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Report on PTC Hawaii

Pacific Telecom Council’s Annual Conference January 18-23, 2003

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PTC Hawaii• 25th annual conference in Hawaii (www.ptc.org). • PTC brings together operators from different regions of

Asia-Pacific to share their experiences• PTC has evolved to include traditional and convergent

telecom technologies, industries and markets. • The annual conference also hosts associated events on

– China Telecom– Pan Pacific Distance Learning– Pacific Island Telecommunications– Pacific TeleHealth

• CWTG members Telos Technologies and Daniels Electronics participated in the show and Convedia, fSona and Norsat sent product brochures for distribution at the CWTG booth.

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Conference Hob-Nobbing

Ind. Cda. Bruce Drake & Dave Fransen S,R&D Minister Rey Pagtakhan

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Conference Topics

• How to Successfully Deploy Telecom/ Broadband Access– China as the success model

– Regulatory, legal, IP issues

• Distance Learning Case Studies– N.B. MIT OpenCourseWare

• Mitigating Business Risk in Dangerous Times– Bandwidth Economics & Project Financing

• Satellite & Submarine Cable systems

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Conference Highlights

• Telecom demand still growing at 7-8% per year

• Internet still adding 5M+ subs per year• May have to work off an ~10 year Telecom

‘overhang’ (over capacity)• Think of Long Distance as free

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How Telecom Is Becoming A Cyclical Industry

Eli M. Noami, Columbia University, USA - Opening Plenary • Cyclicality will be an inherent part of the telecom

sector in the future– not a one-time recovery from a one-time boom and bust

• To deal with such instabilities, companies and investors will seek consolidation and cooperation

• Oligopoly is likely to be the equilibrium market structure– Government, will need to reassess its basic policy

approach that has long been focused on the enabling of competition

• The future network industry will look a lot more like the old telecom industry and less like the new internet

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Drivers of Cyclicality• Demand growth has slowed.• Investment and regulatory lags prevented

adjustment. • Network externalities and lumpiness in

investments amplified the swings. • Economies of scale and network externalities

created strong incentives for growth strategies, at the expense of profitability. Financial markets encouraged this strategy. Managers benefited from it in the short run.

• While expansion made sense for each firm individually, it created a major oversupply in the aggregate.

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Economies of Scale

Capacity Over-Build

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Future Project Finance StructuresRobert W. Stuart, InDepth Financial Advisors LLC, USA

• Project Financiers will look for simplest financing stories, easily understood both in credit approval and syndication process. – e.g. single project builds serving the well-documented needs

of a finite marketplace– with Management “A Teams”

• Regional aggregation or feeder systems will be financed first (when the financial markets again become receptive)

• Bankers may restrict additional borrowings even those structurally subordinated to its own senior secured debt– Only fully funded Business Plans will be secure project debt

funding;

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Heterogeneous Mobile Networks: Getting a WIFI of 3G

Peter Waters, Hong Kong SAR, ChinaBernadette Jew and Rob Nicholls, Australia

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Conference ReportsConference Papers can be viewed/downloaded from www.ptc.org,

user=ptc25, p/w=broadband Reports picked up at the Conference:• CD - The APT (Asia-Pacific Telecommunity) Yearbook 2002• Newsletter - AsiaCom, Dec 2002 - including Asia Broadband

Subscriber Counts• Magazine - Pacific 2003 Alamanac: Global Broadband, Regional

Divides• Journal PTR - Pacific Telecommunications Report, Q1 2002• Journal PTR - Pacific Telecommunications Report, Q4 2002• Workshop Handouts - Paul Weis: Asia's Telecommunications

Markets (Finance outlooks)• Journal - Preston Gates Guide to Telecommunications in Asia (Legal

summary of national markets)• Workshop Handouts - Gilbert & Tobin: IT & Communications

(WiFi, China CATV, Interconnect)• Magazine - Outside Plant, Dec 2002

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Purchased IEC Reports• CD Web Proforum Tutorials Vol. 9, on ATM,

Broadband Access, Optical Networking, SS7, Wireless • CD/HC Annual Review of Communications, Vol 55, 2002• CD/HC Telecom Outlook Report - Executive Analysis• HC only Telecom Outlook Report: Millennial Edition• CD/HC Telecom Outlook Report on Wireless• CD The New Satellite Industry• CD/HC IP Applications & Services 2003• CD/HC IP and the Intelligent Network• CD/HC The Business of Broadband: Access & Applications• CD/HC Broadband Access and Services in the Local Loop• CD/HC Operations Support Systems 2002• HC only Knowledge Management for the

Telecommunications Industry

* Additional IEC Reports available at 50% of list price

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Trade Show• Conference Attendance was down ~20% from

last year; down 30% from peak in 2001– 1,800 in 2001 1,500 in 2002 1,200 in 2003

• Trade show participation down by similar factor

• Most significant change is reduced participation by larger vendors and carriers– smaller presence and delegations

• But exhibitors still reported making the senior-level contacts the conference is renown for

• PTC also has an aging membership problem

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Trade Show

Layout

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Booth Setup

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Business Results

• In general, there was stronger interest in products offering incremental expansion of, or new services on, existing networks, such as IP Telephony, than in new network builds.

• ~40 contacts, 6 leads (for Convedia)• As for the past year, vendors with business in

China reported good results.Also reports of smaller networks in emerging regions such as Africa and the Pacific.