Introduction

When Insight began researching this report, we believed that we would find an international marketplace that was providing international private line (IPL) services at a healthy rate and international frame relay (IFR) services evolving and growing rapidly internationally. In fact, we joked at times that by the time the report was finished, these services would have been supplanted by even newer technology.

What we found is an industry that is indeed evolving rapidly; however, the speed of that evolution varies significantly in different parts of the world. The array of telecommunications products and services available in the US to both the business and residential consumer and the speed with which new technology becomes commonplace can cause the average American to mistakenly assume that their counterpart in the far flung reaches of the world enjoys similar access.

In researching this report we did find that the telecommunications infrastructure continues to be enhanced worldwide, and international private line and frame relay (FR) services are becoming available in more locations every quarter. The inherent complications arise, however, when crossing not only continents and oceans, but also when navigating international bureaucracies, and they have caused this reach to continue to lag in certain areas. Because technology takes longer to become established in more remote and developing areas, both international private line and frame relay services should be with us for many years to come.


Types of Services

International Private Line Services

IPL service involves the leasing of a channel of communications (leased circuit) for specified periods of time dedicated just for the customer's use. Generally, international private line circuits can be purchased in two fashions: full end-to-end and half circuits.

A full end-to-end circuit is engineered from the customer’s domestic physical premises to the customer’s foreign physical premises. The service is usually obtained through a single vendor who arranges for all segments of the circuit—a one-stop shopping arrangement. Half circuits, on the other hand, are purchased in two segments: one from the domestic end and the other from the foreign end. These two half-circuits are joined at a designated point to create the full circuit.

IPL circuits can be purchased in many different speeds or bandwidth. The various types include:

• 56 Kbit/s,
• 64 Kbit/s clear-channel (or DS-0),
• fractional T-1,
• T-1/E-1, and
• T-3/E-3.

Higher bandwidth in the form of OC-1 or OC-3 can also be purchased. These high bandwidth circuits, however, are usually negotiated as needed and are charged on an individual case basis. OC-1 and OC-3 are most often purchased wholesale between international carriers, but on occasion they are purchased by very large multinational corporations.


International Frame Relay Services

IFR has become a highly popular network access protocol for bursty data applications. Both IFR and its predecessor, X.25 packet switching, employ switching data, in either packets or frames, across a meshed network of switches. This topology allows for automatic rerouting of the transmission in the case of congestion on the main routes.

IFR best suits applications with the following characteristics:

• Periodic traffic — The cost efficiency is most pronounced when the traffic is variable and/or unpredictable.
  
• Wide connectivity — IFR allows companies to access a list of remote locations without the otherwise prohibitive expense of leased private lines.
  
• Large transaction sizes — Because access to frame relay service usually operates at speeds of 56 Kbit/s and higher, it is suitable for graphics, document transmissions, and large file transfers. It supports local area network (LAN)-to-LAN interconnection and other large transmissions, such as medical/diagnostic image sharing.
  
• Bursty transactions — Frame relay works best with heterogeneous networks that support a variety of applications, some of which are quite large, while others are small. This mixture allows the efficiencies of frame relay to be fully utilized.
  

Managed Bandwidth Services

For the purpose of this report, we have defined managed bandwidth services (MBSes) as a product set provided by the international carrier to the customer. The customer can purchase one or more of these products and benefit by having a single carrier provide every aspect of the service. In a sense, these MBSes are enhanced IPL and IFR services.

By bundling the total management of the service within MBSes, companies can use these services without the expense of maintaining technical staff in-house to support their private network. Smaller companies can thus essentially have IFR and IPL capabilities in-house without paying additional payroll and employee benefits. With larger corporations, managed bandwidth takes advantage of the outsourcing trend by reducing the number of personnel required to manage large networks.

Managed bandwidth ultimately will become simpler because of the types of products being introduced in the marketplace. Rather than requiring the carrier and customer network administrators to understand all the intricacies of each quality of service (QoS) mechanism and their interaction with each other, the next generation of products is already incorporating predefined class-of-service profiles or templates. Eventually the carrier will be able to provide a plug-and-play type of connection into their managed bandwidth networks.

Insight expects that carriers and service providers will be moving away from usage-based billing and toward offering multiple service and quality classes, each with unlimited usage. This alternative pricing model will begin in the domestic environment and eventually move into the international arena. Carriers see this shift as a necessary move to avoid competing on price alone and are emphasizing service availability, quality, and convenience. Competition will migrate to value and away from price.


Provisioning of Services

Two types of IPL and IFR service are generally available. Coordinated service involves the international carrier placing, on behalf of the customer, all orders and providing all the follow-up needed to establish the circuit. With one-stop shopping, the long haul carrier not only places orders with the local exchange carrier (LEC), foreign corresponding carrier, and the PTT to create the circuit, but the carrier also sends a single bill to the customer for all three channels.

Managed bandwidth is a full turnkey solution so one-stop shopping is the only option available for this service. While managed bandwidth may be a bit more costly, it means less hassle for customer. Because there is a single point of contact for all services and equipment, the coordination between the three or more components is smoother. In addition, the customer does not have to maintain internal technical expertise for all their diverse locations or worry about obsolescence, warranties, and compatibility as new services and equipment become available.

Presently, five carriers dominate the IPL and IFR markets for US customers:

• AT&T,
• MCI WorldCom,
• Sprint (with Global One for IFR),
• Concert, and
• EQUANT.
  

The appendix lists the international reach for the IPL and IFR services provided by these carriers prior to the publication of this report.


Past, Present, & Future Market Forecasts

To our knowledge, a detailed market analysis of the IPL/IFR industry has never been published. In developing our own analysis, we began with the following assumptions:

• As the IFR reach grows, companies will increasingly turn to IFR in preference to IPL;
  
• Growth of IPL will level off and then begin to decline over the projected period of 1999 to 2004;
  
• IFR growth will continue through the projected period; and
  
• As costs drop and as business becomes increasingly global, smaller companies will be buying IFR services. Because these companies are likely to lack the infrastructure for sophisticated network management, they are more likely to purchase fully managed bandwidth services.
  

A number of trends are having an impact on the international private line and frame relay markets today. Generally they revolve around two basic areas: the ongoing technological improvement of networking equipment, and the increasing availability of higher capacity transmission facilities.

For private line, these two areas can be distilled into two trends: the reduction in cost of higher bandwidth facilities, and the use of frame relay as a replacement for older point-to-point private line networks. The growth of international frame relay has been most impacted by the technological improvement of networking equipment. The growth of Internet protocol (IP) networks in the United States is expected to undermine the overall growth of domestic frame relay.

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