The sector that comes under the most severe pricing pressure is international leased lines, but Internet growth has resulted in a soaring bandwidth demand, offsetting the decline and increasing revenue. The leased line market comprises international, domestic long-distance and local leased lines.

International leased line revenue in Asia-Pacific is forecast to grow from $1.8 billion in 2002 to $1.9 billion in 2003. “Despite severe pricing pressure from the launch of new high-capacity regional cables, increasing deregulation and competition have unleashed pent-up demand from large emerging markets such as China and India, supporting regional growth,” says Gartner.

Steady growth from the local leased line sector, currently the biggest segment in many countries, will also bolster revenue. This sub-sector accounts for up to half of total leased line markets in some places. Bandwidth demand is rising, and incumbent carriers face little competition and are thus under little pressure to cut prices.

“The biggest users of leased lines are corporations, followed by cellular operators, Internet service providers and alternative carriers,” says Alayne Wong, industry analyst for Gartner Dataquest’s worldwide telecommunications group. “Bandwidth demand is actually very strong as many Asian markets are still expanding and higher-speed applications are emerging. However, revenues are muted by falling prices.”

Domestic long-distance leased line revenue is projected to reach $5.4 billion in 2003, a slight increase from 2002 revenue of $5.3 billion, but Gartner Dataquest analysts say the segment will experience revenue declines a few years later, but this will be marginal.

“As competition has already set in liberalised markets like Japan, South Korea and Australia, there is little room to cut prices further. This sector has been buoyed by demands from new alternative carriers, cellular operators, and ISPs without their own network infrastructure. However, going forward, the bigger players will start building their own networks,” says Wong.

Local leased line revenue is expected to reach $6 billion in 2003 — an increase from 2002 revenue of $5.7 billion. “This is the main growth segment for many countries and incumbents still have virtual monopolies over this sector with little pressure to cut prices. Demand from corporations is still growing strong for corporate networks. In addition, cellular carriers have emerged as the next biggest buyer for linking base stations to support an increasing subscriber base,” Wong sums up.