The market for value added networks is pretty cut-throat at the moment, with some big European contracts up for grabs and a number of suppliers flexing their muscles, keen to establish dominance of this burgeoning market. Accusations of dirty tricks have been bandied around in recent weeks and this highly-charged atmosphere is unlikely to ease up in the near future, with DEC due to enter the fray this April and Europe’s trading communities implementing communication links in preparation for a fully deregulated market in 1992. Rocket to UKP1,000m But according to a report published by UK consultancy Systems Dynamics Ltd of Chorleywood this month, suppliers will not have too long to jostle for position and the next five years will be a critical time to stake out market share. The early 1990s will see between five and 10 suppliers dominating over 70% of the European market, says the report. Called Value Added Networks Monitor, the report also makes a number of predictions about the changing nature of value added network technology, the market forces driving the new network services, and changing user demands. A liberalised telecommunications industry is the key to a nation’s healthy network services market, say the authors. For this reason Europe is still lagging a fair distance behind the US in terms of volume implementation, and commentators expect development this side of the Atlantic to mirror the US example. Early liberalisation of the telecommunications environment was the trigger for intense activity in the US which has resulted in a glut of telecommunications facilities. Consequently US majors are trying to export their expertise, and Europe is the main target. The UK is bearing the brunt of this thrust, largely because the liberalisation embodied in last February of its value-added network services legislation has made it an attractive entry point. 1986 figures value the UK network services market at a modest UKP260m, but given that it is being used as a springboard into Europe by many suppliers, the UK market should rocket to UKP1,000m by 1991, according to the report. France and Sweden are starting to grapple with the opportunities and problems while restrictive legislation in other countries such as West Germany and Belgium mean that value-added services are still the sole province of the state monopoly telephone operators. The authors believe that Japan is also in a strong position to attack world markets owing to a combination of recent legislative changes and its tenacity in the graphics field. Under its telecommunications business law, only Japanese interests can control a value-added service so US efforts have concentrated on collaborative ventures that are dominated by the Japanese partner – but with the US firms in most cases providing the technology. This licence to import technical know-how but keep control over the business base is enhanced by Japan’s strength in graphics, a plus point in the messaging services. One of the report’s most important assessments is that for the more advanced markets, the US, the UK and Japan, 1988 will be the key year in transforming the market from supply push to demand pull. Most of the demand for viewdata – videotex – information services will continue to come from the financial sector, although there is strong interest in specific applications such as electronic data interchange, EDI, and messaging. In 1986, information services accounted for 90% of the value-added services revenue in the UK and even by 1990 are expected to generate 70%. Value added network services continue to be aimed primarily at four vertical sectors: finance, transport, retail, and manufacturing, and impetus for developing services further will tend to come from these industries. But the report notes that one of the fundamental changes occurring in the mid-1980s is a requirement for different trading communities to exchange data over networks. Electronic funds transfer at point-of-sale, Eftpos, or cashless shopping, for example was developed by liaison between retail banks, credit card companies a
nd retailers. However, the lack of interconnection capability between competing services, means that users who have already committed themselves to one supplier are locked into one community for the time being. Pressure is being exerted on suppliers to interlink their services but they have resisted to date with arguments that cite commercial rather than technical difficulties. Certainly the task of working out the charges across a plethora of different tariffing systems is onorous and while suppliers are promising cooperation on interconnection now, in private they do not expect it to happen for a couple of years at least. Ignorance gap Other short term factors are inhibiting the growth of the market to some extent. For example, the report points to user ignorance of network technology and its possibilities as a business tool as a slowing factor, although in the UK the ignorance gap is a void which a government funded campaign, Vanguard, is currently trying to bridge. Perhaps the greatest deterrent to suppliers is the high capital investment required to enter the network services market which means that few of today’s services are profitable and there is therefore less of a choice for the user. The survey expects many of today’s smaller suppliers to fold before the end of the decade given that even ventures undertaken by the majors have failed in the past. Edinet, the joint venture between McDonnell-Douglas and British Telecom was abandoned after 18 months when it failed to win sufficient patronage. With the market today largely untapped, highly fragmented and in a volatile state, Systems Dynamics predicts that market leaders will emerge this year and tip General Electric’s GE Information Services, and McDonnell Douglas Corp’s Tymnet as hot contenders not too surprisingly, for both those networks have been in place for nigh on 20 years. But with traditionally computing-based majors with a lot of spending power – IBM, DEC – keen to get a slice of the action, nothing is certain. The report, Value Added Network Services Monitor, is available from Systems Dynamics Ltd, Chorleywood, Hertfordshire, WD3 5BW; telephone 09278 5466.
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