ITU Telecom World 2006: A Robust Outlook

At the U.N. forum in Hong Kong, China's booming markets and the explosion in high-speed networks globally are creating plenty of optimism

At the last ITU Telecom World confab held in Geneva back in 2003, the mood was decidedly grim. After all, the industry was still reeling from overcapacity problems, a deep profit recession, and massive layoffs from the bursting of a global telecom bubble in 2000. Only a year earlier, the U.S.'s No. 2 long-distance carrier, WorldCom, had gone bust under the weight of $40-billion plus in debt in the largest bankruptcy in U.S. history and had been nailed for massive accounting fraud.

This time around, for the 2006 ITU global gathering that kicked off Dec. 2, the world's biggest telecom companies, handset purveyors, equipment makers, and government regulators have shifted the venue for the first time from Geneva to Hong Kong.

The Geneva-based ITU (or International Telecommunications Union) is the United Nations agency focused on information and communication technology issues. And the industry outlook is far brighter, what with the rise of China and India, big spikes in global mobile phone usage, and the recent rollout of wireless technologies and next-generation, high-speed networks.

Shift of Locale

Mobile phones and wireless networks now reach about one-third of humanity, notes Yoshio Utsumi, Secretary General of the ITU. "There were more than 2 billion mobile phone users in 2005, and it is possible to foresee that 3 billion users will be reached by 2009," he said. On top of that, the rapid extension of broadband networks is also reshaping lifestyles and corporate business practices.

Worldwide, about 215 million consumers use some sort of broadband network to retrieve (or increasingly generate their own) content on the Internet, while 60 million subscribers, mostly in Asia, use mobile broadband networks.

It's no surprise the ITU has taken its event to Hong Kong, given the startling rise of China's Internet user base and mobile phone markets. "China is now the world's largest market for fixed-line and mobile phones, and it will soon overtake the U.S. for broadband and Internet" users, according to Utsumi.

Olympian Task

The telecom sector has also become a surprisingly big part of the mainland economy, accounting for about 7.2% of total gross domestic product, said Chinese Information Industry Minister Xudong Wang.

The 2006 ITU forum will examine, among other key issues, the impact on global equipment suppliers when China starts handing out licenses for its homegrown wireless 3G standard, called TD-SCDMA, or time division synchronous code division multiple access. It has been billed as a sign of China's growing technological sophistication, and China's Ministry of Information Industry is expected to hand out licenses early next year so that providers and handset vendors will be fully operational by the 2008 Beijing Olympics.

Chinese regulators hope TD-SCDMA will evolve into a rival global standard to W-CDMA (wideband CDMA) and CDMA2000 1X EV-DO (evolution data optimized).

Born in China

But the standard will surely give the mainland wireless industry a boost. "A lot of the core TD-SCDMA intellectual protection (IP) rights are held by Chinese companies, which means IP licensing fees will be lower than for competing international standards," Vincent Dong, a Beijing-based senior analyst with Norson Telecom Consulting, said in a recent interview.

"And the standard's Chinese origins mean that most of the major players in the TD-SCDMA value chain are Chinese." (See, 11/27/06, "China's 3G Mobile Marathon.")

Wang encouraged foreign telecom equipment makers, saying China remains friendly to foreign investment, and the country is making strides to protect intellectual property rights, which has been a concern for companies such as Cisco Systems (CSCO) that filed—then settled—a lawsuit with Chinese telecom gear maker Huawei Technologies over alleged technology pirating a few years back.

Prices Coming Down

Meanwhile, the explosion of social networking and video-sharing sites is creating a wholesale shift in Internet and mobile phone usage. "Users are no longer just consumers, they are creators and distributors of information," says Utsumi. And he sees that trend accelerating with median broadband prices continuing to fall and networks continuing to increase speed and reliability.

John Chambers, chief executive and chairman of Cisco——a company whose market capitalization has jumped 47% to $162 billion over the past year—sees the equipment side of the industry delivering high-performance and lower costs, too. "What costs 10 times too much today will cost one-fifth as much in five years," he said.

Chambers also sees the explosion of high-speed networks and user-generated content fundamentally changing business practices at the most innovative companies by harnessing the brainpower of global workforces that can communicate round the clock and instantaneously. "The next level of productivity will be about collaboration," he says. "It is speed we are just beginning to understand."

A Digital Divide Remains

Also difficult to fathom is the sheer volume of words being communicated digitally around the globe and how that is set to grow in the years ahead as even the most remote parts of the world are connected by fixed-line and wireless networks. Chambers thinks the scale of Internet traffic could reach 15 exabytes a month by 2010.

One exabyte is a unit of information or computer storage roughly equivalent to one quintillion bytes—or about five times the bytes represented in all of the world's printed matter.

Will all this exuberance be justified in the years ahead? Plenty of work must be done bridging the digital divide that has kept the poorest segments of the world from getting decent telecom coverage. Yet both China and India are high-speed economies with big chunks of the population yet to be reached by mobile telephony and the Internet.

That fact and the remarkable expansion of broadband in recent years have brought back some good cheer to the global telecom industry.