Yankee Group optimistic about future of wholesale telecom market

Even though the telecommunications market is tight, the outlook for Canada’s wholesale services providers is hopeful, a new study predicts. The evolution of the sector should encourage growth for some time to come. The Yankee Group, which released the report entitled Wholesale Services in Canada last month, follows up on a similar study released in September 1999. While the analysts have found the number of players shrinking, they believe the prognosis for the industry is good. "Canadian consumers and businesses continue to flock to the Internet," the study says. "Further, the applications used are adding continued pressure on the bandwidth side of the equation. The evolving needs of the end-user population will result in a marked increase in bandwidth needed by the service provider community." The paper divides the wholesale providers into two groups. On one side are the telcos, both incumbents and established IXCs such as AT&T Canada and Sprint Canada. On the other are "pure-play" firms, which act as carriers’ carriers. The Yankee Group cites Stream Intelligent Networks Corp. and the financially-stressed 360networks Inc. as examples of the latter group. "The past 12 months have dramatically changed the marketplace," research director Mark Quigley writes. "The focus is no longer on filling pipes. Those companies that have emerged unscathed have been forced to re-investigate this approach and refocus efforts on filling pockets, as the bottom line has become more important than market share or top line growth." There has been a dramatic shift in contract terms over the past year. While customers once had no option than to sign a long-term deal, the arrival of pure-play companies has afforded the opportunity to enter into shorter agreements that may feature opportunities to renegotiate. "The end result for service providers is two fold," the report notes. "Not only are they confronted with shrinking margins across product sets, but they must also contend with the operational headache of implementing frequently renegotiated contracts." The study also remarks on the changes in product offerings. "A shift from dark fibre/IRU arrangements to the offering of lit or managed services has already occurred. For the carrier, the addition of value-added services, such as managed network services, means that a higher premium can be charged. There are also benefits for the customer, as the purchase of managed services results in a potential decrease in operational costs." The Yankee Group says this shift will lead to the introduction of bundling of wholesale products. Value-added services, such as network management, will increase in importance. The decline in fortunes of some pure-play companies has altered the pace at which the changes are apt to occur.

Yankee Group optimistic about future of wholesale telecom market

News | 01/14/2002 5:00 am EST

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