Giving away access set to net increased ad revenue

SINGAPORE - What industry would spend hundreds of millions of dollars developing products and services and then just give them away?

Free-to-air television is an obvious example and telecommunications, led by a growing number of internet service providers, is about to follow.

The reason is that by giving away access and other services, internet service providers and site hosts can attract users to revenue-generating advertising. At the moment sluggish internet response times are turning off potential viewers. But that will change when the 56Kbps modems that provide most people with their internet connection give way to broadband access in less than four years' time.

By then, demand for moving picture type advertising will support a slew of high-speed applications that will turn business marketing models upside down, often making it profitable to give products and services away, says Bill Allard, a marketing vice-president with Lucent Asia Pacific.

Speaking at a conference on the broadband revolution in Singapore last week, Lucent executives said the demand for high-speed data and internet services was already putting extraordinary pressures on telecommunications companies - incumbents and new entrants alike - who must find ways of managing the convergence between conventional voice telephony, television, computing and programme content.

Each of those makes quite different demands. While consumers take the high bandwidth used to deliver television for granted, they are reasonably forgiving when there are momentary breaks in service. Not so telephony, where network outages are measured in hours, and more likely minutes, per decade.

Reliability, meanwhile, has never been the computer industry's forte, but when computer systems are running, they can process massive amounts of information and get the answers right.

The challenge for the telecommunications industry is to get the voice, video and computing components of the equation right.

To do so requires extension of high-capacity fibre optics further into networks, while incumbent telephone companies have been quick to adopt ADSL. which expands the bandwidth capacity of existing copper networks.

According to Lucent's Paul Higgs, the telecommunications companies will soon outsource not just IT functions, but the actual management of their networks.

"The traditional incumbents have been very good at managing their own networks throughout their life, but the complexities are now driving them to seek outside help," he said.

Mr Higgs' observations come with a measure of self interest; he is executive vice-president of a Lucent Asia Pacific division set up expressly to provide network management.

Lucent believes that 80 per cent of the exploding number of new entrants over the next three to four years will opt to outsource management of a substantial part of their operations.

* Richard Braddell travelled to Singapore courtesy of Lucent Asia Pacific.