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Enterprise Connectivity Services: Leased lines rule

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CIOL Bureau
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Networks are the nerve center of any enterprise, and connectivity services bring these networks to life. Thanks to the telecom revolution that has ushered in a plethora of connectivity options to enterprisesright from the mundane dial-up connections to advanced leased lines. Earlier, service providers used to offer services as per the license agreements. Basic service providers offered only basic telephony and ISDN services whereas NLD operators offered leased line services. But, over the last two years, large operators have started addressing a range of services like basic, cellular, ILD, NLD, ISP, VSAT, and international connectivity services such as ATM, frame relay, IP-VPN, IPLC and MPLS-based IP-VPN. 

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In line with the buoyant demand, the ILD market, a key component of enterprise connectivity services, grew from previous fiscals Rs 7,251 crore to Rs 11,506 crore. In contrast, NLD registered a sharp decline of 20% and garnered revenues of about Rs 7,186 crore as against Rs 9,015 the previous fiscal. The decline of NLD is attributed to aggressive competition and STD tariffs going down.

If we look at the Internet and the broadband arena, FY 07 was the year of broadband. The total Internet subscriber base stood at 9 mn and registered a 29% growth in subscriber terms. The overall Internet services revenue during FY 07 is estimated at Rs 2,040 crore, a growth of 26%. Broadband adoption was more on the business side of things with the home-user base steadily increasing. On the business side, with players like BSNL and Airtel offering business plans enabled enterprises to opt for broadband for branch offices, which turned out to be affordable as traditional ISDN connectivity.

A Good Year

The need for different types of connectivity services is increasing every day, and unique about the Indian market is the co-existence of all technologies. Take for example dial-up Internet services, which in advanced geographies have been marginalized. But, in India, dial-up still has a market, and broadband is growing impressively. Enterprises moved from point-to-point connectivity to point-to-multipoint and connecting with multiple geographical locations. The type of connectivity they adopted depended on core performance, and organizational requirements like reliability, reach, security, capacity and cost.

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Over the year, services like IP-VPN found good adoption with enterprises looking at reducing costs through virtual networks. With the shift to IP, the requirement for a single network gained prominence. Connectivity options also expanded making security a major issue as organizations struggled to grapple with the ever-growing connected end-point devices.

Major vendors saw good demand for their connectivity offerings in FY 07. For Airtel, it was the first year when enterprise services operated as a distinct business unit of the company. It focused mainly on offering a higher standard of service to large corporate customers. Key developments for Airtel include its partnership with the Delhi Traffic Police for setting up a pilot Delhi Police city video surveillance system on metro etherneta first of its kind project in the country; an MoU with the Adani Group on Mundra SEZ to roll out end-to-end telecom solutions, and also become their exclusive telecom partner for the next seven years; and, NNI (Network to Network interface) agreements with leading international carriers.

BSNL, Reliance, Sify, VSNL and host of other MNC players like AT&T, and Cable & Wireless also had a good year. Sify focused on expanding its network connectivity to remote locations and also launched its third data center keeping with the increasing need for enterprise storage, along with network/connectivity requirements. Sifys integrated solutions on business continuity/disaster recovery offerings for large and medium enterprises saw good demand.

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Major Trends

The different types of connectivity services are linked to the service providers ability to offer bandwidth on various configurations as per the demands of the enterprise. By using leased lines, enterprises accrued guaranteed bandwidth needed for voice, data, and video. Enterprises favored leased lines for real-time as they remained one of the best options for data transfer between customer locations without any packet loss.

The Internet subscriber base went up 29% to 9 mn, with revenues up 26% to $450 mn

In sync with the market demand, many of the leased line providers offered a range of bandwidth options. They also offered on-demand bandwidth services to enable enterprises manage seasonal peak bandwidth demands.

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A key trend in the connectivity space over the last year was the escalation of Multi Protocol Label Switching (MPLS) based VPN. MPLS VPN became a preferred choice over frame relay. Moreover, MPLS technology brought in the sophistication of a connection-oriented protocol to the connectionless IP world, enabling IP networks to support business grade applications. Another trend over the last year was that most enterprises focused on creating highly agile and redundant networks, given that MPLS emerged as a major connectivity option.

IPLC continued to remain popular as a good option for bandwidth-intensive applications. IPLC also enables seamless convergence of data, voice, and imaging services. Hence, enterprises looking at point-to-point private line opted for IPLC, as it supported an array of services like Internet access, and LAN-to-LAN connectivity.

At present, only International Long Distance Operators (ILDOs) are able to sell IPLC services in the country. But more liberalization seems to be on the anvil as the Government has accepted TRAIs recommendations of resale in the IPLC segment of the ILD marketto be introduced after five years of opening up of the ILD sector with effect from Feb 07. In another significant move last year, VSNL slashed prices for its international bandwidth products like IPLC and ILL. This move saw IPLC and ILL process going down in the country by 25% and 40%, respectively.

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If we look at other connectivity options like VSAT and ATM, the market was driven by unique requirements. VSAT, for instance, is becoming very niche and its adoption scenarios are becoming limited. Here, cheaper leased lines are displacing VSATs.

VSATs were also used as back-ups to MPLS, ISDN or for that matter any wireless technology. The leading player in the space, Hughes Communications, has a market share of 22%, followed by vendors like HCL Comnet (19%), Tata Indicom (14.8%) and Essel Shyam (13.5%).

Up Ahead

The market for a range of connectivity services in an Indian context is expanding year on year. Even on the consumer side of things, services like NLD will see huge growth. On the enterprise side, leased line and its various flavors will continue to drive the ILD market. Also, the past year saw MNC players like BT upping their presence. Verizon has also tied up with Videocon for ILD. Sifycomm, a subsidiary of Sify, has also got ILD licenses. With competition getting intense, the connectivity options before the enterprises are clearly expanding. FY 08 will see many of the connectivity services becoming affordable compared to previous years.

Shrikanth G