking will become a substantial
business, and that it will evolve to encompass all aspects of network
design and provision.
The third US long-distance operator, MCI, launched its global
communications services at the beginning of this year. MCI will design
and put together a network to any country and manage the services that
run over it. It will handle all the network management and trouble
shooting, while the customer receives one bill for everything.
A further development will be virtual data networks, where
sophisticated data facilities are provided on dial-up public lines. The
research organisation Yankee Group believes that companies will
initially try the virtual network concept with their voice telephone
services but in the next year or so, they will begin to use them for
data as well.
If that is so, private leased lines could become a thing of the
past. 'If I look ahead five years, private lines as we know them today
will be here but they won't be leading edge technology,' says Mr Eldon
Blust, a MCI director.
It is possible that hybrid networks will evolve. Private lines will
be used for a company's most sensitive data, or on routes where very
high volumes of traffic are regularly transmitted. But the rest of
their data communications traffic may be entrusted to a value-added
'bandwidth broker' or the company may sign up for a virtual service.
Companies with very large private networks will tend to be cautious.
What these customers look for is competitive pricing and high
service levels. They also watch for any discrepancies between promise
and practice. On the transport networks there can be considerable
differences in time taken for the network to respond to a terminal. It
may be very fast if only one terminal goes on line, but considerably
slower if a group of terminals are logged on.
Very often too, the network operators will say they can offer
service in certain places, on the assumption that if they win the
contract, they will put a node in there.
As more competition arrives, they are being forced to respond to
customers. The most common request today is for 'bandwidth on demand' -
network capacity made available in whatever quantities the customer
needs, at any time that it may be needed.
One of the attractions of a value-added or managed service is that
expensive dedicated lines do not lie idle for 364 days a year, just so
that the company has enough capacity to handle a surge in traffic on
the remaining day. They expect that if they sign up to a third party or
vitual network service, they will have the lines when they need them,
and not have to pay for them, when they do not.
An extension of this concept is a user-defined network. According to
Mr McLean, this is where a customer can specify regular time slots when
extra capacity will be needed: 'A facility you might ask for is that
every Tuesday and Thursday at midnight you need a 2 Megabits a second
line between A and B. A user-defined network gives you the opportunity
to go in from a console and ask for those 2 Megabits.'
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