The Yankee Group

The Yankee Group Research Notes


 Covering the week of June 25, 2002

The Yankee Group's Weekly Analysis of the Hottest Topics in the Information Technology and Communications Industries
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Table of Contents

1.   VoIP Inches Forward, Goes Global

2.

  700-MHz Spectrum Band Saga Continues as Government Puts Last-Minute Brakes on Auction
3.   SingTel Puts the Brakes on 3G

4.

  Enterprise Remote End-Point Security Products Report Predicts Revenues to Grow to Over $260 Million by 2006
5.   After Tragic Fire, Another Internet Café Crackdown in China
6.   Research In Motion vs. Good Technology, Inc.

7.

  J.D. Edwards Goes Direct in Argentina

8.

  Best Practices for Price Management and Profit Optimization

9.

  MMS and 3G Pricing Announced by mmO2

10.

  Metro Carriers' Carrier Lights Network in Tier 2 Market

11.

  Yankee Group Report Profiles Operators in Four Key Asia-Pacific Metro Markets
     
    Publications for the week of June 25, 2002
    Audio Conferences
    Conference Information
    About the Yankee Group

1. VoIP Inches Forward, Goes Global

Communications Network Infrastructure
by Daniel Klein

Event Summary

Despite the gloom and doom in the North American marketplace today, voice-over-IP (VoIP) inches forward with several announcements, both in the United States and globally. For example, on June 20, Verizon announced a new Voice Over Broadband service based on the services of GoBeam, a provider of managed PBX services. Additionally, SBC announced the rollout of IP Centrex services based on Lucent Technologies' iMerge platform, and media server vendor SnowShore Networks announced wins with Z-Tel and SkyWave, an Asia-based IP service provider. Other recent announcements have focused on expanding vendors' reach into the international marketplace.

Market Impact

In addition to the typical North American contingent, this year's SUPERCOMM attracted an unprecedented number of international players with booths by such previously unrepresented organizations as Huawei, ZTE Telecom, and the government of India. Packetized voice was a definitive theme among these companies. This showing strengthens the Yankee Group's contention that demand overseas is strong. Vendors such as VocalTec, COMGATES, and ECI Telecom are ahead of the game due to their strong global penetration and existing relationships. In fact, distribution agreements such as the one that Sonus and Sumitomo signed in June 2001 are the types of relationships that will allow vendors to sell their products overseas, and hence weather the economic turmoil. Recent international partnership agreements include:

Recommendations

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2. 700-MHz Spectrum Band Saga Continues as Government Puts Last-Minute Brakes on Auction

Wireless/Mobile Services
by Linda Barrabee

Event

On Wednesday, June 19, the federal government signed a measure that postponed indefinitely this month's planned auction of most of the 700-MHz frequency band, which is currently occupied by television broadcasters. The new legislation calls for the FCC to refund some of the payments to select bidders, while a portion of the band—18 MHz of spectrum in the lower band (channels 52–59)—is still slated for auction in August. The FCC has shelved indefinitely the auction of the remainder of the lower band, and the planned January 2003 auction of the upper band (channels 60–69) will be reviewed and likely delayed as well.

Market Impact

This latest delay is not much of a surprise and is on the whole welcome news for the mobile phone industry. While the FCC continues to work toward making additional spectrum available, complications have persisted with the 700-MHz frequency band, as there is no specific plan for removing incumbent UHF television broadcasters before their required relocation in 2006. The spectrum has become less attractive for potential bidders, which face the possibility of having to pay significant sums to broadcasters in order to facilitate early relocation. Additionally, while the 700-MHz frequency band is attractive because it is the last piece of available spectrum that allows for greater in-building penetration for the wireless signal (especially attractive for wireless data), there are drawbacks: there is no existing equipment (network hardware and handsets) built for the band, and existing wireless providers would have to deal with managing either a second or third different spectrum band within their networks.

Conclusions/Recommendations

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3. SingTel Puts the Brakes on 3G

Wireless/Mobile Asia-Pacific
by Shiv Putcha

Event Summary

On June 14, Singapore Telecommunications announced that its mobile unit, SingTel Mobile, was delaying the award of a contract for the supply of a 3G mobile network. The company cited both limited demand and supply-side bottlenecks as principal factors influencing the decision.

Market Impact

SingTel's decision comes close on the heels of the Singapore regulator, the Infocomm Development Authority of Singapore (IDA), announcing that sharing for 3G network infrastructure costs would not be allowed. Moreover, the IDA has also since rejected an appeal by Singapore operators to waive or extend the current deadline of year-end 2004 for full deployment of a 3G network and commercial service launch.

While the IDA has cited European case studies as benchmarks for its decision, SingTel's decision appears to be far more grounded in reality. The enormous debt burdens borne by European operators in the stampede for 3G licenses has sent tremors around the globe, and Asian operators appear to be coming to the general consensus that there is no hurry to deploy 3G. SingTel executives have cited the nascent development of 3G technology, insufficient demand, handset shortages and a general lack of suitable applications and content among the many reasons for their cautious approach to 3G.

SingTel has reportedly conducted 3G trials with Sweden's Ericsson, Finland's Nokia, and a consortium including Germany's Siemens, as well as Japan's NEC Corp and Itochu Corp., although the tender award timeline has not been revealed. SingTel Mobile said it expects to be able to offer limited 3G services in 2003, and meet the deadline of the end of 2004 set by the IDA for the nationwide rollout of its 3G network.

Recommendations/Conclusions

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4. Enterprise Remote End-Point Security Products Report Predicts Revenues to Grow to Over $260 Million by 2006

Security Solutions & Services
by Anil Phull

Event Summary

Enterprise networks now must extend beyond corporate campuses to serve the business informational needs of teleworkers and traveling employees working from remote end points such as laptops and other mobile devices. These remote end points are increasingly the targets of attacks by hackers that seek a convenient back door into corporate resources and systems. The recently published Yankee Group research Report, "Enterprise Remote End-Point Security Products: Driving Security Policies to the Last Mile," discusses enterprise requirements, vendors, and futures for the rapidly growing remote end-point security (REPS) product market.

Market Impact

The Report details the product offerings and winning strategies of REPS vendors, whose market is expected to grow in revenue from $20 million in 2001 to over $260 million by 2006. The corresponding enterprise REPS installed base is expected to increase from just over 500,000 early-adopting end users in 2001 to over 7.2 million deployed seats in 2006.

REPS products are a natural and essential extension of the data transport security provided by IP VPN hardware and software vendors and service providers. In order to remain competitive, these vendors must quickly assess their compatibility with the most prevalent enterprise REPS solutions. The Yankee Group envisions rapid evolution of REPS products to protect remote end points against emerging and blended Internet threats such as the Code Red and Nimda worms.

Conclusions/Recommendations

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5. After Tragic Fire, Another Internet Café Crackdown in China

Networked Business Strategies Asia-Pacific
by Christopher Slaughter

Event Summary

A disastrous fire that killed 24 people and injured 13 others at an illegal Internet café in Beijing has led to a police sweep across the city. Some 2,400 public Internet cafés have been closed—both legally licensed establishments as well as "hei wangba," the underground "black Internet bars" that were the main target of the sweep.

Market Impact

Beijing municipal officials have said the establishments will be closed for three months while safety inspections are carried out and licenses reviewed, and that no new licenses will be issued for an indefinite period. Meanwhile, other city and provincial governments across China have been following Beijing's lead and cracking down on Internet cafés, of which state media claims there are some 200,000 across the country, with as many as half operating illegally. Over the years, thousands have been closed and more than 14,000 others have reportedly been "punished" for infractions.

The Beijing sweep in particular is being called a "safety overhaul" and is nominally part of a campaign to ensure compliance with safety codes in public venues as diverse as dancing halls and barber shops (both identified as centers for prostitution), beauty salons, and even public bathrooms. The inclusion of Internet cafés in such a list makes it clear that they are seen as an issue of public morality as much as an issue of public safety.

In the wake of the tragedy, state-run media have begun calling for greater supervision and enforcement of the already-strict regulations on Internet bars (see our May 2002 Research Note, "China Tightens Control Over Internet . . . Again"). Just last month, new regulations were passed prohibiting teenagers from entering Internet cafés on school days, and the deaths in Beijing are sure to lead to even stricter—but equally unenforceable—regulations.

Conclusions/Recommendations

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6. Research In Motion vs. Good Technology, Inc.

Wireless/Mobile Technologies
by Sarah Kim

Event Summary

On June 19, Research In Motion (RIM) announced that it has filed an intellectual property complaint against Good Technology, a well-funded enterprise wireless solution start-up and to date RIM's most direct rival. The Good Technology wireless service, comprising an enterprise messaging server (GoodLink), Web-enabled data downloading (GoodInfo), and a Mobitex-based hardware device (Good G100), is designed to support any device, including RIM devices. Among others, RIM's complaint alleges that Good Technology has violated a BlackBerry patent related to the way in which wireless data applications are remotely managed from a central host.

Market Impact

Good Technology's key differentiation is its ability to deliver continuous over-the-air synchronization of Exchange e-mail (Lotus support is not currently available) and PIM features (e.g., calendaring, address book) without the need for a cradle. The service also incorporates other feature enhancements such as positive acknowledgement upon message delivery, the ability to edit attachments (PowerPoint, spreadsheets, text) and access to Web-enabled corporate data.

Despite these technical advantages, Good Technology faces an uphill battle. Its case for displacing RIM's existing customers is weak in the current macroeconomic environment. We anticipate few enterprises to replace their existing BlackBerry devices and applications in favor of a me-too product with modest improvements. Moreover, Good faces a more formidable challenge, as RIM moves toward a more open solution. RIM has ported its proprietary OS to a J2ME platform, reorganized its salesforce to facilitate its growing carrier customer base, and, most recently, launched a reference design program to attract OEMs to build devices that support the BlackBerry push architecture.

Conclusion

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7. J.D. Edwards Goes Direct in Argentina

Networked Business Strategies Latin America
by Grant Smith

Event Summary

J.D. Edwards opened new offices in Argentina, located in the Puerto Madero Zone, after severing relationships with the ASSA Group systems integrators (SIs). From this point forward, J.D. Edwards's principal objective is to provide direct support to existing ERP, supply chain, and other applications customers in Argentina including Telecom Argentina, Ledesma, and Arcor. In the second stage, the company plans to hire additional personnel for sales and service. J.D. Edwards is not moving alone, as business application vendors in Latin America make massive adjustments in the face of a changing market.

Market Impact

Latin America market leader SAP is fine-tuning an indirect channel for the launch of its Business One applications suite, sized for the sophisticated SMB market. Brazilian giant Microsiga is training and motivating its 47-region franchisee network to defend a highly lucrative SMB niche, and better position full software localization that complies with all Brazilian and neighboring country markets’ complex tax and legal requirements. Other mid-market players are evaluating potential acquisition candidates to lock in more market share. Many, like J.D. Edwards, are severing long-time relationships with systems integrators and going direct. Vendors are seeking either exclusivity or higher levels of loyalty from their remaining SIs, even as they assure software customers that endless implementations and multimillion-dollar fees to consultants are things of the past.

Recommendations

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8. Best Practices for Price Management and Profit Optimization

Business Applications & Commerce
by Kosin Huang

Summary

Pricing is a fundamental business function that all companies must manage. It has always been and remains a critical profit lever and value driver. Companies are now addressing price management and profit optimization with a new class of software aimed at solving the complexity of the pricing problem, and automating and supporting this often disaggregated business process. Software providers delivering these solutions include the likes of Rapt, Manugistics, i2, Vendavo, KhiMetrics, DemandTec, SAP, Siebel, and Oracle, along with several other emerging players.

As companies begin to deploy pricing solutions, what should they consider? How do they best capitalize on these solutions?

Recommendations

There are some key success factors to keep in mind once companies do invest the time and resources in implementing a pricing system:

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9. MMS and 3G Pricing Announced by mmO2

Wireless/Mobile Europe
by Philip Taylor

Introduction

Busy times for mmO2's marketers who made a range of pricing announcements this week. On Tuesday June 18, it became the first European operator to reveal prices for 3G services, in this case those of its subsidiary, Manx Telecom on the Isle of Man. On Wednesday, it followed this up with news that it would be launching a range of multimedia messaging services (MMS) from this coming autumn.

Market Implications

For Manx Telecom's 3G services, mmO2 has gone with four tariff packages, aimed at large businesses, small and medium-sized businesses, heavy-use consumers, and light-use consumers. The charges (detailed below) are based on a monthly subscription, which includes free use up to a set allowance of data. It has been calculated by mmO2 that a typical consumer will end up paying around £44 (US$72.16) a month while business users can expect a monthly bill of about £80 (US$131).

As for MMS, mmO2 is the third network operator in Europe that we are aware of, to have made explicit its pricing plans. On June 1, T-Mobile in the UK launched its MMS service, "T-Mobile Picture Messaging." For a flat monthly fee of £20 (US$32), users can send and receive MMS up to a limit of 10 Mb of data. Finnish incumbent operator Sonera, launched its MMS service on June 11 with messages costing 0.59 (US$0.56) to send. Italy's TIM is providing MMS for free up until September in order to assess consumer usage patterns before electing a pricing scheme.

Conclusions


Exhibit 1
Price Comparison: 3G at Manx Telecom and GPRS at O2 (UK)
Source: mmO2 and Yankee Group

 Manx Telecom
3G Pricing

 3G Business

 3G Enterprise

 3G Consumer

 3G Protonet
Data Subscription  US$131  US$82  US$41  US$8
Free Data
Allowance
 100 Mb  50 Mb  20 Mb  1 Mb
Charge per Additional Mb  US$0.16  US$0.82  US$1.6  US$3.3

 O2 GPRS
Pricing
 Web Professional Web and Work WAP Surfer WAP Starter
Data Subscription US$77  US$39  US$13  US$6.5
Free Data
Allowance
36 Mb  12 Mb  1 Mb  0
Charge per Additional Mb  US$1.9  US$2.44  US$6.54  US$32.8

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10. Metro Carriers' Carrier Lights Network in Tier 2 Market

Wholesale Communications Services
by Nancy Bedard

Event

Memphis Networx announced on June 19 that it lit a 90-mile fiber network in Memphis and Shelby County, Tenn. The company signed its first customer in May. Kentucky Data Link (KDL), a regional carriers' carrier, is using Memphis Networx's last-mile connections to expand its reach in the Memphis market.

Market Impact

Memphis Networx was able to obtain funding and complete its network in a market where announcements of metro carriers' carrier closings and bankruptcies are more common than success stories. Wholesale market opportunities are holding firmer in Tier 2 and Tier 3 areas than in the often overbuilt Tier 1 areas. Despite the more favorable market conditions in Tier 2 cities, funding for a new fiber build is not easy to obtain in any market. Memphis Networx is a private company that obtained funding from the municipal utility Memphis Light, Gas & Water and a local private investment group. Memphis Networx is negotiating capacity with a number of service providers, including Ethernet providers and wireless carriers.

Conclusions/Recommendations

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11. Yankee Group Report Profiles Operators in Four Key Asia-Pacific Metro Markets

Convergent Communications Asia-Pacific
by James Walsh

Report Summary

Having upgraded their backbone and long-haul infrastructures, service providers throughout the world are currently overhauling their local access, and metropolitan area networks (MANs) to meet an increased demand for bandwidth from both enterprise and residential users. In a forthcoming Yankee Group Convergent Communications Asia Pacific Report, we profile four service providers that are building out MANs in key markets in the region. The Report shows how these operators have taken different approaches, and are adopting a variety of technologies depending on local competitive and regulatory conditions, their target markets, as well as their background and overall strategy.

Market Impact

In the first quarter of 2002, 39.3% of global vendor wins for MAN equipment were from the Asia-Pacific region. The rapid development of this market has come about in response to a number of interrelated trends. First, corporate demand for broadband services to support data-rich applications such as content distribution and storage area networks is increasing. Second, the application of technologies such as Ethernet and dense wave division multiplexing (DWDM) in MANs has enabled operators to build out highly scalable networks, and quickly deploy inexpensive high-bandwidth services. Third, ongoing deregulation has made it possible for new operators to compete with incumbents, which until recently have monopolized the metropolitan markets in the region. Liberalization of dark fiber has made it possible for new entrants to build out networks at low cost and avoid the problems related to rights-of-way that are faced by operators building out their own infrastructures.

Recommendations

The Report includes a list of recommendations for service providers, vendors, and end users:

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Publications for the week of June 25, 2002

Price Management and Profit Optimization: From Planning to Execution
bac, Report, June 2002, by Kosin Huang

Bridging Supply and Demand: i2's Value Chain Vision
bac, Flash, June 2002, by Kosin Huang

Status Quo in Thailand: Liberalization on Hold
ccap, Flash, June 2002, by Koji Oki

Global Metropolitan Area Networks: A New Attitude
cni, Report, June 2002, by Marian Stasney

Regulating Broadband Services Around the World—Controversy, Uncertainty, and Questioning of Competition Policies (Part 1: Asia-Pacific, Europe, the Middle East, and Africa)
grs, Report, June 2002, by Dianne Northfield

SME Asia-Pacific 2002: A Perspective on Japan
jms, Report, June 2002, by James Walsh

SME Asia-Pacific 2002: Mobile Means Voice, Not Data
wmap, Report, June 2002, by Shiv Putcha

Selling Wireless Data in the Enterprise: Carrier Strategies and Tactics
wmec, Report, June 2002, by Eugene Signorini and Roberta Wiggins

Colombia's Mobile Sector Boasts Surprising Growth
wmla, Report, June 2002, by Andy Castonguay and Wally Swain

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Audio Conferences

June 27, 2002

A Wholesale Communications Services Audio Conference
Metro Wholesale Providers and Unbundled Network Elements: Not Necessarily Mutually Exclusive

June 28, 2002

A Communications Network Infrastructure Audio Conference
2002 Edge Router Marketplace

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Conferences

The Yankee Group's signature conferences provide a real-time opportunity to explore the technologies transforming the information technology, media, telecommunications, and wireless marketplaces. Our exclusive and interactive forums provide the ideal setting for Yankee Group analysts, together with industry leaders, to discuss and define the future of technology, business, and strategy.

Click here to view the Yankee Group's upcoming Conference Schedule online

For questions or more information on upcoming events, please e-mail conference@yankeegroup.com, or call
(617) 956-5000 ext. 460.

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The Yankee Group believes the statements contained in this publication are based on accurate and reliable information. However, because our information is provided from various sources, including third parties, we cannot warrant that this publication is complete and error-free. The Yankee Group disclaims all implied warranties, including, without limitation, warranties of merchantability or fitness for a particular purpose. The Yankee Group shall have no liability for any direct, incidental, special or consequential damages or lost profits.

Yankee Group Research Notes was prepared by the analysts for use by its clients. These analyses supplement the research available through the Yankee Group Planning Services. For more information please call the Yankee Group. Phone: (617) 956-5000; Fax: (617) 956-5005; E-mail: info@yankeegroup.com

Copyright 2002, the Yankee Group. All rights reserved.

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