APAC WAN services market sees steady growth

The promising economic outlook combined with a relatively stable political
environment is attracting a surge of foreign direct investments into Asia
Pacific, and creating favorable conditions for business expansion. This is in
turn driving the need for enhanced business connectivity and demand for
sophisticated WAN (wide area network) services across the region.

“Many multinational corporations (MNCs) have established regional bases in
Asia Pacific, while many Asian enterprises are also expanding beyond their home
markets,” said Krishna Baidya, Industry Analyst, Frost & Sullivan. “These
factors, as well as Asia Pacific's strong position as the preferred
destination for business process outsourcing (BPO) operations, are fueling the
demand for international WAN services in the region,” he said.

New analysis from global growth consulting company Frost & Sullivan,
Growing WAN Services Market in Asia Pacific, finds that this market-covering
13 major APAC economies-earned revenues of $17.41 billion in 2005 and is
likely to reach $18.57 billion in 2012, registering a compound annual growth
rate (CAGR) of 0.9 percent for the period 2005 to 2012.China and India are
leading the way in the growth of WAN services in the region. Domestic and
international connectivity needs in both countries are rapidly increasing due to
the fast growth of small and mid-sized enterprises (SMEs), as well as the rising
appeal of India as a priority destination for BPO activities. These two emerging
markets are expected to witness steady growth throughout the forecast period,
and by 2012, are likely to account for 18.1 percent of the total WAN services
revenue in APAC.

While international private leased circuit (IPLC) and local loop circuit
(LLC) are currently the most popular services for WAN connectivity, this could
change with the rapid growth of IP-based virtual private network (IP VPN). In
2005, an IP VPN service accounted for 31.4 percent of the total WAN services
revenue, and is expected to gain greater share as it steadily replaces legacy
WAN services. By 2012, IP VPN is forecasted to contribute close to 52 percent to
total WAN market revenues.

“With technological maturity and security concerns being addressed, IP VPN
is increasingly driving the migration of subscribers from legacy data services
such as frame relay and ATM (asynchronous transfer mode).” A key challenge is
the trend of declining prices for WAN services in Asia Pacific, especially in
deregulated markets. Although most countries in the region are witnessing strong
demand for enhanced business connectivity, the overall WAN services market still
remains highly price sensitive. As competition mounts, this trend is only likely
to intensify further, leading to a slower growth rate for market revenue.