The market for international data services in Asia Pacific is driven by the region strong and growing economy and business connectivity needs, coupled with a stable political environment.

In the deregulated markets in Hong Kong and Taiwan, service providers are offering discounts up to 80 percent to attract major new customers. In more regulated markets such as China and Malaysia, the decline is less significant, as the domestic incumbents dominate the market and face less competition, according to the analyst of this study. The large price decline in the last few years coupled with demand greater than anticipated in many routes, bandwidth prices are already showing sign of stabilization. Bandwidth price is expected to remain rather flat over the next two to three years, especially on competitive routes.

Frame relay and asynchronous transfer mode (ATM) prices have dropped by 30 percent on average compared to those in early 2004. The decline in prices is expected to slow down, as remaining enterprise customers are more likely to continue using frame relay in order to avoid switching costs and other technical issues. Internet protocol virtual private network (IP VPN) is perceived as a cost-effective connectivity solution. Hence, service providers continue to maintain it at a competitive price that is substantially lower than those for traditional data services. As IP VPN subscribers continue to grow, service providers have begun offering value-added services to complement the basic IP VPN service.

IP Makes Its Move in the Booming Market

International Private Leased Circuit (IPLC) remains as the dominating service offering in the Asia Pacific region, especially for intra-regional routes. The contracted bandwidth is normally between 256K to 1 MB for customers in various countries. Usage of higher bandwidth is common on routes priced at very competitive levels, such as the Singapore-Hong Kong route.

IP VPN service has gained significant momentum, as it offers similar functionalities as frame relay at a more competitive price. With technological maturity and security concerns being addressed, IP VPN has managed to attract subscribers of legacy data services (such as frame relay, ATM). In relatively developed markets such as Hong Kong, Japan, Singapore, and South Korea, carriers are more aggressive in promoting this service, and mass migration is expected to start within the next two years.