E.1 Overview

The key objective of this report is to chart the course of development of the narrowband infrastructure throughout the world and who will be the winners and losers in building it. In order to achieve this objective, we have reviewed key industry trends in the marketplace and have developed detailed ten-year forecasts of international narrowband markets and an assessment of opportunities and threats in the global narrowband marketplace.

Narrowband communications as defined in this report refers to digital communications at or below 2 Mbps. This report focuses on wireline technologies, specifically, X.25 packet switching, ISDN, and frame relay.

E.2 Narrowband Services in Argentina

In 1990, the state owned operator Empresa Nacional de Telecomunicaciones (ENTel) was separated into two regional monopolies and privatized through the sale of 60 percent of the shares of each new company, later increased to 100 percent. Telefonica de Argentina serves the south, while Telecom Argentina serves the north. The exception is Buenos Aires, where both companies operate. Telintar, jointly owned by both Telefonica and Telecom, provides international communication services.

Much of the demand for data services is concentrated in the Buenos Aires region. According to Impsat, the top 15 data service users in Argentina are concentrated in the downtown area of this city. ISDN is only available in the major cities of Argentina. Both Telecom and Telefonica, however, are continuing their efforts to digitize the central exchanges and lay fiber optic cables throughout Argentina. Telintar, the international carrier, has established international correspondent relationships with several of the major alliances, e.g., Concert, to allow Argentina to use international ISDN protocols.

The domestic public switched data network in Argentina, although operational since 1990, has only 2,500 subscribers. Most companies choose to use Startel's business centers for their data communications needs. There are also private packet networks. Once ISDN services are implemented nationwide, there will be less and less demand for X.25 packet switching.

The telecommunications equipment industry in Argentina is composed of 40 companies, but six companies account for 85 percent of domestic production and dominate the market. Most switching equipment, branch exchanges, and multiplexers are assembled locally, using imported components from parent companies. Siemens (Germany), Ericsson (Sweden), and Thompson (France) have significant domestic subsidiaries in Argentina.

E.3 Narrowband Services in Brazil

Telebras, a 24 percent state-owned holding company, is the current operator of the telecom system in Brazil. Telebras controls over 27 different local telecom operators, corresponding to each of the 27 Brazilian states. Its five largest subsidiaries are Embratel, the long-distance provider; Telesp; Telerj; Telemig; and Telepar.

Embratel operates the National Data Communications Network using the X.25, X.28, X.400, and X.92 protocols. Embratel divides its data transmissions into its two subnetworks, Transdata and Renpac. Transdata is a dedicated point-to-point network that has recently been transformed into the E1Network aimed at heavy users needing at least a T1 connection. Renpac operates the public X.25 switched data network and has been in existence since 1982. Telebahia, a regional Telebras company, uses advanced data packet switching equipment provided by Nortel and provides services to transportation, finance, and industrial companies. Telesp was the first regional operating company to develop its own data network for the entire state of Sao Paulo.

Two international data networks also exist: Interdata and Findata. Interdata interconnects local data networks to provide users with access to foreign data networks. Transdata employs packet switches to connect to Brazil's international data communications gateway. Meanwhile, Sprint, AT&T, and MCI are competing to become the major carrier responsible for all data traffic within Brazil. Many of the world's leading market players, such as AT&T, Ameritech, BellSouth, Bell Atlantic, and U S West, also operate in Brazil. All these companies are bidding for a chance to win one or more of the regional concessions.

Although private companies in Brazil may provide enhanced services, paging, and private networks, including closed user groups, the telecom equipment market is often not open to competition from overseas companies. However, data-related telecom equipment, which previously could only be imported if there was no domestic product, now can be imported with minimal restrictions.

ISDN is available both domestically and for international connections. Thus, for example, although MCI does not have a subsidiary in Brazil, it has a cooperation agreement with Embratel to carry its global ISDN service. In 1994, Newbridge Networks was responsible for performing major upgrades to Renpac's packet switching network. Renpac is now capable of providing LAN interconnection services, high-speed data, video, and frame relay. Sprint recently installed a packet switching network for Microsoft, which enabled it to introduce the Microsoft Network in Brazil. Sprint is also the Internet access provider for Embratel, linking Embratel's X.25 network to Sprint's global X.25 networks.

Many of Brazil's financial institutions have been migrating their packet switching networks to frame relay because of their increasing needs to interconnect LANs and to integrate their various data and voice networks. StrataCom has built frame relay networks for several Brazilian companies and AT&T and Embratel have formed an alliance to provide multinational companies with the ability to access global frame relay networks. Customers for this service currently include Dow Chemical and and AlliedSignal.

E.4 Narrowband Services in Chile

Major market players in Chile include CTC, ENTel, VTR, Telecom Chile, ChileSAT, BellSouth Chile, Iusatel, and five other smaller providers. These providers are active in the local, long-distance, data, and cellular markets. U.S. companies have heavily invested in many Chilean communications companies. ENTel and CTC are also strong players in the data communications market. In October 1990, ENTel formed ENTeldata to provide switched and point-to-point data services. CTC invested around $300 million in its Datared network, which offers point-to-point and point-to-multipoint data services. It also has partnered with AT&T to offer electronic data interchange (EDI), global messaging, and E- mail. CTC is a member of Telefonica's Pan-American Network and markets Telefonica's entire suite of products and services.

Strong competition exists among other Chilean firms for data traffic and value-added services. In 1985 VTR and Telecom Chile, received licenses to operate a packet switched network in competition with the state-owned company ECOM. Today, VTR and Telecom Chile split the $7 million packet switched market. VTR offers integrated voice, data, video, image services, and value-added services through Alcatel's fiber optic network.

In addition to domestic BRI and PRI services, CTC also has correspondent agreements with many international carriers, such as MCI to offer ISDN. In addition to CTC, ENTel, VTR, and Telecom Chile, several other companies operate X.25 packet switching networks. Global One, Concert, and AT&T's World Partners and Unisource alliances offer global packet switching services.

Many of Chile's financial institutions have been migrating their packet switching networks onto frame relay because of their increasing needs to interconnect LANs and to integrate their various data and voice networks. Banco Sudamericano, one of Chile's largest banks, has migrated its X.25 and SNA traffic to a frame relay network created by Network Equipment Technologies. Chilepac, a state-owned X.25 network, is another company that has implemented a frame relay solution to its data communication needs. Chilepac has installed frame relay technology throughout its network. Additionally, Infonet, a company whose majority owner is Global One, has been selling frame relay networks to many financial and petrochemical corporations.

In the past, Chilean telecommunications equipment markets have been dominated by European firms such as Alcatel, Siemens, and Ericsson; however, Japanese and U.S. companies have recently built strong presences through the use of aggressive marketing and a willingness to form partnerships arrangements with numerous Chilean companies. New North American entrants include Newbridge Networks, AT&T, and Motorola.

E.5 Narrowband Services in Mexico

Telmex, the dominant carrier in Mexico, has invested heavily to expand and upgrade its network. By January 1995, Telmex had invested more than $8.5 billion toward improving the telecom infrastructure. Since the end of 1994, Telmex has provided automatic switched service to all cities of more than 5,000 people and to over 18,000 small cities and rural towns. The north and metro regions of Mexico have the most advanced communications infrastructure. The recent upgrading of the local network, now 65 percent digital, has allowed for new services, such as data and image transfer, to flourish. Telmex expects to have digital service in all major cities by the end of 1996; 95 percent of Mexico City already has digital service. Telmex operates a VAN called the Digital Integrated Network (DIN) to 17 cities, reaching 237 terminals.

Telepac, a subsidiary of TELECOMM, a state-owned data and satellite company, operates a packet switched network connecting 55 cities; it has over 3,000 modems with an estimated 820 users. TELECOMM also owns a share in Infonet, an Internet service provider. More than 1,000 private data and shared data communications networks exist today in Mexico, with almost 37,000 terminals and 13,400 modems in 27 cities. All four major global telecommunications alliances have a presence in Mexico. Global One's partner France Telecom owns five percent of Telmex and has ownership interests in RadioMobil. Additionally Telmex has a partnership with Sprint International for data communications across the U.S./Mexican border. AT&T has formed Alestra -- a joint partnership with GTE, Bancomer-Visa (the country's largest financial group), TISA, and Grupo Alfa -- to offer domestic and international telephony as well as data communications to multinational corporations in Mexico.

In October 1990, new telecom regulations allowed private, Mexican majority-owned companies to compete against the state-owned data and VANS networks provided by TELECOMM and Telmex. The NAFTA agreement further opened this market, providing U.S. companies with open access to the Mexican VANS market by lifting the local ownership requirements for enhanced service providers. NAFTA also resulted in a further liberalization of the data and VANS marketplace.

Although data communications are primarily transmitted via private lines and analog long- distance circuits, lately private satellite networks using Very Small Aperture Terminals (VSATs) has become increasingly widespread. The October 1990 telecom law allows for private ownership of VSATs if they are used for intracorporate data transmission. In 1995, nearly 80 percent of all VSAT traffic was domestic.

Telmex is the only company authorized to provide ISDN services. Telmex recently completed the Integrated Digital Network, a 12,400 kilometer fiber optic network that will carry voice and data throughout the country, and Columbus II, a 12,200 kilometer undersea cable linking Mexico with other Caribbean countries, the U.S., and Europe. These new digital services have allowed Telmex to implement ISDN services in more cities in Mexico.

Unlike companies in the U.S. and other countries, where ubiquitous packet switched networks blanket the country, Mexican companies have relied on a combination of public, private, and VSATs for all their data communications needs. Mexico's Telepac system has rarely been used to support LANs because it can not handle the bursty data of LANs or sustain higher transmission speeds or dynamic bandwidth allocation, and also because its switches and nodes are not capable of processing the data. Additionally, Telepac is not known for its dependability and reliability, two essential ingredients for assuming LAN traffic. Grupo Iusacel operates a nationwide X.25 network with more than 400 points of presence and has a joint venture with CompuServe to carry all CompuServe data traffic throughout Mexico.

Frame relay is a relatively new public data service in Mexico. The market for frame relay in Mexico is small but will boom after Telmex loses its monopoly status and its hold on alternative infrastructure. Intersys became the frame relay pioneer when it created Intervan, the country's first nationwide frame relay network, and linked it to LDDS WorldCom's Wilpak network in the U.S. Currently, Intervan is a public extension of the frame relay network built for Banco de Mexico and links three of the country's largest cities, Monterrey, Mexico City, and Guadalajara. Nine more cities are being added shortly. LDDS WorldCom has also come to arrangements with Telecomm, the government owned satellite provider. Under these arrangements, WorldCom International has signed a network-to-network interface (NNI) agreement with Telecomm to link the two carriers' public frame relay networks. In its own right, Telecomm offers frame relay both via satellite and over a terrestrial fiber network. In July 1996, Ashton Communications chose Cascade to create a backbone for its Mexican high-speed frame relay network. Ashton's network allows U.S. subsidiaries in Mexico and Mexican companies to interconnect with companies in the U.S. and elsewhere. Frame relay is more common in northern Mexico, especially in those cities that border the U.S. There are numerous providers of frame relay in these border towns and in the large cities nearby.

E.6 Narrowband Services in Peru

Telefonica del Peru is the exclusive provider of domestic and international telecom service; it is composed of CPT and ENTel Peru. CPT offers cellular service in competition with Telemovil/Cellular International, another private Peruvian company. Tele 2000, which has invested heavily in cellular and wireless pay phones, remains an active competitor to Telefonica. Tele 2000 is building an optical fiber/coaxial network to provide telephone, data, messaging, ISDN services, and video. On February 28, 1994, the government of Peru awarded Telefonica de Espana the right to purchase a 35 percent stake, for $2 billion, in Telefonica del Peru, breaking a 25-year state monopoly in the telecom sector. The government still owns 29 percent of Telefonica del Peru, but at the time of writing was one the verge of selling its stake in this company.

In Peru, packet switching systems are the main method of data communication because of the historical weakness of the telecom infrastructure. Both AT&T and Sprint have successfully marketed their own packet switching networks and there are also private packet networks installed. ISDN does not seem to be at all well developed in Peru. However, MCI now offers ISDN service between its sites in the U.S. and Telefonica del Peru. MCI is the first carrier with which Telefonica del Peru has decided to offer ISDN. The service can be added to MCI's Vnet and Vision long-distance plans, and networkMCI Small Business contracts.

ISDN services will become nationwide after 1997. As the country is increasingly wired both with fiber optics and with wireless infrastructure, the data communications options will multiply. Once ISDN services are implemented nationwide, demand will decline for packet switching.

E.7 Narrowband Services in Venezuela

Venezuela privatized its carrier, CANTV, in 1991 when a 40 percent interest and management control was purchased by a consortium of GTE, AT&T, Telefonica de Espana, and two Venezuelan companies (Electricidad de Caracas and Consorcio Inversionista Mercantil Cima) for $1.9 billion. The government still owned an equity stake of 49 percent, but has now sold off most of this holding. CANTV operates VENEXPAQ, a small packet switching network, for its high-speed data transmission needs via the public switched network. Additional concessions were awarded to Teleservicios, Urmet (Italian), and Smart Phone Company (Malaysia). These companies will spend over $240 million to install thousands of data, fax, electronic mail, and videoconference terminals over the next seven years.

In Venezuela, both public and private packet switching networks are extremely strong. Since the privatization of CANTV, private data users have emerged as such an important customer base that the increase in private users has resulted in the relaxation of import restrictions on telecom equipment. Frame relay has been picking up momentum as corporations are realizing that they need many of the services and benefits it offers. In the next several years, CANTV will have completed the digitalization of Venezuela. As central exchanges within the public network become upgraded, many new applications and technologies can be introduced.

E.8 Narrowband Services in Germany

Four major international telecommunications service providers/alliances are active in Germany. Deutsche Telekom (DT) is a one-third owner of Global One and has a monopoly over all basic telecom services, including ISDN, until 1998. Cable and Wireless operates through its affiliate Vebacom. AT&T's Unisource Services operates through an alliance with Mannesman/CNI. Concert, the MCI-BT joint venture, operates through its partner Viag.

Reform of the German telecom sector began in 1989, when Deutsche Bundepost was broken up into three public enterprises. DT retained monopoly rights over voice traffic and infrastructure. Although competition has been allowed for all non-voice value-added services and for data communication, DT has been said to have attempted to hinder this process. In 1995, DT was ordered to stop illegally subsidizing its Datex-P service with monopoly profits while requiring other packet switching providers to use higher price Telekom lines. In 1995, Germany converted DT into a joint stock company in preparation for selling 49 percent in an initial public offering on the stock market. Once liberalization occurs in 1998, DT will be less able to cross-subsidize its services.

German companies use packet switching and ISDN extensively. Deutsche Telekom is the world's most successful ISDN operator with an installed base of over 0.75 million connections and over eight years of experience in the market. It has achieved this success through heavy subsidization of ISDN equipment and service. Three types of ISDN exist in Germany: the old national ISDN service, Basic Euro-ISDN, and Primary Euro-ISDN. Germany is unique in that its promotion of ISDN since inception has resulted in a large number of customers who prefer the old national standard, which did not use SS7 technology.

The market for frame relay in Germany is growing quickly as more and more users need better methods for interconnecting their LANs. Additionally, managers are looking at better ways of improving LAN-to-LAN traffic over WANs. The high costs in Germany of dedicated leased lines needed to handle the peaks of bursty data prevent most companies from linking LANs unless absolutely necessary. X.25 networks will continue to be widely used in Germany for some time to come, mostly because of the heavy subsidization by DT of Datex-P and because corporations have invested heavily in these technologies. However, the old "national ISDN" service will cease to be supported by DT, resulting in many more companies reevaluating their use of data transmission and communications. Some companies may decide to migrate to frame relay in an effort to regain competitiveness and also to avoid relying on an outdated technology. Other companies will go with the newer version of ISDN.

Germany has its own indigenous equipment industry, which has long been dominated by Siemens, the only German firm producing narrowband equipment with a major international presence. Another important indigenous equipment manufacturing firm in Germany is Bosch, which through subsidiaries builds transmission and terminal equipment. Krone AG is a manufacturer of ISDN, packet switching, and network management software. In addition, two long-established German equipment manufacturing operations are now owned by other European equipment manufacturers -- Alcatel owns what used to be Standard Elektrik Lorenz (SEL) and Philips owns the old Tekade firm. Nevertheless, while the German manufacturing sector has proved itself quite adequate in supplying network equipment, customer premises equipment is often supplied by the North American equipment vendors who have pioneered the data communications industry worldwide.

E.9 Narrowband Services in France

France Telecom (FT)'s wireline network provides a technically digitally advanced network and has been known for spreading advanced practices. Digitalization of local exchanges was completed in 1994. FT, however, is still a state-run enterprise. Privatization is not expected until April 1997.

FT's ISDN services are universally available throughout France and is branded under the name "Numeris." The service was begun in 1990 and includes BRA and PRA (BRI and PRI). FT's Transpac, one of the largest packet switching networks, provides X.25, frame relay, and Internet access via a dedicated network of switches; it has subsidiaries in 17 European countries and owns a 21 percent stake in Infonet, a value-added service provider. Transpac's main competitor for X.25 service is British Telecom France, which mostly supplies X.25 and frame relay services to major multinationals. In 1998, Transpac's network will be combined with DT's in the Atlas alliance, the European owner of Global One.

The reluctance on the part of the French government to completely dismantle domestic monopolies has had a negative effect on competition in the domestic X.25 market. Even after infrastructure was opened to competition, competitors had to overcome many obstacles in applying for and receiving an X.25 license. Additionally, closed user groups must obtain a license from DGPT.

France Telecom's Numeris ISDN service was the first ISDN in existence. ISDN service began in Brittany in 1987 and arrived in Paris in 1988. Nationwide ISDN service began in 1990. Numeris connects with over 20 destinations worldwide. FT remains the only provider of ISDN services in France. In the next few years FT expects data applications to account for 50-60 percent of all ISDN use, up from 40 percent. Recently, FT has significantly cut its prices for ISDN services and has introduced a series of special offers and discounts that have further reduced the prices charged for domestic and international ISDN.

Transpac accounts for approximately 25 percent of the European market for data transmission. By the end of 1994, Transpac provided access from over 90 countries and 140 data networks. Transpac's network outside of France has been combined with DT's to form Atlas, the European owner of Global One. After 1998, France and Germany will be able to combine the home networks into the Global One alliance.

All switches in France will finally conform to Euro-ISDN standards by 1997. The old "national ISDN" service will cease to be supported by FT, causing many more companies to reassess their use of data transmission and communications. Many companies may decide to migrate to frame relay in an effort to regain competitiveness and also to avoid relying on an outdated technology. Liberalization of the telecom sector will speed the adoption by companies of frame relay. After liberalization, FT will realize that it must offer a better quality frame relay to remain competitive.

The dominant equipment manufacturer in France is Alcatel, which was built from the telecommunications subsidiaries of a major French government-owned electronics company and the telecommunications subsidiaries of the old ITT. Groupe Matra is another French company that supplies narrowband equipment. In addition many of the other major international narrowband CPE companies have offices in France.

E.10 Narrowband Services in the United Kingdom

British Telecom (BT) remains the largest provider of telecommunications services in the U.K. and offers the full range of narrowband services. It has one of the most modern networks in the world and it is also known for world-class engineering research. Nevertheless, BT is still vulnerable to competition from new entrants with lower costs than BT. In addition to its domestic activities, BT has a presence worldwide through its involvement with Concert. This alliance has been strengthened recently through BT's acquisition of MCI.

Cable and Wireless owns and operates Mercury Communications, which provides domestic and international telecommunications services in direct competition to BT. Mercury began servicing both domestic and international customers in 1985 when it was granted the first license to compete against BT. Apart from BT it was also the only carrier, until June 1996, to be authorized to carry international traffic. Mercury has a digital fiber optic network, much of it based on the railway system. Its prices have shadowed BT's structure, often being about 10 percent less than BT on all services. Although allowed to serve residential customers, Mercury prefers to focus on the business community, where it has about 20 percent of the market (more in domestic than in international).

BT has been operating pilot ISDN BRI services throughout the U.K. since 1985. A commercial service was launched in 1991. In 1988, BT introduced its PRI service on a trial basis. Mercury and Energis operate both BRI and PRI through their digital networks but lease their ISDN lines from BT. BT controls over 90 percent of the ISDN market. Mercury's and Energis's costs for operating PRI lines are significantly less than BT's. Additionally, both BT and Mercury charge a surcharge for carrying data internationally through the "B" or "D" channel. BT charges 40 percent for international data traffic outside of Europe, while Mercury charges a 100 percent data surcharge for carrying international data traffic outside Europe and the U.S. and 50-60 percent for Europe and the U.S. BT and Mercury do not completely adhere to the Euro-ISDN standard -- for BRI they use a variant of Euro-ISDN, and for PRI they give their subscribers a choice between Euro-ISDN and another ISDN standard.

International ISDN calls are available to many countries and are also marketed and distributed domestically by BT and internationally by Concert under the name Global ISDN. Analysts cite BT's high installation costs and connection charges for ISDN service as one of the major reasons for ISDN's slow growth. Analysts, however, cite that ISDN has never been popular among businesses because of the low prices in the U.K. for leased lines.

ISDN was languishing in the U.K. because neither BT nor Mercury was promoting it. This has changed dramatically in the past few years as consumers begin to understand the benefits that ISDN provides. Additionally, the popularity of the World Wide Web has resulted in an upswing in both PRI and BRI services. Large companies are now purchasing PRI despite the high installation fees and monthly charges. Consumers, not just corporations, are purchasing ISDN services, driven by a need for a faster and higher capacity connection to the Internet. ISDN's high-speed service solves the bandwidth access problems that users experience.

BT's public packet switching network, Tymnet, is now marketed as the Concert Packet Network. There are also public packet switching networks in the U.K. An example of a private network is Camelot, the National Lottery network, and HealthLink, a messaging service run for the National Health System. The market for frame relay in the U.K. is growing quickly as more and more users need better methods for interconnecting their LANs. Thames Water Utilities is just one example of a company benefitting from frame relay services. Thames is using frame relay to integrate data and voice services across its 5,500-user enterprise network. Energis, the new national telecom carrier, is using frame relay as its backbone for the entire network.

The main inhibitor to the growth of the ISDN market in the U.K. is cost. Although ISDN equipment prices continue to drop, the equipment is still too expensive for the average small business. However, the environment for ISDN in the U.K. is slowly changing, and as ISDN gains momentum and popularity, competitors will emerge. The equipment manufacturers are already facing competition, which will result in lower prices and more innovative products. Software and hardware companies have begun to form alliances to better market and distribute their products.

The shakeup in regulation of U.K. telecommunications services has been paralleled by an equally dramatic shakeup in the equipment sector. The U.K. equipment market was originally dominated by three leading switching and transmission companies -- Plessey, Standard Telephone (STC, originally a subsidiary of ITT) and the General Electric Company (GEC). Plessey and GEC's telecommunications interests were merged into a single company, GPT, in 1987 with the companies' other interests remaining separate. GPT was later acquired by Siemens. STC's history has been even more checkered. It was originally part of AT&T, but was sold to ITT in the 1920s an is now owned by Nortel. In addition to Siemens and Northern Telecom, Ericsson is also a major factor in the U.K. equipment market, where it is in partnership with the U.K. electronics firm Thorn-EMI.

E.11 Narrowband Services in Italy

The Italian telephone industry still bears some of the marks of the government-dominated industrial structure established during the Fascist period. The Italian national service provider, now called Telecom Italia, is owned by a state-dominated holding company called STET, which in turn is owned by the state holding company, IRI. Telecom Italia itself was created in 1994 by merging the hotch potch of state-owned telecommunications companies that had existed previously in Italy. The Italian government, however, is quite determined to privatize the Italian service provider structure by the end of 1997. As part of this privatization process, STET and Telecom Italia will be merged -- STET also owns various satellite and long-distance facilities not officially owned by Telecom Italia.

Italy charges more for carrying data on its ISDN networks than for carrying voice. However, Telecom Italia has placed considerable emphasis on deploying packet-based services for Italian-based businesses. It has offered X.25 and frame relay services in many cities across Italy for some time and is in the process of upgrading its infrastructure to increase its capacity for frame relay and introduce ATM services.

Italy has been behind some of the other advanced European countries in terms of deploying a public infrastructure based on advanced packet switching. However, in 1995 Telecom Italia began to construct a nationwide frame relay network using AT&T ATM switches. In early 1997 Telecom Italia announced that it had also selected Cisco to supply ATM infrastructure for its business data services including frame relay. In addition to AT&T (now Lucent) and Cisco, another equipment company with strong ties to Telecom Italia is Gandalf Digital Communications, which won a recent contract from Telecom Italia for its ISDN products. Italy also has a significant indigenous equipment industry.

E.12 Narrowband Services in Spain

The national carrier Telefonica is the dominant factor in narrowband communications in Spain. In addition, three of the major international alliances are active in Spain. Global One's partner France Telecom has been awarded a license to operate a national data network. Global One markets and distributes its products and services through its local office. AT&T's Unisource Services operates through its partner Telefonica, which has a monopoly over basic domestic and international telecom services.

Concert, the MCI-BT joint venture, operates through its partner, BT, which has a joint venture with Banco Santander to operate a data network and will shortly launch Spain's first frame relay network. The company is addressing the corporate market and sells the Concert series of products and services. Another factor in the market is Red Electrical Espanola, which provides telecom services to the electricity generating/distributing companies and boasts a digital broadband fiber network. In addition, Retevision is a state-owned organization and was the first company to receive approval to provide leased lines and to resell capacity on its infrastructure. Retevision will provide service in collaboration with Correos, the state-owned post office.

In many key narrowband technologies, as in other telecom services, Spain remains behind most EU countries. The number of corporate users of higher value-added telecom services is just a small proportion of the potential demand base. Only about 10,000--12,000 companies, out of a total of 1.1 million, use digital narrowband technologies of any sort. Small- to medium-sized enterprises account for 99.8 percent of all companies in Spain, and it is these companies who have been slow in adopting narrowband technologies.

Movement toward integrating ISDN into Telefonica's network began in 1980 with the plan for the gradual digitalization of the Spanish telephone network. ISDN was piloted in Madrid in 1989, with pre-commercial service in 1990 operating in several large Spanish cities. Testing of Euro-ISDN was begun in 1992 and was extended in 1993 to major business sectors in 14 provinces. ISDN was available in 70 percent of all cities in 1994 but was not available nationwide until 1995. By the end of 1998, Telefonica hopes to extend ISDN to all towns of more than 5,000 inhabitants. International ISDN is available with 13 countries, including the major EU partners, Australia, the U.S., Singapore, and Japan.

Since Telefonica did not introduce ISDN nationwide until 1995, it did not have the same problems as France and Germany in migrating thousands of people from the old national ISDN to the new Euro-ISDN standards. However, Telefonica is still working out several problems in its system. Some ISDN switches take over 10 seconds to setup a call unless they see a special end-of-number character, while others have no problems with phone numbers. Unlike France Telecom, Telefonica does not charge more for sending data through its ISDN lines. Since ISDN is treated as a basic service, no other company is allowed to offer a competing ISDN service. However, companies serving closed user groups within France have the ability to offer ISDN, especially if they own their own infrastructure.

Red-Uno is the public packet switching network in Spain. It will be merged into Unisource by the end of 1996. Although virtual private networks have been liberalized in Spain since 1993, competitors have had difficulty entering the market. As a result, there are only a few data communication providers in Spain. Telefonica only allows access to its network by mutual access agreements with other carriers. Telefonica's most important foreign competitor in this arena is BT's Concert Managed Data Services. BT offers data transmission services in partnership with Banco Santander and is a 6.31 percent owner of Airtel.

In 1993, Sprint International acquired a license to offer data communications services through its SprintNet services. As part of the Global One alliance it will merge its data packet, frame relay, and Internet network with that of France Telecom. Sprint currently has access nodes in Madrid, Barcelona, Bilbao, Valencia, and Seville and plans to extend access to all major cities in Spain.

Telefonica offers frame relay services through its Red-Uno packet switching network and through its Unisource Services alliance. The three other alliances offer frame relay public networks to their clients, especially those companies that want multipoint connectivity but do not fully use private lines because of their huge expense, or that need additional bandwidth for special applications from time to time. Another major user of frame relay in Spain is Banco Santander, the largest commercial bank in Spain. With the extremely high cost of leased lines in Spain, virtual networking solutions, such as frame relay, would seem to present a significant opportunity for both carriers and end users.

The Spanish telecommunications equipment market has traditionally been quite closed with Telefonica only giving approval for Spanish made equipment or to equipment from manufacturers in which it held an equity stake. This included Alcatel Standard Electrica, Citesa (also owned by Alcatel), the Spanish subsidiary of the Italian Telettra and a Spanish handset manufacturer called Amper. However, the market opened up as the result of both action by the Spanish government and by the EU. During the late 1980s and early 1990s, the Spanish equipment market saw a growing involvement by Ericsson, working hand in hand with its Spanish partner Intelsa. AT&T (now Lucent) also has major manufacturing facilities in Spain, but these facilities make chips rather than systems-level products. However, Telefonica has bought intelligent networking equipment from AT&T/Lucent and has a small share in that company's European equipment operations. Other equipment companies that have been active in the Spanish market through joint ventures with Telefonica include Corning (optical fiber) and Fujitsu (computers, rather than telecommunications equipment).

E.13 Narrowband Services in Denmark

Tele Danmark, the incumbent operator, is one of the least expensive service providers in the EU, for both business and residential customers and for calls of all distances. Some 61 percent of all switches are currently digital, with the final 39 percent expected to be converted by 1998, two years ahead of schedule.

Three of the four major international telecommunications alliances market and distribute their products and services in Denmark. Concert has a partnership with Tele Danmark to market its entire suite of products and services. Additionally, MCI markets its non-Concert products and services in Denmark. Global One markets and distributes its products and services through its local office. AT&T sells its products through a distributor.

ISDN is still in its infancy in Denmark, with only 5,722 BRA and 163 PRA lines sold since 1994. Tele Danmark charges only a minor surcharge for sending data through its domestic ISDN lines but charges a 50 percent premium for sending data to non-European countries. There are no data surcharges for sending data to European countries. Datex is Denmark's public circuit switching network, while Datapak is the public packet switching network. The Datex network was a joint development between the Nordic countries and was setup in the 1970s and 1980s. The Datex network forms one part of the Nordic Public Data Network (NPTN). Datapak became operational in 1993 and forms another part of NPTN. Meganet is a third packet switching network designed for high-capacity data traffic from 64 kbps to 2 Mbps. It is currently linked to Meganet networks in Switzerland, Sweden, Norway, and Finland.

Considering Denmark's size, it has a very sophisticated equipment manufacturing sector, with three particularly dominant companies: Nordisk Kabel og Trad (NKT), GN-Telematic, and Alcatel Kirk. In the context of narrowband equipment, the most important companies are probablyAlcatel Kirk, which manufactures PBXs, small business telephone systems and handsets, and GN-Datacom, which makes data transmission equipment. RC International developed packet switching equipment for the public network, but now makes UNIX hosts. Bang & Olufsen, best known as the producer of one of the world's highest quality audio and video entertainment systems, has also active in this business through its Dikon Systems Division, which is now 50 percent owned by Ericsson and has been renamed Diax Communications. Dikon/Diax has developed an ISDN switch and Bang and Olufsen also sells telephone handsets.

E.14 Narrowband Services in Finland

Telecom Finland is technologically advanced, with almost 100 percent of its customers connected to digital exchanges. In 1994, it introduced its ATM network and, in 1995, it completed deployment of SONET technology across its trunk network.

The first commercial ISDN service in Finland was begun in 1988 and is offered only by Telecom Finland. Unlike France Telecom, Telecom Finland does not impose a surcharge for sending data through its domestic ISDN lines, but charges a 0-60 percent premium for sending data to other countries, particularly to Asian-Pacific countries. Telecom Finland has no direct ISDN link to any of the Asian-Pacific countries and thus must pay fees to other PTTs to carry its traffic. Additionally, Telecom Finland is one of the few European countries that does not support data traffic through its "D" channel.

Datex is Finland's public circuit switching network, while Datapak is the public packet switching network. As previously noted, the Datex network was a joint development between the Nordic countries and was set up in the 1970s and 1980s. The Datex network forms one part of the Nordic Public Data Network. Datatie is the packet switching network for the 46 independent local telephone companies that form the Finnet Group. Datatie is the leader in long-distance data communications. It owns and operates a high-capacity digital network through which it offers X.25 and other packet switching networks. Telivo Oy, a subsidiary of the Imatran Voiman Oy, the state-owned power company, operates a packet switching network called PowerPak.

Telecom Finland began offering LAN interconnect services in 1989 and moved to a frame relay service in 1991. The market for LANs has grown substantially since they were first introduced. In late 1993, Telecom Finland implemented one of the first ATM data networks. Finland has one of the most competitive markets in the world, with prices for data transmission dropping by 90 percent in the last five years. Competition in Finland means that companies must continually offer new services or risk losing their clientele. This has allowed Finland to remain at the forefront of data communications technology.

The market for frame relay in Finland is extremely robust as more and more users need better methods for interconnecting their LANs. Competition in Finland means that new services are continually being offered by the carriers and at extremely attractive prices. Frame relay provides a competitive way for the Finnet Group to supply customers with services. The Finnet Group has implemented an 87-node network based entirely on Newbridge Networks's LAN interconnect services. Other companies that have implemented frame relay solutions to solve data communications problems are Kemira Oy and Telecom Finland. Kemira Oy is working with AT&T to implement a frame relay network for order processing, production planning, financial reporting, and electronic mail between its subsidiaries in Finland, Sweden, Denmark, the Netherlands, Belgium, the U.K., and the U.S.

In spite of its small size, Finland has been at the cutting edge of developing new narrowband and broadband communications technologies. This country's relatively competitive markets are a model of how narrowband markets may develop in other parts of Europe. Finland's small size may lead one to expect that the Finnish equipment market would be supplied from outside the country. In fact, the country has its own world class equipment company, Nokia, along with important subsidiaries of Ericcson, Siemens, and Alcatel. Most telecommunications equipment installed in Finland comes from these four companies.

E.15 Narrowband Services in Norway

Telenor, the national carrier, is one of the strongest incumbents in Europe: it has achieved low prices, is becoming extremely efficient, and has a market focused orientation. Nearly 70 percent of its switches are digital, and complete digitalization will be completed by 1998. Telenor has seen a substantial growth in ISDN lines and expects to have nationwide coverage by the end of the year. Telenor makes considerable use of satellites and is an active member of the international satellites consortia.

Telenor is a partner with the other incumbent telecom operators in Scandinavia in Datapak and Datex, but believes that these two networks have not been sufficiently developed because of the popularity and low costs of leased lines and virtual private networks, allowing businesses to create their own private networks. ISDN was first piloted in January 1990 in four major Norwegian cities. Both BRA and PRA services were offered in each of these cities. In 1992, ISDN access was extended to four other cites and now is available on a regular basis. Telenor expects ISDN coverage to be nationwide by the end of 1996.

Although Norway's low density population has delayed the deployment of ISDN in Norway, this same factor may actually be a driver for ISDN usage in Norway, since there is a need to provide high quality communications to and from homes and businesses in sparsely sparsely populated areas. ISDN may have an influence in the northern part of the country, where jobs are extremely scarce. ISDN use in this region can have a major impact on job growth. For the first time, job opportunities could stay where the labor force is and not require job seekers to move.

The market for frame relay in Norway is extremely robust as more and more users need better methods for interconnecting their LANs. The dominant supplier of Norway's public switching market in recent years has been Standard Telefon of Kabelfabrik (STK), which is one of the many former ITT subsidiaries that now belong to Alcatel. In addition to this company Northern Telecom has an involvement in the Norwegian PBX market through its holding in G.A. Ring.

E.16 Narrowband Services in Sweden

The major carrier in Sweden, Telia, carries out its operations in eight independent telecom areas or regions, each of which are responsible for its own financial results. Telia is one of the most efficient incumbent operators in Europe and has among the lowest prices, as measured by the OECD price baskets. Telia has invested heavily in modernizing its network and will complete its digitalization of all exchanges by 1997. Its data communication services include Telelink (a dedicated leased line service offering analog and digital transmission) and Telia Duo and Telia Multi, its BRA and PRA ISDN services.

Tele2 is the only authorized competitor for all telecom services in Sweden It is a private company owned by C&W (40 percent) and Kinnevik, a local Swedish company (60 percent). Tele2 began by offering only X.25 packet switching services throughout Sweden using the fiber backbone of the Swedish railways. Tele2's data network service includes Flex 25, a global packet switching service, and SwipNet, an Internet access service. In late 1992, Tele2 added leased lines, followed by national telephony in October 1994.

There are many competitors within Sweden for the data communications needs of businesses. All four alliances are extremely active here and offer their full suite of data communications products, from simple packet switching networks to frame relay services. Telia is one of the equity partners in Unisource services; in fact, all its international data communications, from X.25 networks to frame relay, are marketed and distributed through Unisource. Global One is perhaps the weakest alliance in Sweden.

ISDN trials in Sweden began in 1989 but ISDN was not commercially released until 1993. Even today, many regions of Sweden cannot access ISDN lines. Furthermore, ISDN services will not be fully integrated into the public switched telephone network until 1997. Three main types of ISDN services exist: Telia Duo, for small companies; Telia Multi, for large offices; and customized ISDN, for individuals with special requirements. Domestic ISDN services are managed by Telia, but international services are marketed and distributed by Telia's alliance partner, AT&T Unisource Services. Telia does not impose a surcharge on ISDN data use, unlike its neighbor Finland, and it plans to extend its ISDN service worldwide by forming correspondent relationships with other carriers to carry its international ISDN traffic, but often these agreements work only one way. Although Telia is the lone ISDN provider in Sweden today, Telenordia, Tele2, and Telegate plan to provide ISDN in the near future.

As in other parts of Scandinavia, the deployment of ISDN in Sweden should help communications in the more remote parts of the country. The current lack of ISDN infrastructure in Sweden has limited ISDN's use mostly to large multinational corporations. Once the infrastructure is in place, more companies will begin using it because of its ability to connect a small branch or home office to a remote network and function as if it were in the same room.

The market for frame relay in Sweden is growing quickly as more and more users need better methods for interconnecting their LANs. Concert, Telia and its Unisource partners, Telia2 and its Cable and Wireless partners, as well as others offer frame relay service to large multinational corporations. For example, SKF Group, a large manufacturing concern in Sweden, uses Concert's frame relay services for all its data communications needs and to connect its offices in Norway, Denmark, Switzerland, and Spain. SKF has used Concert's frame relay services to replace its slower leased X.25 lines. SKF has also integrated its vast packet switching network into its new frame relay network.

The Swedish PTT has traditionally manufactured much of its own equipment. However, although all the major narrowband equipment vendors are active in the non-captive Swedish market, this market is dominated by its domestic giant, Ericsson. It has a dominant share of many equipment markets in Scandinavia and a strong presence in many European equipment markets, especially switching and cellular telecommunications. It is also an important factor in some developing countries, especially in Latin America.

E.17 Narrowband Services in Belgium

Belgacom, the national carrrier, is a private carrier 51.1 percent owned by the state and is the monopoly provider for all domestic and international basic services and infrastructure. It has rapidly modernized its network and will have digitized 88 percent of its switches by the end of 1996. TF is a corporation owned by the government of Flanders that has requested permission from the Belgian regulator to become a second telecom operator during 1997. TF plans to join Belgium's 40 cable television networks, which have a 95 percent penetration, and offer switched services in Flanders and then nationwide. U S West has an option both to purchase 25 percent of TF and to operate all TF telecom services.

The first commercial phase of ISDN in Belgium was in 1989. Belgacom offers both BRI and PRI ISDN services to its customers. However, the use of PRI services in Belgium is very low, partly because it is higher priced than in most other countries in Europe. Belgacom has extended its ISDN service worldwide by forming correspondent relationships with other carriers to carry its international ISDN traffic, but often these agreements work only one way. Moreover, international ISDN connections tend to be fairly rudimentary -- a number of the gateways between European countries do not even support SS7.

Belgacom provides switched service over its DATEL network and packet switching over its Digital Communication Service (DCS) network. DCS has nationwide coverage and consists of 25 interconnected exchanges. Access to the network is via direct connection, dial-up connections, or the DATEL network. Additionally, Belgium offers its Megaline network, which provides high-capacity data transmission and offers the option to create closed user groups.

Belgacom is in the process of creating a public frame relay network for all of Europe and has selected Newbridge Networks's suite of frame relay and network management products. The new network will connect directly to Belgacom's international network and will offer customers a unified frame relay solution. Other competitors in the frame relay market in Belgium include Concert, Global One, AT&T's Unisource Services, Telecom Finland, and a host of other communication companies. Because Belgium's capital Brussels is the home of many EU institutions, this country has many hundreds of international organizations, all needing a cost-efficient method of connecting their LANs together or connecting to a WAN.

Belgium has a well developed equipment manufacturing sector, but most of the facilities are owned by non-Belgian companies. The most important company is the Bell Telephone company. Bell Telephone has traditionally been a major supplier of switching and other equipment to the Belgium national provider and is also a major source of export earnings for Belgium. While Bell's focus has been on the public network, ATEA has been a domestic source of private network equipment, including terminals and PBXs. ATEA was originally a GTE subsidiary, but was sold to Siemens in the mid-1980s. Other major international companies with a stake in the Belgian equipment industry are Philips and Ericsson.

E.18 Narrowband Services in the Netherlands

KPN, the national carrier, is well placed to take advantage of the opening of the European telecom markets to competition in 1998. It faced competition earlier than most operators in continental Europe, is one of the most efficient European operators, and has the most balanced tariffs in Europe, offering one of the lowest tariffs to business customers. The high digitalization rates of the Netherland's local exchange switches (65 percent) and the spread of SS7 mean that this country is able to offer customers supplementary services, such as call waiting, forwarding, and call return. KPN is also one of the founders of the Unisource consortium.

During 1993, the market for data communications and value-added service was opened to competition, and a number of companies have established network centers to provide better national and international services. Commercial introduction of regular ISDN service began in mid-1993; however, ISDN was not available nationwide in the Netherlands until 1996. KPN does not impose a data surcharge for domestic or international traffic. International ISDN calls are available to many countries and are also marketed and distributed by the various alliances.

The market for frame relay in the Netherlands is growing quickly as more and more users need better methods for interconnecting their LANs. MCI markets its own brand of frame relay as well as its Concert brand. Global One and Unisource Services also offer frame relay.

Vertis, the information technology subsidiary of Avebe, has recently completed a private frame relay network to carry voice, data, and LAN interconnection traffic. Vertis's future network plans are to expand its frame relay network to cover its 25 operations all over the world, rather than rely on a combination of ISDN and leased lines to connect its offices. Another example of frame relay in the Netherlands is the Amsterdam police department, which recently upgraded its 35-site data network (two communications centers and 33 offices) to frame relay, since this technology promised better performance in times of emergency service where network security, reliability, and availability are crucial.

The dominant factor in the Dutch telecommunications equipment market is Philips, which has always had strong ties to the national carrier. Prior to the digitalization of the public network in the Netherlands, Philips supplied about 70 percent of the switches in the network with the balance coming from Ericsson's Dutch subsidiary. Ericsson and Philips were also the main suppliers for the initial deployment of digital switches, but the digital switches came not from the main switching operation of Philips, but rather from Philips joint venture with AT&T, which was known as APT. In addition, the Dutch government insisted that the PTT found a third supplier for switching gear, the company chosen being Alcatel.

E.19 Narrowband Services in Russia

The major carriers in Russia are still the state-owned phone companies which lease international capacity from Rostelcom. Because of the relative poverty of the Russian telecommunications infrastructure, foreign firms have sorted and found market opportunities in constructing new infrastructure and starting new carriers.

ISDN is available in Moscow but not in any other cities. Combellaga, Comstar, and Sovintel provide this service. BT and Sovintel established the first international ISDN connection from Moscow to the U.K. However, by the end of 1996, Sprint will have finished work needed to begin offering ISDN service in six large cities (Moscow, Novosibirsk, St. Petersburg, Ufa, Irkutsk, and Ekaterinburg). Three additional cities will come online by 1997 as well as international ISDN links. Bringing ISDN to cities outside of Moscow is problematic, primarily because of the lack of fiber and digital switches in the public switched network. Sprint plans to initially link the six cities by satellite, but this requires setting up a separate connection from Moscow to each of the five other cities. More cities will come online as soon as the fiber backbones are laid.

Sovintel ISDN service offers digital data communications, videoconferencing, fax, file transfers, routers, new databases, and digital audio broadcasts to the numerous multinational corporations based in Moscow. Sovintel's network handles the data and voice communications needs of 50,000 business subscribers.

In Russia, packet switching systems are witnessing explosive growth as more Western businesses open operations in Russia. Sprint has been the leader in providing X.25 networks, with more than 100 data network access centers. Sprint also provides Internet access to numerous organizations in Russia. In 1990, Sprint and the Central Telegraph of the Russian Ministry of Communications created the first packet switched data network in the former Soviet Union. Today, the vast majority of its customers are Russian organizations communicating with remote offices and trading partners within Russia.

AT&T has created a partnership with the Russian Telecommunications Network (Rosnet) to build a national public data network; the network supposedly now serves all regions of Russia as of the end of 1996. The Russian Federation has designated this network as the preferred supplier of telecom services to government agencies. This partnership gives AT&T a significant market advantage over its competitors and a substantial share of this large and growing market. Rosnet and AT&T will also offer Internet access, EDI, E-mail, and frame relay services.

Frame relay is just beginning to be implemented in Russia. Soyam Teleport, a joint venture between Cable and Wireless, IAS, and SFMT, offers frame relay in 13 cities throughout Russia. Sprint and its partner Central Telegraph also offer frame relay, but only in three cities: Moscow, Novosibirsk, and St. Petersburg. Soyam Teleport is using frame relay as its backbone technology for its LAN interconnect service, which it markets to banks and other financial institutions. It currently has about 3,000 subscribers. In February 1996, the Russian government issued a tender to construct a new data communications network based on X.25 and frame relay technology with a planned evolution to ATM. The network will be constructed from the infrastructure used by 19 of the regional railway systems and is expected to take three years to build.

Outside of the military sphere, the Soviet Union had almost no capabilities to design and manufacture advanced equipment. In the past, much of the equipment manufactured for civilian use was defective and, beyond some simple terminal equipment, export restrictions from countries in the free world meant that the installed base of telecommunications hardware in the Soviet Union was quite ancient. For example, when the Soviet empire collapsed, copper wire laid by Ericsson in 1907 was still being used. In the 1980s, the Soviets bought equipment from several East European countries. Major orders for handsets were filled by a plant in Sofia, Bulgaria and what was then Czechoslovakia also supplied handsets. The NEK plant in East Germany was a major supplier of switching equipment. The Soviets also got more advanced equipment built under license from western companies in Hungary as well as a limited amount of equipment bought directly from western firms. Notable among these were Nokia (Finland) which supplied both switches and cables and Thomson CSF (France) which also supplied switching equipment. The 1980s also saw the development of more sophisticated equipment by the Soviets themselves. However, most of the plants building this equipment appear to have been in the now-independent Baltic Republics.

E.20 Narrowband Services in Hungary

Because of the age and quality of the current installed infrastructure, MATAV, the national carrier, is able to offer few special services to its subscribers. However, MATAV has been rapidly modernizing its network; 41 percent of its lines are already digital. In addition, local telephone services have been appearing that have the necessary infrastructure to challenge MATAV's dominance once its exclusivity on long-distance expires in 2005. In addition, Utility providers will shortly pose a significant threat to MATAV's dominance in Hungary. Many of them operate private networks that compete with MATAV for customers.

A series of laws passed in the early 1990s relaxed state control of commercial agreements and allowed for repatriation of profits. Northern Telecom was the first company to form a joint venture in Hungary to manufacture and supply digital switches to MATAV and to other business customers. A number of other ventures have since been formed with foreign companies, including Siemens, Ericsson, and U S West, for equipment manufacture and service provisions.

The construction of a nationwide ISDN infrastructure was recently completed, and within the next few years, MATAV will begin providing nationwide ISDN services. MATAV began ISDN trials in Budapest in early 1995 and implemented ISDN throughout Budapest in 1995. By the end of 1996 ISDN was available in all Budapest telephone exchanges and in the main county seats. MATAV has extended its ISDN service worldwide by forming correspondent relationships with other carriers to carry its international ISDN traffic, but often these agreements work only one way. International ISDN connections tend to be fairly rudimentary; a number of the gateways between European countries do not support SS7. MATAV imposes a 40 percent data surcharge for domestic or international traffic because it claims that since it routes its data over special circuits, its costs are higher.

Please, Hungary's high-capacity packet switched data network, was completed in 1993 and provides access to over 20 provincial exchanges.

X.25 networks are extremely popular throughout Hungary. HUNGARNET's network uses both X.25 and TCP/IP technology with many segments owned by universities or groups of universities. Internet technology primarily uses packet switching as a means of data transmission. There are over 50 commercial Web servers, 10 government Web servers, and 15 Web servers for research centers. Budapest Bank installed one the country's first integrated private data and voice networks and is the largest frame relay installation in Hungary. A total of 25 offices have been connected. The network interconnects Budapest Bank's LANs and maximizes communications between the LANs and WANs.

Hungary has a small but significant equipment manufacturing sector that has been centered around two firms: Budavox and BHG. These companies have provided equipment that is of sufficient quality to export not only to other eastern European countries but to western European countries, including Greece, Italy and the U.K.

E.21 Narrowband Services in Poland

The national carrier is Telekommunikacja Polska (TP). MCI has a partnership with Telbank, the national digital network for Polish banks and financial institutions, but has lately expanded its reach to include all commercial companies. Telbank markets and distributes the Concert packet services product suite. Global One markets its products and services through Polska Telefonica, in which DT owns a 25 percent stake.

Poland has no access to ISDN or frame relay, just packet switching products. Last year, Telecom Polska began operations on its new digital data network. Before this network was installed, customers had to lease either a 2 Mbps circuit or a point-to-point voice grade circuit. Polpak was the first public X.25 data network and has been operated by TP since 1992. KDD offers its Venus-P packet switching network in addition to TP's Polpak. Packet switching is extremely popular throughout Poland. Presumably this is in part because there are hardly any alternatives.

Poland will soon be implementing ISDN trials. The government hopes to have 10,000 terminals connected either to a switched data network or to ISDN. It will also provide business and regional administrative centers with connectivity. It also seems likely that frame relay will emerge as an option for corporate connectivity within a short space of time.

Under the Communists, all telecommunications equipment manufacture was done by a state monopoly called United Telekom. However, in the late 1980s this company was split into three competing organizations, which, in some cases, have begun joint venture with western firms. Other equipment firms that have been involved in the Polish market are Ericsson, which has worked with Telecom, along with AT&T/Lucent (U.S.A.), Italtel (Italy) and Samsung (South Korea).

E.22 Narrowband Services in Japan

There are five carriers in the narrowband marketplace in Japan: Nippon Telephone and Telegraph (NTT), Daini Denden (DDI), Japan Telecom (HT), Teleway Japan (TWJ), International Telecom Japan (ITJ), International Digital Communications (IDC), and Kokusai Denshin Denwa (KDD). Additionally, all four alliances are active in Japan.

Japan was the first country to start large-scale implementation of ISDN in 1988. NTT has installed pay phones equipped with ISDN across the country and plans to rollout a $450 billion ISDN-based network by 2015. Currently ISDN is simply an overlay to the existing digital network. Enterprise networks based on ISDN are not as popular in Japan as in some other countries because of the high price KDD and NTT charge for ISDN circuits.

X.25 remains the dominant technology for connecting far-flung sites over a wide-area. X.25's proven error-checking and routine abilities make it almost indispensable in areas where telecom infrastructure is poor, as is the case in many countries in the Asia/Pacific region, although not in Japan. Packet switching is available nationwide in Japan and is offered by more than a dozen operators. The dominant carrier by far is NTT, but KDD is said to have the best service and quality rating among network managers.

All four major service providers in Japan offer frame relay as do a number of the value- added networks. Additionally, each operator has linked their domestic frame relay offerings with a multinational carrier that can provide access to international frame relay networks. More than a dozen companies have applied for and received a license to sell frame relay.

Japan has one of the most powerful telecommunications equipment industries in the world. This industry includes NEC, Fujitsu, Oki and Hitachi, companies that got big through their ties to NTT, which has never been allowed to manufacture its own equipment. These ties have been weakened to some extent by liberalization which has led to NTT seeking to procure from smaller firms. There has also been an effort to get NTT to procure from overseas companies. However, it is not clear how significant this effort really is, although imports of telecommunications equipment into Japan have been rising. Despite the persistence of stories about tariff and non-tariff barriers to importing high-tech goods into Japan, most of the major international switch and transmission system vendors have a presence in the Japanese market.

E.23 Narrowband Services in South Korea

In 1982, DACOM was established to accelerate developments in data communications. It was originally 33 percent owned by Korea Telecom, but in 1993, Korea Telecom was forced to transfer its ownership stake to the government. Furthermore, KT was forced to compete directly with DACOM in international voice services. In January 1996, DACOM was permitted to offer domestic long-distance in competition with the incumbent KT. As a result, there now exists a duopoly in both international and domestic long-distance service.

Three of the four alliances are active in Korea. Concert's partner, Samsung Data Systems, markets and distributes its entire suite of products. BT, Concert's partner, has an alliance with Datacom. Global One markets and distributes its products and services through its local office and also through Korea Telecom (KT) and DACOM. AT&T World Partners has an alliance with Korea Telecom to market its products and services.

Korea launched ISDN trial service in 1991 in three cities (Seoul, Daejeon, and Cheju) and then opened commercial service at the end of 1993. In 1994, ISDN service was expanded to 11 cities. International ISDN services are available from eight countries. Both DACOM and Korea Telecom heavily promote ISDN for multimedia and Internet usage. Two other companies marketing applications that use ISDN services are Teleglobe and Hyundai Information Technology (HIT). Teleglobe and Korea Telecom jointly market a videoconferencing service for businesses with clients or branch offices in Canada and Korea. ISDN technology provides correspondents with cost-effective, usage-based voice, data, and images. HIT markets ISDN and applications that use ISDN throughout Korea. HIT was formed to help the Hyundai group meet the challenges of emerging technology by developing new business structures, improving productivity and lowering costs through use of information technology.

Packet switching is available nationwide and is offered by two operators. Both Korea Telecom and DACOM have public packet switched networks. DACOM provides high- speed data transmission and LAN interconnect services. It also can integrate voice and data transmission over the network. Open competition between DACOM and Korea Telecom for domestic X.25 services has resulted in high-quality service and low prices. W. R. Grace, a U.S.-based chemical company, is a beneficiary of this high-quality service. It uses an X.25 network to link its office to its other international locations throughout Asia, rather than migrate it to frame relay as it did in other countries.

Both DACOM and Korea Telecom sell frame relay. DACOM's frame relay service is linked to Global One, while Korea Telecom is linked both to Global One and to AT&T's World Partners. Korea Telecom claims a savings of as much as 70 percent for companies switching to frame relay. Korea Telecom appears to have the edge on DACOM on service and quality of frame relay, with 20 nodes to DACOM's three. DACOM's frame relay has the advantage because it can transmit at speeds up to 2 Mbps, while Korea Telecom, which runs frame relay over its X.25 network, is limited to 64 kbps.

Korean industry has attempted to reproduce the path to success followed by the Japanese and its equipment industry is dominated by a few major industrial conglomerates, including: Hyundai, Samsung, LG (the former Luck Goldstar), Daewoo and Sunkyong. Until recently, telecommunications equipment was a relatively minor output for these companies. Despite this sudden aggressiveness by the indigenous equipment industry, or perhaps because of it, the Koreans announced, as this report was going to press, that their telecommunications equipment market would now be open to European manufacturers. In fact, Ericsson has already signed contracts worth $30 million with Korea Telecom for AXE switches and Intelligent Network (IN) equipment.

E.24 Narrowband Services in Taiwan

Telecommunications in Taiwan is still a monopoly service, and, therefore, there is only one major player. However, three of the alliances are present in Taiwan.

Taiwan began ISDN field trials in 1989; however, commercial operations did not begin until 1994. Taiwan has a cooperative agreement with MCI for access to international ISDN services. Since ISDN is still in its initial phase of commercial deployment, not all cities in Taiwan have access to ISDN services. If one uses other Asian-Pacific countries to measure the potential for ISDN's popularity in Taiwan, then the outlook is very positive. Over 30 percent of companies in the Asia-Pacific region expect to integrate ISDN into their networks.

In Taiwan, X.25 remains the dominant technology for connecting far-flung sites over a wide-area. Packet switching is available nationwide and is offered by two operators. PacNet is the public packet switching network, but it is only available at low speeds. PacNet's service, dependability, quality, and availability are above average for the region. There are also private X.25 networks operating in Taiwan. For example, W.R. Grace, a U.S.-based chemical company, owns a private X.25 network to link its offices in Taiwan to its other global locations.

Although the first frame relay network in Taiwan was completed in June 1993 with six access points, frame relay is just beginning to become popular. The Taiwanese PTT has a small frame relay network consisting of only four nodes. This network contrasts sharply with the network constructed by the Taiwanese Telecom Network Service (TTNS). By December 1996, TTNS will have completed its frame relay backbone network. Its network will tie seven cities through T3 lines.

Competition for the provision of international X.25 services is relatively healthy, but since VAN operators are prohibited from connecting their networks to the customer site, they cannot guarantee the reliability of their network. VAN operators must trust that the local telecom provider will be able to quickly trace and correct service outages. Most operators do not have this trust.

Taiwan has become a major location for small electronics companies, although it is not a source of much sophisticated telecommunications equipment. Nevertheless, many PC boards -- including communications boards -- are made in Taiwan and one of Taiwan's larger electronics companies -- Sun Moon Star has been manufacturing and exporting small business telephone systems.

E.25 Narrowband Services in Singapore

Singapore Telecom (ST) is the national carrier for basic telecommunication services but claims that even though it is the only provider in Singapore it faces competition in every other commercial center of the world, particularly in Hong Kong. There are 34 independent VANS providers, with approximately 24 of these service providers being foreign owned. Many VANS specialize in providing communications services to multinational companies with offices and factories in Singapore. Communication services are provided over dedicated leased lines.

Singapore's telephone exchanges have been linked by optical fibers since 1987. The digital services that Singapore Telecom offers include DigiNet and ISDN. Other narrowband services include X.25, mobile data, and frame relay services. DigiNet is a private digital network service that provides users with the capabilities and reliability unattainable from analog voice or data communications. Recently, ST has carved out a new network for data communications. This enables users to gain high-quality transmission, rerouting or reconfiguration at short notice, and transportation of high volume, time-sensitive information at low cost. Major users include various government departments, statutory boards, and companies in the banking, finance, and information industries.

ISDN in Singapore is heavily targeted to small- and medium-sized businesses, medical centers, the government, and the general public. There is no competition for ISDN services, because ISDN is viewed as a basic service and thus is the exclusive (monopoly) right of Singapore Telecom. Singapore Telecom has correspondent agreements with 25 other nations to interconnect its international ISDN service. ST also has arrangements with the major alliances, such as Global One, World Partners and Concert, for them to carry ST's ISDN services. SingNet has offered both BRI and PRI ISDN access to customers since May 1996 and to customers in the trial phase since November 1995.

In Singapore, X.25 has been losing ground against ISDN, DigiNet, and frame relay. Packet switching is available nationwide and is offered by two operators. Telepac is the public packet switching network; however, it is only available at low speeds.

Singapore does not have a domestic frame relay service, only an international one. International frame relay is quite strong because of the thousands of multinational companies located in Singapore.

E.26 Narrowband Services in China

In 1993, China had only about 1,700 data communication users, but this figure is now above 100,000. Since 1993, China has established ChinaPac, ChinaDDN, and China Net. By the end of 1995, many of these companies built applications systems by taking full advantage of the public data networks.

ChinaPac was created in 1993 after a decision that the current public data network, China National Public Data Network, could not handle future Chinese telecommunications needs. It did not become operational until February 1994. ChinaPac is intended to be the major public data network backbone in China and covers all provincial capital cities. By the end of 1996, ChinaPac will have 120,000 data communications network users and will cover all Chinese counties and some advanced townships. Investors in the Guangdong Province have poured money into the fixed assets of ChinaPac and DDN. This has allowed the switching capacity to expand to all cities and counties of the province as well as some townships. ChinaNet is China's newest public data network, opened June 1995. It began operations in the same year, and now has subscribers in over 200 cities across the country.

The first national ISDN trials began operating in Guangzhou in June 1995. The network offers teleconferencing, video-on-demand, home shopping, and multimedia. The sophisticated Digital Data Network (DDN) will be the backbone for the ISDN network of the future.

In China, X.25 is extremely popular and is growing rapidly as more and more people are provided with the means of accessing the public data network. Already ports have grown to 110,000 (140,000 expected by 12/96) and users to 100,000, expected to climb to 120,000 by the end of 1996. Also, by the end of 1996, over 3,600 cities will have access to one of the X.25 networks. Interconnection of China's public data network and the Internet are in the planning stage. Public packet switching is available nationwide and is offered by two operators, ChinaPac and Jitong. Other large players are Sprint, Infonet, and many VANS. Additionally, Sprint also provides EDI, E-mail, and Internet access to its various global clients.

Numerous VANS are increasingly becoming available throughout China, but their service varies from region to region, or county to county, with the most sophisticated VANS available only in China's largest cities. Detailed statistics are difficult to obtain, because most VANS are new and also because foreign companies are not legally permitted to sell products in China. The available data do suggest that the sector is growing strongly.

The Golden Bridge portion of the Golden Projects is the advanced networking system to be used for all the other projects that fall under the Golden Projects umbrella. Golden Bridge will establish a nationwide ISDN, frame relay, and X.25 network composed of a backbone network of optical cable, satellite systems, and digital microwave equipment. It will also interconnect state committees and ministries, 30 provinces, municipalities and autonomous regions, and 500 key cities, as well as major state projects, including 1,000 large enterprises, to form the China National Economic Information Network. Golden Bridge will also interconnect with ChinaPac, DDN, and the Public Switch Telephone Network.

As suggested above, the Chinese have frequently looked to western firms to supply their telecommunications infrastructure. In the past few years, companies such as Lucent, Motorola, and Nortel have all been involved with installing wireless systems. Lucent, in particular, has a history of involvement with the Chinese that goes back to the 1980s, when as AT&T it began manufacturing telephone handsets in a joint venture in China. Lucent has also supplied switches to the Chinese public telephone network and, a few years back, signed a $100 million joint venture contract to upgrade a switching systems manufacturing operation in northern China. The other partners in the JV include China International Trust and Investment Corp (CITIC), Shandong Posts and Telecommunications Administration, China Electronics, and Hisense Electronic.

E.27 Narrowband Services in Australia

Telstra is the dominant carrier in Australia and is 100 percent owned by the government. Telstra provides the following data communications products: Austpac is the public packet switched data network in Australia. Transcend is the old packet switched network and is mainly used for booking, inventory control, merchandising, betting, and some government services. It transmits at slow speeds of 1,200-2,400 bps. DDS Fastway is an enhanced replacement for the Dedicated Fastway service offered previously. It is a full fractional E1 leased service providing speeds from 64 kbps to 1,984 kbps.

Telstra offers two frame relay services, national and international. In addition, Telstra is an affiliate of AT&T WorldPartners and offers access to the Worldsource frame relay service, as well as Infonet's InfoLan and Global One's frame relay service, to corporations. Carriers who offer domestic frame relay complained to Austel that Telstra's tariff and interconnection fees were pricing them out of the frame relay market. Austel concluded that Telstra's national frame relay tariff "has, or is likely to have, the effect of materially and adversely affecting the development of commercially sustainable competition" and is forcing Telstra to revise this tariff.

Telstra offers BRI and PRI ISDN access. Australia has its own national standard, which is incompatible with the European ISDN standard. It has correspondent agreements with other international carriers, e.g., MCI, to interconnect its international ISDN services. Telstra's switched digital services are used to provide customers with access to overseas ISDN. There is no competition for ISDN services because ISDN is viewed as a basic service and thus the exclusive (monopoly) right of Telstra.

In Australia, X.25 remains the dominant technology for connecting far-flung sites over a wide-area, although frame relay is becoming more popular. Telstra operates a nationwide X.25 service, with competition in some areas by Optus. In addition to the domestic public X.25 networks in Australia, there are international public networks including SprintNet, Infonet and LDDS WorldCom, and private X.25 networks.

Domestic frame relay services are available from five operators: BT Australia, Q-Net Australia, Telstra, Optus, and AAPT. Domestic frame relay is usually supplied by operators who actually own the cable in the ground; however, to extend domestic frame relay service to international locations, a provider must either purchase leased lines from the national service provider, such as World Partners, Concert, or Global One. International frame relay is extremely strong in Australia and is provided by five carriers: Telstra, Optus, AAPT, BT Australia, and PPC Communications. MCI's Hyperstream frame relay is also used throughout Australia.

E28. Interregional Activities

The key markets for narrowband services for interregional carriers and VANS are financial, insurance, manufacturing, pharmaceutical, industrial, health, government, and service industries. Basically any large multinational corporation with branch offices, salespeople, or remote users based in other countries need VANS, as well as companies wishing to use EDI for trading and business purposes. There is fierce competition among the IVANS and interregional carriers for customers.

A general description of this report is also available online.

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