As prices in the datacommunications market go into free fall, declining at a rate of 30%-35% a year, and the telcos continue their incursions into the value-added network (VAN) services arena, so the VAN providers are being forced to adapt to the changing world. Moves by Dutch-American network services provider Equant point the way, as it introduces a raft of new Internet Protocol services and a $100m investment program that it hopes will keep it ahead of a growing field.
The datacommunications market may be growing at an annual rate of between 20% and 30%, but basic carrier services have become commodities. As a result margins in the VAN market have thinned as providers come under extreme price pressure. To meet the challenge VAN providers are beginning to differentiate themselves with new service offerings. Equant’s latest iVAD (integrated voice and data) with off-net dialing service is typical of the sort of innovation that’s being seen in the sector. In addition to voice and data being integrated on a single access line, it will be possible to make calls off-net using Equant’s global data network.
This comes with the introduction of flexible usage charging and flat-fee billing which represents a departure from the traditional VAN business model where bills are tied to a recurring monthly fee according to the type of service and some transaction or network usage metrics. Analysts believe this to be a good move helping Equant secure revenue for the mid-term and allowing the company to entrench itself further in the market.
With its new Global LAN service, Equant reckons it can now provide and support an organization’s global IP-based LAN and WAN architecture. This service should help improve Equant’s positioning in the market, as it can now claim to be a supplier of end-to-end IP infrastructure. Equant has also announced the introduction of a high-speed PPP (point-to-point protocol) dial service, using the V.90 protocol at 56 kbps for PSTN users and 128 kbps over ISDN. Finally, its video conferencing product with availability in 42 countries, claims to offer reduced call blocking as well as offering cost savings over international ISDN services.
These new service announcements follow on the heels of Equant’s move to invest $100m in an STM1 circuit between New York and Amsterdam. This funding is intended to increase the company’s network bandwidth and ensure that it has the infrastructure necessary to introduce yet more data services. Equant intends to broaden the scope of its service offerings through the introduction of a web hosting service for business customers that will allow for the delivery of high-volume internet, intranet and extranet applications on demand.
Equant, formerly SITA Telecommunications Holdings, owns and operates a worldwide data network covering more than 2,000 cities in 220 countries. Its network was created back in 1949 by airline cooperative SITA to enable data communication between large international airlines and not surprisingly, its strength lies in the travel and hospitality industry sectors. However, it has managed to reach beyond its core markets and now boasts a client list that includes financial services organizations such as American Express and ING Bank and multinationals like Shell, Samsung and Xerox.
Financial results for the first six months of 1998 showed Equant revenues up 31.2% to $319.5m compared with $243.5m for the first six months of 1997. Network revenues, which represent 60% of Equant’s total revenues, increased 82% to $192m for the first six months of 1998.
These figures follow on from the company’s successful IPO in July of 1998 that raised $768m through the issuance of 30 million shares on the NYSE and the Paris Bourse. Since then Equant has completed a $3.6 billion secondary public offering that brought its publicly traded shares up to 39% of the 201 million shares outstanding. It has also seen itself included on the SBF-120 market index on the Paris Bourse. The index comprises companies selected from the top 200 listed on that market based on capitalization and liquidity.
Since Equant’s Managed Data Network Services are provided over a single platform network in which all points of presence are owned, managed, and maintained by Equant, operational procedures and network management tools can be standardized on a global basis.
These network services offer a full portfolio of data network services for global business communications. They take in high-speed, large-volume data exchange services down to occasional access services. As a single integrated global network, services are fully managed from end-to-end and can be supported on an international scale. These include global voice services, business intranet and Internet solutions, high performance remote access services over local fixed or dial-up lines, and many other Wide Area Network services.
Despite Equant’s strong showing on the markets it still has a battle to fight. The increase in revenues for network services should be seen in the context of a general increase in demand for international data communications. That said, it does have a track record for playing ahead of the game. For instance, it was the first company to introduce a global dial-access product in July 1997 with its PPP Dial Service. Its more recent initiatives show that it has a willingness to maintain a stance for innovation.
