International broadband market to fare better than US

PHILADELPHIA: Although plunging prices for data and voice transmission forced

many US communication companies to slash jobs or declare bankruptcy, the

international and sub-sea market will suffer less severe price declines and

turmoil, industry executives said.

"Prices are dropping in the sub-sea market and Europe, and we'll

continue to see prices come down. But it won't be as dramatic as we've seen in

past couple of years in North America," said Tom Soja, president of T. Soja

Associates Inc., a consulting and market research firm in Boston.

Prices along trans-Atlantic sub-sea communications networks - where there are

many competing cables - have fallen on a similar scale as North American prices.

But prices in the Asian Pacific and Latin American sub-sea markets have seen

only moderate decreases, Asia Global Crossing Ltd. Chief Executive John Legere

said in an interview.

Asia Global Crossing was created in 1999 as a joint venture between Global

Crossing Ltd., Microsoft Corp., and Softbank 9984.T to build a high-speed

communications network across Asia.

The company currently derives about 95 per cent of its revenue from selling

transmission services in a market where some analysts contend there is already

oversupply. Asia Global Crossing, however, is adding more sophisticated services

such as Web site hosting and software applications to bolster its revenues.

The Pacific sub-sea networks have seen prices fall about 30 per cent, while

the intra-Asian networks have seen price declines of only 18 per cent to 20 per

cent, Legere said. Prices have remained relatively stable for a number of

reasons, analysts said. The cost and complication of stringing fiber-optic

networks on ocean floors limits the number of competitors flooding the market.

Also, sub-sea cables, which contain only eight pairs of fiber strands, are

unable to physically handle as much traffic as terrestrial networks, which

contain 144 pairs of fiber, analysts said. That puts a limit on capacity even as

demand continues to rise.

Asia Global Crossing expects near-term prices to decline at a similiar pace

since some competitors have curtailed expansion plans and sub-sea cables have

less capacity than land-based networks. The threat of new competitors remains

slim for now since getting funding to build networks has become more difficult

in the wake of the slowing economy and technology stock shake-out, analysts

said.

In North America, prices are expected to drop about 40 per cent to 70 per

cent over the next 12 months, analysts said. Legere contends that price declines

are not always bad. Asia Global Crossing has seen a two per cent to three

percent revenue increase for each one per cent to two per cent price decline.

(C) Reuters Limited 2001.