Resellers warned over cheap bandwidth
Cheap bandwidth has serious implications for resellers because carriers will be forced to compete against the channel, according to a report by IT research company, Ovum.
Cheap bandwidth has serious implications for resellers because carriers will be forced to compete against the channel, according to a report by IT research company, Ovum.
Called Telecoms Hotels, Co-location and Data Centres: Hosting in the New E-economy, the report says that carriers will be faced with a freefall in bandwidth prices as competition increases in the telecoms market.
Carriers are responding by building so-called telecoms hotels that offer internet hosting, application services and managed data centres. This will cause many problems for networking resellers, which in the past had the market for value-added networking services to themselves, warned Stephen Young, lead author of the report and principal analyst at Ovum.
"Circumstances have forced bandwidth carriers to move the value chain to provide web hosting and application service provision," he said. "For carriers, telecoms hotels are becoming a must-have thing and will force the development of new turnover models that are based on services, not just connectivity."
The good news for the channel is that demand for networking services is increasing. Ovum estimated that demand for data centres and co-location will create a worldwide market of $55.8bn (£37.4bn) by 2005. However, the bad news is that this is a market far beyond the resources of all but a handful of resellers.
"Many players will need a fair bit of money to be able to compete in this new services market," said Young.
One networking vendor agreed with this pessimistic view of the channel's future. Simon Clark, sales director at Sitara Networks, said: "In the future, bandwidth might even become a commodity, but the carriers are never going to give it away."
To remain competitive, carriers will always have to add value to their offering, he added. "Increasingly, we will be looking at the service providers and the growing number of application service providers to add the intelligence to what were, at one time, no more than dumb, point-to-point networks," he said.
First published in Computer Reseller News