1999 was the year the Internet came of age. At the beginning of 1999, the number of Internet subscribers worldwide totalled around 150 million, but by the end of the year that number had reached over 250 million and continues to grow. Although the majority of Internet users remain concentrated in developed countries, the number of subscribers in developing countries grew by some 127% – almost twice as high as growth rates in the developed world. In addition, practically every country in the world is now connected to the global Internet.

Despite a recent decline in the market capitalization of so-called “dot.com” companies, the Internet continues to grow. No company, and especially no telecommunications company, can now afford to neglect the Internet. During the course of the year several traditional telephone companies established, acquired or spun-off Internet operations, with the result that, just a few months later, the value of some of those Internet subsidiaries now rivals that of the parent company itself.

Fixed and Mobile Networks

If 1999 was the year of the Internet, it was also the year of mobile cellular. The number of cellular network subscribers worldwide reached more than 470 million by the end of the year, with 99% of those subscribers enjoying a choice of service supplier. Italy, the Republic of Korea, Paraguay, Portugal, Venezuela and Uganda joined Cambodia and Finland on the growing list of countries where mobile phone subscribers now outnumber customers of traditional fixed-line service.

Despite soaring demand for mobile services, the fixed-line telecommunications market also continued its global expansion in 1999, reaching just under 900 million subscribers by the end of the year. Much of this demand is being driven by customers’ need for second lines and new broadband technologies for Internet access, as well as by the need to increase telecommunication penetration in the developing world.

Telecommunications demand was driven by increased liberalization and continuing privatization around the world, as well as by the growing volume of traffic generated by mobile and Internet subscribers interconnecting with the fixed-line network. As a consequence of the requirement for interconnect, there was noticeable growth in the volume of local call traffic, which has for many years lagged behind growth rates for international and long-distance service.

New Technologies

The late 1990s saw frenetic activity in the fields of satellite communications and new multimedia applications. More satellite systems have been launched during the last decade than in all previous years combined, with most activity focusing on the booming market for direct broadcasting services. The development of new Global Mobile Personal Communications by Satellite systems (GMPCS) has been slower than expected, and the focus has now shifted away from voice services towards Internet and location-finding applications.

In the realm of multimedia, major media interests around the world focused on buying up distribution channels for new, online content, while telcos worked hard to build broadband capacity into their core networks and to cement alliances with content providers.

The lure for both is the forecast tidal wave of data traffic, with telcos hoping to cultivate a new and lucrative source of revenue from their installed networks, and media companies looking to cash-in on the explosion in value-added, pay-per-use online consumer services.

Open Markets

The effects of the opening of the telecommunications markets of European Union members along with the WTO agreement on basic telecommunications, both of which came into force in 1998, began to be felt in 1999. For example, the number of countries allowing competition in international telecommunications services rose to more than 40 over the course of the year. That said, the year as a whole was a relatively slow one for privatizations of telecommunication operators, with just five transactions involving incumbent telecommunication companies generating total revenues of around US$20 billion. Three transactions involved additional sales of already partly-privatized companies, while two concerned new privatizations of operators in Bulgaria and Croatia.

This slowdown in privatization can be partly attributed to a lack of opportunity – for example, the majority of incumbent operators in the Americas region are already fully or partially privatized. A further inhibiting factor has been the sluggish economic climate throughout the Asian region. While a greater number of privatizations are forecast for the year 2000, it will become increasingly difficult for operators to generate a good price from the sale of fixed-line assets which are not linked to a mobile network.