This Magic Quadrant evaluates providers of international network services to multinational corporations (MNCs) with networks spanning the Asia/Pacific region. We rate these providers on two major criteria: Completeness of Vision and Ability to Execute. These criteria are consistent with those used in last year's Magic Quadrant to provide continuity in our assessment.

We measure the progress of individual providers against that of others, based on the needs of enterprises now and in the future. A provider that performs less well than its competitors in today's highly competitive market would see its market position decline.

When selecting a provider, network managers need to pay particular attention to Ability to Execute. The sheer size of the Asia/Pacific region makes it more challenging to deliver high-quality, pan-regional network services here than elsewhere.

We give high marks to providers that "go the extra mile" to deliver superior service quality through their regional network, local service and support, and service-level commitments. We also place special emphasis on the delivery of superior connectivity to and within China and India — markets whose large-scale networking requirements make them the most important in Asia.

We continue to give more weight to managed services and network-related IT services to reflect their growing importance. Extra recognition is given to service providers that lead in terms of innovative services, particularly managed services that meet a real business need or technical requirement.

Network service providers in the Asia/Pacific region continued to make big improvements during the past year. MNCs now have a wide choice of service providers, offering better network service quality and competitive prices. In addition, most providers have rolled out managed services, with new options for enterprises with needs that go beyond connectivity.

Despite intensifying competition, all the major providers remain in the market. Global players based in the U.S. and Europe continue to expand their presence aggressively in Asia, driven by their strategy to provide a worldwide proposition to MNCs. They continue to face strong competition from Asian carriers. Due to the competition, pricing remains highly competitive.

Big improvements in network infrastructure: Most carriers have invested heavily to improve their network coverage and redundancy. Progress has been good in terms of improving connectivity to China and India, although significant differences exist between providers. In India's case, liberalization of the market has allowed players to establish a direct presence in order to serve customers better. Service providers are also extending coverage to emerging markets such as Vietnam, the Indian subcontinent and the Middle East.

Global players narrow gap with Asian carriers: Several global players have improved significantly in terms of customer satisfaction and, therefore, in overall service quality. This is largely due to these carriers putting more emphasis on service and support — their weak point in the past. They have narrowed the gap with the major Asian carriers, which used to have a big lead in overall service quality.

Asian carriers lead on price-performance: Asian carriers have improved significantly on their network performance and quality, even though they were late starting Internet Protocol virtual private network (IP VPN) services. This improvement, combined with their superior service and support and increasingly competitive pricing, means they present increasingly good value for money in terms of price-performance, which will allow them to step up the competition.

More choices for managed services: Global players are still ahead in managed services. However, Asian carriers are catching up quickly. Most have completed their rollout of managed services. Although they have limited experience offering managed services, they will improve with time, which will put them in a better position to compete with the global players beyond connectivity.

Gap narrows between competitors: Overall, the gap between the strong players has narrowed significantly in the past year in terms of network coverage, service quality, products and services. As such, it will get increasingly difficult for enterprises to select a service provider in a field crowded with increasingly competent players. However, the risk of making a bad choice is low, as the market is relatively mature.

Price competition will persist: The large number of providers and the diminishing differentiation between them will heighten price competition, which has lessened in recent years. This will further commoditize a market already struggling with low margins. In turn, this will put more strain on service providers, especially those that invest heavily in building managed and IT services capabilities.

Arrival of high-capacity players: Until recently, most providers focused on climbing the value chain into managed services. But the past year saw the emergence of a new class of player, in the form of Pacnet (formerly Asia Netcom) and VSNL International. Both own more submarine cable capacity than all their competitors combined, which could give them a huge advantage in the increasingly commoditized connectivity market.

In the short term, the risk of a sudden drop in service quality is low because most network service providers are large players backed by big home markets. The majority are committed to competing in the region, and they will evaluate the market for the next two to three years before deciding their next move.

The long-term outlook is less clear. Many players, including global and regional providers, lack the economies of scale to sustain a strong regional presence. As such, some may scale back their regional presence, leaving the market with fewer players and less choice. In view of this uncertainty, enterprises need to monitor how the market evolves.

This Magic Quadrant evaluates providers of international network services to MNCs with networks spanning the Asia/Pacific region. The providers focus on data services, especially IP VPNs and, increasingly, Ethernet offerings. Most also offer voice services, especially voice over Internet Protocol (VoIP) and IP telephony in association with IP VPNs.

Asia/Pacific's connectivity market is fairly mature, with a large number of providers, many of which have good network infrastructure and geographic reach. There is limited differentiation in terms of connectivity. The main differences are in local service and support in developing markets, which can result in big differences in terms of installation and restoration times — a major consideration as many MNCs are expanding rapidly in the region.

The market is beginning to move beyond connectivity, with most providers climbing the value chain into managed services. Most managed services are relatively new, but they are improving quickly in terms of features and performance, due to advances in networking technology, which will help drive demand. Providers that excel in this area will be in a better position to become leading players.

Several providers are moving into network-related IT services. It is difficult and costly for even large players to gain sufficient skills to address customer requirements across the region. They also need to compete with local IT services providers, which typically have more skills and experience in their own market. As such, entering the network-related IT services business presents considerable risks, which may impact a provider's ability to compete in the broader market.

Selection of service providers for this Magic Quadrant was based on the following criteria:

• Service providers should have a strong regional presence, with an ability to support pan-regional corporate networks.
• They should provide connectivity to at least 12 major markets in Asia/Pacific using their own network infrastructure.
• Those without comprehensive network coverage but that can extend their reach via partners are considered, but they receive lower ratings than those with extensive coverage.
• Those that offer services over other players' networks are considered, but they get lower ratings for regional coverage, network infrastructure, and products and services.
• Service providers must offer data services, including managed services. They should offer voice services, in particular VoIP and IP telephony.

VSNL International: It focuses on connectivity between India and key markets in Asia, the U.S. and Europe, meeting a key requirement for MNCs, many of which have IT support operations in India. VSNL is expanding its network infrastructure in order to offer regional coverage in 2008.

Pacnet: Renamed from Asia Netcom, following its acquisition of Pacific Internet.

Sprint: Its presence in the region has diminished significantly, due to its strategy of focusing on U.S. customers with connectivity needs in Asia.

Enterprises need to pay particular attention to Ability to Execute when selecting a network service provider. The Asia/Pacific region, with its large and fragmented geography, presents more challenges than other regions when it comes to delivering pan-regional network services of consistently high quality.

When evaluating a network service provider, we:

• Place most emphasis on service quality and price-competitiveness. Those that exceed in both areas present better value for money — the most important consideration when choosing a provider.
• Place emphasis on operational efficiency and effectiveness, especially local service and support capabilities, which are needed to deliver consistently high service quality across the region.
• Place high emphasis on the range of products and services. While the main focus is on essential network services, we place a lot of emphasis on services beyond connectivity, including managed services and network-related IT services. We give high marks to innovation and relevance to customers, especially in Asia.
• Assess its overall financial health, especially the financial success of the business unit in this market and its likely ability and willingness to sustain its investments in product development and service delivery.
• Review its marketing and sales execution, including its success and consistency in building its brand name, market share and track record in this region.

When evaluating a network service provider, we:

• Assess its market understanding, especially with regard to challenges in the Asia/Pacific region. We then review its business model for successfully operating in this market, giving higher marks to those with a strong, clear focus.
• Place high emphasis on geographic focus, which refers to a network service provider's vision, commitment and strategy to deliver services that meet the needs of enterprises with pan-regional requirements.
• Put high emphasis on its strategy for products and services. While the focus is on essential network services, we also look for innovative services that will meet emerging and future needs, in particular managed services and network-related IT services.
• Review its marketing and sales strategy, how it communicates its value proposition to customers, and its acceptance in the market.

Leaders demonstrate strong vision, especially in terms of defining future market needs. They back their vision by investing ahead of competitors in new or unproven areas, and are generally better positioned for the future. However, significant differences exist between the Leaders in terms of strategy and execution, and none excel in all areas. The long-term outcome is not clear for these providers, as continued challenges may force some to scale back their plans and presence.

Challengers exhibit strong operational capabilities and competitive pricing. However, they tend to limit their investments and risks in unproven areas. They either lack a good understanding of the market's direction or their long-term direction is unclear. This market is characterized by many Challengers focusing on delivering high-quality connectivity services — the main requirement today. Most have stepped up their managed services capabilities to close the gap on the Leaders.

Visionaries have a good understanding of the market and its direction. They may present an alternative approach to the market, which could give them a chance of competing for leadership. However, they either lack the resources to execute their vision or are still in the early stage of executing it.

Niche Players focus on a narrow strategy or specific geography. They have limited ability to challenge the leading players, but their focused approach can provide significant value to specific groups of customers. There are few Niche Players, and they differ significantly in terms of strategy and value proposition.

• AT&T is highly focused on its strategy to lead in network and managed services. This has given it a big lead in the market.
• It has consistently executed its strategy, with continued improvements in network infrastructure, service and support, and regional presence.
• It has a good portfolio of managed services, which have been integrated well with its network capabilities to deliver a stronger value proposition to customers. At the same time, AT&T has enhanced its strength in connectivity.
• Customer satisfaction — AT&T's weak point in the past — has improved significantly among large customers since it expanded its support team.
• It continues to gain market share in Asia, although revenue growth has slowed slightly. It is particularly strong in China and India, where it has invested ahead of competitors in terms of building a direct presence.

• AT&T no longer has a lead in network infrastructure — its main differentiator in the past — as other service providers have improved their network infrastructure dramatically.
• It has been slow to invest in submarine cables, especially on key routes, which are needed to give it a cost advantage in future.
• It is more expensive than most players, due largely to its global proposition.
• It lacks the personal touch when it comes to service and support across its large customer base, especially for smaller customers.

• BT has overcome its biggest hurdle — demonstrating that it can deliver consistent service quality after its return to Asia. Customers say its overall service quality has improved year on year for the past three years and is now on par with more established global providers.
• The improvement in service quality is due to BT's investment in a highly redundant network, increased stability in its Asia network operations, and continued improvements in service and support.
• It is accelerating its strategy to climb the value chain into managed services and network-related IT services.
• It is investing heavily to build up its managed services skills in Asia. It recently acquired Frontline Technologies, a regional IT services provider, which will significantly augment its skills and presence on the ground.
• BT is highly flexible in terms of meeting new or non-standard requirements of customers, giving it an edge for large and complex projects.

• BT's push into managed and IT services requires large and sustained investments in skilled personnel to gain sufficient scale to address Asia, a geographically large and fragmented market. This is a major challenge, even for a large company like BT.
• Its managed and IT services capabilities are immature. BT must gain more breadth in terms of choice of services and more depth in terms of experience to gain wider market acceptance.
• It takes on more custom projects than others, which result in long sales cycle and implementation times. This can impact its profitability and its ability to sustain investments.
• BT's prices are higher than those of most carriers, due largely to its willingness to take on more complex projects with requirements beyond connectivity.

• Cable & Wireless takes a focused approach to competing in Asia. By concentrating on fewer larger customers, it is executing better in terms of service quality, especially in its ability to build large distributed networks across the region.
• Customer retention is good, albeit from a relatively low base, and it is beginning to win more large customers. It is now expanding its presence and capabilities so that it can support a broader customer base in the near future.
• It already has a good regional network, with particularly strong coverage in India, where it has 10 nodes in six major cities. Cable & Wireless also has good diversity back to Europe, its home market.
• It takes a flexible approach toward meeting non-standard requirements, an important consideration for large enterprises with complex requirements.
• It is expanding its service and support as well as IT services capabilities, especially in network consultancy, project management and integration.

• Cable & Wireless has a limited market presence in Asia, which puts it at a disadvantage when competing against established players.
• Its newly-built service and support capabilities have not been tested across a broad customer base, although this is not a critical issue as the company intends to grow at a measured pace.
• It also needs to build up local support in more markets in order to improve customer experience further to gain a bigger market share.
• It needs to gain more depth, experience and scale to mount a challenge in this region.

• KDDI is accelerating its return to the market, focusing on completing its regional network infrastructure and expanding its network-related IT services.
• It now offers regional network coverage, with good connectivity to China and a secondary hub in Singapore for improved performance between Southeast Asian countries. It has also expanded its reach to India — a weakness in the past.
• KDDI has experience supporting Japanese enterprises with network and systems integration in developing markets, particularly China where it has 180 staff in eight cities.
• It provides consistently good service quality, due to its good local service and support in developing markets and network management capabilities.
• It has experience offering a highly reliable Ethernet service in Japan and has extended this service to major markets in Asia.

• KDDI has a limited range of managed services. It is expanding its range of solutions and geographic coverage, building on its strengths in network management, systems and network integration, and data center capabilities.
• It used to be a distinct leader in overall service quality, but it no longer has an edge as other providers have improved their local support and service quality in the past few years.
• It has limited experience in India, although it has moved quickly to increase network coverage and local support there.
• KDDI is a strong competitor at home, but its profile is low in Singapore and Hong Kong, where many large Western MNCs have based their regional telecom hubs. To pose a strong challenge, it must rebuild market understanding and recognition of its capabilities.

• NTT is highly focused on becoming a leading provider, and has continuously invested ahead of many other players in product development, network infrastructure, and service and support.
• These efforts are reflected in the steady growth of its customer base, especially outside Japan. Today, half its customers are non-Japanese enterprises; 40% of its new customers in the past year were non-Japanese.
• It has a wide and well-thought-out portfolio of managed services, extending beyond WANs into remote management of LANs, servers and desktops, and applications, in particular for security. Recently, it launched a videoconferencing application, based on its own technology.
• It provides extensive network and systems integration support for customers in developing markets where it is difficult to find experienced system integrators.
• It is strong in service and support, especially in China, where it has a single point of contact for customers, 400 support staff, and customer service centers in Shanghai and Dalian for IT and security services.
• Its efforts to go beyond connectivity resulted in a significant increase in its managed services revenues last year — a validation of its strategy to climb the value chain.
• It has a good data center footprint in Asia, which it is now expanding and upgrading quickly to meet the strong growth in demand for hosting.

• NTT has limited experience in India, although it has moved quickly to increase the number of points of presence, support staff, and system integration partners in the country.
• It has limited market share in Singapore and Hong Kong, where many large Western MNCs have based their regional telecom hubs, although it is gaining market share at home.

• Orange has a more ambitious vision than most players in terms of going beyond connectivity into managed services and network-related IT services.
• This is reflected in its broad and well-thought-out product portfolio, which is more complete and holistic than those of other carriers.
• It uses a standardized approach to addressing complex solutions, especially those involving IT. This is important for delivering consistent service quality globally.
• Managed services revenue is growing at a healthy pace — a validation of Orange's strategy to climb higher up the value chain.
• It continues to lead in geographic coverage, although its lead is shrinking as other carriers are expanding their coverage aggressively. In remote markets, it is also challenged by the Internet, which provides a low-cost alternative.
• Orange is making progress to become a more cost-competitive player, especially with its large support and competency center in India.

• Orange lost momentum in the marketplace in the past year. This was due to major changes in its regional management, which has been tasked with accelerating the company's transformation into a solutions and services provider. The transformation is in progress.
• It has little flexibility to address user needs beyond its product set. This leaves room for other carriers more willing to accommodate non-standard requirements.
• Orange is more expensive than most players in terms of network services, due largely to its global proposition and extensive network coverage.
• Its overall service quality has come down slightly, although network performance and reliability are not issues for concern. It now lags behind many other players in terms of price-performance.

• Pacnet (previously Asia Netcom) is well-placed to compete in connectivity, with its ownership of the two largest cables in Asia.
• It is integrating its EAC and C2C cables with automatic failover capabilities, which will give it a big edge over players in terms of capacity and diversity.
• It is the most price-competitive provider — a reflection of its strength in capacity.
• It is a more mature provider today. Its service quality continues to improve and is now more consistent, due to tighter operational processes, better coordination between customer service and network operations, and dedicated service managers for customers.
• It often outdoes larger competitors in terms of innovative products and services and pricing schemes.
• It retains a good relationship with ex-parent China Netcom, giving it an edge in China for end-to-end international leased lines and enhanced business Internet services.
• The acquisition of Pacific Internet, a regional Internet service provider, should augment Pacnet's ground presence and skills significantly when integration is complete. Pacific Internet is known for its technical skills and good customer service.

• Pacnet has to bear the cost of running two large cable systems in Asia. Integration and upgrade of the EAC and C2C cables also requires substantial investment, although most of the financing has been secured. Both factors will require the company to generate higher revenue in a highly competitive market.
• Network performance is fine, but local support capabilities are average. Pacnet must improve its local support significantly to compete with the leading Asian carriers.
• It has limited experience in India and connects to the market primarily via partners. This approach, while adequate, is significantly behind that of other leading carriers, which have substantial direct presence in the market.

• PCCW Global provides the best value for money in terms of price-performance. Customers say it offers consistently high network service quality, competitive pricing, and excellent customer service and support.
• It delivers superior installation and restoration times, especially in developing markets. This is due to its strong project management, effective processes, and good local support capabilities.
• It has a good understanding of conditions on the ground in China, especially southern China. It also has good relationship with Chinese carriers, which provide it with back-to-back service-level guarantees.
• It is innovative in terms of new products and services. In addition, it has built up a sophisticated contact center operation in China, putting it in a position to support outsourcing requirements, especially from foreign enterprises operating in China.
• It offers international Ethernet services to key markets, and excels in high-speed connectivity between Hong Kong and China.

• PCCW and Telstra, joint owners of the Reach regional network, may go their separate ways, although a decision has not been made. This would reduce the cost advantage they have with a shared network infrastructure, which might in turn impact their price-competitiveness.
• PCCW has almost completed a separate regional network, which suggests that PCCW and Telstra may dismantle their Reach joint venture. We expect PCCW to progressively migrate its traffic from Reach to its own network. Customers need to watch for a drop in service quality, although the risk is low, based on PCCW's track record of providing consistently high service quality.
• It is a strong competitor in its home market, but has limited market share in other major regional hubs such as Singapore and Japan.

• Singapore Telecom (SingTel) has grown significantly stronger in the past year, due to sustained efforts to improve its competitive edge.
• It has made big improvements in its network infrastructure, with good geographic coverage and redundancy. It is strong in connectivity to developing markets, including China and Southeast Asia.
• It has a strong track record of delivering consistently high service quality, but it is streamlining and improving its operating processes to raise service and support quality to the next level.
• It has rolled out a suite of managed services, which will put it in a better position to compete effectively beyond connectivity.
• It is drawing more on NCS, its IT services arm, to take on complex projects. This is beginning to show results in terms of new customer wins. NCS is a regional IT services provider, operating from a strong base in Singapore.
• It is increasingly price-competitive. Capitalizing on its well-managed cost base, SingTel offers good value for money in terms of price-performance.
• It is significantly ahead of many carriers in international Ethernet services, offering a choice of Ethernet technologies and superior geographic coverage, including China and India.

• SingTel's managed services capabilities are relatively new. It needs to gain more depth and experience.
• It needs to integrate more with NCS in order to present a stronger value proposition to the market, especially for complex projects involving IT.
• It is a strong competitor in its home market, but it has limited market share in other major regional hubs such as Hong Kong and Japan.

• Telstra now offers consistently good service quality, the result of continued improvements in its network infrastructure, service and support, and product range.
• It provides good network coverage and performance. It also delivers seamless IP VPN services to China and India via Multiprotocol Label Switching (MPLS) interconnections with domestic carriers, using true label switching.
• It has good network management, support systems and help-desk capabilities.
• It has a good portfolio of managed network services, which will enable it to compete better beyond connectivity.
• It is price-competitive, especially for high-bandwidth services.
• It has a significant lead in the deployment of international Ethernet services.

• Telstra has limited market presence in Singapore and Hong Kong, which puts it at a disadvantage when competing against strong players with home market advantage.
• It must build market understanding and recognition of its wider capabilities, rather than its competitive pricing.
• To grow its market share, Telstra needs to increase its local support capabilities in more markets. This will improve the customer experience and Telstra's relationships with clients.
• PCCW and Telstra, both joint owners of the Reach regional network, may go their separate ways, although no decision has been made. This would reduce the cost advantage they have with a shared network infrastructure, which might in turn impact their price-competitiveness. Telstra would probably retain Reach, which would ensure continuity in service quality.

• Vanco continues to make good progress increasing its customer base and revenues in Asia — a growing validation of its service model.
• Vanco, a non-infrastructure player, differentiates itself from traditional providers by adding value through network sourcing, integration and management.
• It makes a real effort to help customers find lower-cost alternatives, including broadband access.
• It has good installation and restoration processes, enabling it to build large distributed networks in Asia.
• It has strong network management capabilities, which keep customers' network reliability high.
• It has a good customer service culture, resulting in high customer satisfaction and low churn.

• Vanco has fewer local support staff than other players. Instead, it uses local system integrators, working under the direction of its regional network management center, for basic installation and restoration. So far, its overall service is fine, demonstrating that its service model can scale. But as Vanco is growing quickly, customers need to monitor whether it can maintain its service quality.
• It has a small market presence in the major regional hubs, which limits its current ability to compete for market leadership.
• It has a good range of managed services, but will face increasing competition from infrastructure players that are integrating their managed services more tightly with their infrastructure capabilities to provide better service-level guarantees.

• Verizon is now a strong player — the result of a focused effort in the past year to combine its separate strengths in network infrastructure, products and services, and pricing. This is beginning to have an impact on the market, as shown by the company's growth in revenue and market share.
• It has a very broad portfolio of managed services. This is starting to bring results, especially in its ability to address customer requirements for more than connectivity.
• It has a strong lead in security, following the acquisition of Cybertrust, which has a large practice in Australia as well as a presence in several other markets in Asia.
• Verizon has put a major effort into marketing — a weakness in the past — which is raising awareness of its brand and increasing market acceptance.
• It is investing aggressively in submarine cable infrastructure on key routes, which will give it a big cost advantage when building larger and more diverse networks in future.
• It continues to be price-competitive, although it is less aggressive than before in terms of discounts.

• Verizon no longer outperforms other global players in terms of overall service quality, its main differentiation in the past, as other players have improved their service quality significantly.
• There had been a noticeable drop in its local service and support quality, mostly associated with installation delays in several developing markets. Verizon is addressing this problem and quality is improving.
• Its service quality is inconsistent in India, a key market. It needs to widen its geographic coverage, find stronger local partners, and gain more experience on the ground in this market.
• It has a very broad range of products. While each product serves a specific purpose, Verizon can integrate the products into more complete and compelling solutions. It is reviewing its product portfolio and an early outcome of its efforts is its new unified threat management offering.

• VSNL has ambitions to be a global player with superior connectivity to and within India, a key destination for MNCs, many with IT support operations in India.
• It has excellent international fiber infrastructure, the result of its acquisition of Teleglobe and Tyco and its continued investments in submarine cables, especially in Asia. This will give it a big cost advantage when competing on connectivity services.
• It is expanding its global IP network aggressively, capitalizing on its strength in fiber capacity to build a large and diverse network.
• It offers competitively priced high-speed data services, including IP VPN and Ethernet offerings, between India and key cities in Asia, the U.S. and Europe. It is extending its IP network in Asia and will offer reasonable regional coverage by the end of 2008.
• VSNL has superior network infrastructure in India, including long-distance, metropolitan and access networks, which it is still expanding aggressively. It is also building highly reliable data centers to augment its network capabilities.
• It is rolling out a range of managed services, capitalizing on the IT skills base in India.

• VSNL has limited experience supporting MNCs. In the past, it acted as a local partner for foreign carriers terminating connectivity in India. But it is pushing out of India to compete for customers, initially as an Indian-route specialist, but increasingly as a regional player.
• Its service quality is below average, especially in local service and support. It is, however, acting quickly to improve its service quality.
• It offers limited geographic coverage in Asia, although it is expanding this rapidly.
• It is still in the network infrastructure expansion phase, and will take time to gain stability and maturity in network operations — crucial for consistent service quality.