Shift from Private Data Lines Seen
Phone Companies' High-Speed Services Expected to Gain Bank Traffic
To save money and get more network capacity, more banks will shift data traffic to public communications companies from their private networks, a recently released study predicts.
The report from Insight Research Corp., based in Parsippany, N.J., estimates that the market for public network offerings for data traffic will hit $9 billion this year, from $6 billion in 1989. A $27 billion market is predicted by yearend 1996.
The study, "Data on Demand: The Switched Data Communication Service Market 1991-1996," looks at the potential market for existing and planned public data services from telephone companies. The report was based on the stated plans of over 10,000 U.S.-based customers of telecommunications services.
In the deployment of public data services, "banks and other financial services entities are leading the way," said Robert Rosenberg, president of the consulting firm and author of the report.
The banking industry spends more on telecommunications, as a percentage of operating costs, than does any other industry, according to a 1990 survey of the membership of the International Communications Association, an industry group of large telecommunications users based in Washington.
Until now, banks have had little choice: They could use the public network to send data, but only at very slow speeds; or they could lease an expensive, higher-speed private line.
The cost of a leased line is fixed, whether the bank is using the line or not. But with a public, or switched, service, banks are charged only for the time they are using the line.
"There are definitely requirements for high-bandwidth services," said Edward J. Regan, vice president of Manufacturers Hanover Trust Co.
"Today, where companies have an interconnection between a local area network in different buildings, they're leasing [high speed] T-1 lines, but they don't utilize them very efficiently," Mr. Regan said.
Role for Switched Services
Banks may not want to use switched services for links with correspondent banks or with clearing houses.
But they may decide these services are adequate for networks of automated teller machines or for communications among branches and between branches and headquarters.
Or switched services could be used to back up a leased line.
Banks have already expressed renewed interest in one such service, the integrated services digital network.
ISDN is just the tip of the iceberg, however. Other services are on the way. By the end of this year, Bell Atlantic and Pacific Bell plan to offer a service called frame relay, in which packets of data can be sent at very high speed on a per-use basis.
In the next two to five years, telephone companies plan to offer services in which video and images can be sent along with voice and data on a per-use basis.
Meanwhile ISDN, in which voice and data calls can be made simultaneously over a single telephone line, has been touted by the communications carriers for several years. Now, for the first time, it is getting serious attention from some companies for applications such as video-conferencing.
Banks including Sun Trust and Citicorp have signed contracts for ISDN, in which voice and data calls can be made simultaneously over a single telephone line. Mellon Bank, after putting plans to use digital network services on hold, recently said it expects to use the service once its local telephone company, Bell Atlantic, begins to sell ISDN. [Graph Omitted]