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Growth of Value-Added Network Services Spurred By Greater Needs of Data Users.

Continued advances in microelectronic circuitry are resulting in a spectacular decrease in the cost of memory and microprocessor hardware; these price reductions have helped to accelerate the proliferation of data terminals, desktop computers, word processors and personal/home computers. Consequently, there is a growing need for devices that interest with data bases in either centralized or distributed systems.

A recent Frost & Sullivan forecast predicts an almost 10-fold increase in data-line revenues from sales to the data-processing industry during the 1980s, with average yearly growth forecast of 25 percent.

Although data-line revenues accounted for only 3.4 percent of total telecommunications revenues in 1980, if present growth patterns continue throughout this decade, by 1990 revenues from data lines should account for approximately 8.5 percent of total telecommunications revenues.

Data communications services obviously have tremendous growth potential--demand during this decade will be fueled by both continued technological progress and a less-regulated, more-diversified and more-comptetitive communications industry. These changes have already been responsible for a complete restructuring of the telecommunications industry, resulting largely from an FCC de-emphasis on regulation and a greater reliance on market forces, as well as the 1982 settlement of the US antitrust suit against AT&T.

Data communications carriers fall into three major categories: private (dedicated) lines nd networks; dial-up public telephone network service; and enhanced services through packet-switched public data networks. Of these three, the first two provide the FCC-defined "basic" services and the third offers enhanced services.

One of the important trends confirmed by a recent Frost & Sullivan survey is the continuing strong demand for private lines and networks, which will constitute almost 60 percent of the telecommunications traffic over the next five years. Dial-up voice-grade lines are going to be losers in the next five years, falling from 23 percent to nine percent of traffic. The clear winner will be the enhanced (VAN) data lines, now at 15 percent of traffic and predicted to grow to 35 percent in five years.

Private lines and networks are tailored toward the large corporate user with a large in-house data processing center. These users rely mainly on private custom-designed networks.

The dial-up public phone category satisfies the majority of occasional users of data links who want almost no fixed investment, and are a less-demanding and less-sophisticted group of data communications users, not bothered by slow set-up time, lower speeds and a somewhat higher error rate. Enhanced Services Appealing

Enhanced services, by contrast, appeal to a wide variety of users--from the occasional but somewhat advanced data communications user to the most sophisticated and demanding user who wants such special features as processing, storage and conversion. The most attractive feature of enhanced services is its ability to communicate between diverse and dissimilar devices. It is the only service that can offer truly distributed data processing.

Although dial-up telephone lines can also be used for back-up of private lines, more sophisticated users prefer enhanced services, as they offer lower error rates and extra features. These enhanced services are tailored to the data-processing user and will continue to evolve with the computer industry. Of all available data communications services, only enhanced services are suitable for public data networks.

Originally, VAN services conducted code and speed conversion for the purpose of interconnecting otherwise incompatible terminals and hosts. Today's enhanced services include all this but have been redefined to include application processing not related to incompatibility of termianls and hosts, such as transaction services, in-network storage and customer network reconfiguration. As this definition was developed by the FCC, it was created for use in conjunction with public network services provided by common carriers. These same functions can also be used in private networks either separately, alternately or in combination with basic transport services. Better Growth Potential

As enhanced services are essentially a new sector in the telecommunications industry, they have a much better growth potential than the traditional voice-oriented telephone sector. An annual growth rate of up to 50 percent in the mid-1980s is expected as more alternatives to voice grade service--provided mostly by telephone companies--will be made available to data communication users eager to take full advantage of the new services.

Today, as a result of increased competition and decreased regulation, the trend in communications services, particularly data communications, is toward more choices resulting in marked benefits for the user. In the future, enhanced services will be largely expanded in scope, quality and variety of service features at a relatively low cost.

In the coming years there will also be new services available to users through a new category of carriers authorized by the FCC: the Digital Electronic Message Service (DEMS) carriers. These carriers will also be licensed to provide Digital Termination Systems (DTS) using microwave intra-city distribution independent of and in competition with the telephone exchange carriers. These new services will use digital facilities and will thus be ideal for data communications.

As the enhanced services have no established limits, there will be many new and more data-processing-oriented service offerings appearing on the market. Indeed, enhanced services are one of the more promising sectors of the telecommunications industry.
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Author:Engelberg, W.
Publication:Communications News
Date:May 1, 1984
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