Bandwidth Glut Almost Over?

Improbable as it may seem, but the bandwidth glut created by the telecom bubble of the late nineties might be coming to an end. Or there is at-least light at the end of the tunnel. Many of the major long haul service providers are in fact are in the process of lighting up their dark fiber and/or additional wavelengths to add capacity. There is talk of a new transpacific cable being laid by a new group. The network operators who are looking to add more capacity include VSNL, FLAG Telecom, Asia Netcom, and Telefonica.

But unlike the 1990s, this time around the capacity is being added in a as-needed basis, according to research firm, Telegeography. The demand is being driven by a big growth in consumer broadband connections, says Alan Mauldin research analyst with Telegeography. The growth has particularly strong in Asia, and Latin America, where traffic has more than doubled, Mauldin says.

Point Topic, another research firm estimates that there were 209.3 million global broadband users at end of 2005 up 56.2 million or 37% from 153.3 million lines on 31 December 2004. In some countries, such as Brazil, Russia, India and China, the demand for high speed connections is still in early stages, and that is why many in the industry are hopeful that the glut might be over.

The best news however, is the likelihood of a balance between supply and bandwidth demand. A lot also has to do with rapid consolidation in the telecom industry. AT&T+SBC+ BellSouth, Verizon+MCI, Tata Telecom+VSNL+Teleglobe+Tyco Network, and Reliance-FLAG Telecom are some of the key deals that have managed to take off excess capacity off the market.

Lately, Level 3 has been on a buying binge and has acquired Wil-Tel, Progress Telecom and last week there was word that they might acquire ICG Communications. (The news could be announced this week, some say.)

In addition to the consolidation, the demand for bandwidth for new fangled applications like IPTV, VoIP, build-out of new networks are helping equipment providers turn the corner, but the wholesale bandwidth prices are still too low for big backbone companies to turn a profit. And when that happens, perhaps we can be comfortable in publicly admitting that the telecom turn around is in full swing.

If The New York Mets can be 9-2 at the end of first two weeks of the new baseball season, then anything is possible.


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