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Wholesale Market Caught in Cyclone of InnovationWholesale Market Caught in Cyclone of Innovation

Channel Partners

March 1, 2000

5 Min Read
Wholesale Market Caught in Cyclone of Innovation

Posted: 03/2000

Wholesale Market Caught in Cyclone of Innovation
By David Laughland

The next few years will be driven by a cyclone of innovation and a surge of new
business models that will fundamentally transform the telecom wholesale market. The
Internet protocol (IP) wholesale demand will present new opportunities for wholesale
providers and transform how they serve this emerging market.

A recent The Phillips Group-InfoTech (www.phillips-infotech.com) study of market
drivers for the U.S. wholesale telecom services concluded the factors creating this boon
in the wholesale market are:

  • Deregulation and acceleration of competition;

  • Telecom technology surpassing computing in annual price/performance gains; and

  • Implementation of lower cost networks.

These three forces have driven new and existing telecom players to invest significantly
in fiber optic networks and have led to falling prices for bandwidth and traditional
telecom services.

The Internet has resulted in a continuous demand for excess speed, which has created
bandwidth pressures on local access Internet connections and backbone facilities. The
Internet also has created a stampede in the creation of new concepts and e-commerce

Transformation of content into multi-media forms has required even higher speeds and
greater bandwidth in the network. The Internet also has stimulated new business models
with new players seeking bandwidth to provide web-hosting services for consumers and

Supply Side

On the supply side a growing number of new telcos, as well as existing players, have
constructed additional capacity, which has grown the number of fiber route miles to an
estimated 245,000 miles.

AT&T Corp. (www.att.com) is the largest single
player with 40,000 route miles and significant wholesale revenue, as it looks for ways to
utilize its entire network.

With the anticipated merger of MCI WorldCom Inc. (www.wcom.com)
and Sprint Corp. (www.sprint.com), however, the new
company will have almost 30,000 more fiber route miles than AT&T. It also will become
the dominant telco in the wholesale segment.

Graph: IP – Driven Wholesale
Network Services Forecast

New startups–such as Qwest Communications International Inc. (<ahref="http://www.qwest.net">www.qwest.net

), Global Crossing Ltd. (<ahref="http://www.globalcrossing.com">www.globalcrossing.com

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