The old world telecom order is being swept away as data rather than voice-optimised networks become the technology of choice for telephone-service providers. Those who fail to grasp what the changes mean may be doomed to see their business slump into long-term decline. That is the message from United States equipment manufacturer Cisco Systems, which is shifting its business focus from offering just data networks to networks bringing together voice, data and video. The recent purchase of Bay Networks by Northern Telecom is an example of a traditional switched-based manufacturer moving into the same area but from a different direction. Data networks, originally conceived for linking computers, use more efficient packet switching rather than the circuit-switching method, which has been the mainstay of the voice-telecommunications market for decades. What has changed is the rapid increase in data traffic driven by the growth of the Internet. In 1990, just 1 per cent of telecommunications traffic worldwide was data related. That situation is rapidly reversing. Last year in the US, data traffic overtook voice, said Cisco's director of the service provider market Chris Vargas. 'In Asia we expect the data-voice cross-over point to be between 2000 and 2001,' he said. It will not be long before data is 99 per cent of traffic and voice just 1 per cent. With this changing traffic dynamic, networks also need to adapt. 'We need to build networks optimised for data, not voice,' Mr Vargas said. The reason for the high profile 'outs' of telephone networks in the US was because so much data traffic was being handled by networks not designed primarily for data. Service providers who embraced this packet-switched world would enjoy lower cost structures and higher returns on investment, he said. A second reason allowing the likes of Cisco to pitch their network-building capabilities is liberalisation. Deregulation is allowing new breeds of telecoms companies to emerge. No longer are markets dominated by one player that probably has a large legacy switched system. In the US, new telecom companies are emerging that are using packet-switched technologies from scratch, allowing them to provide voice, video and data services for customers. It meant traditional telephone companies accustomed to selling voice services at a premium would face challenges in maintaining the profitability of their businesses, Mr Vargas said. This is why Cisco and the likes of NorTel Networks are targeting markets in Hong Kong, where imminent liberalisation will allow new players to emerge. A good example of this is City Telecom (HK) - known as CTI - one of Cisco's first customers to buy an integrated system capable of delivering voice, video and data. The company is spending US$5 million, much of it with Cisco, to develop an Internet protocol (IP) based packet-switched network. Created in the mid-1990s, the company previously operated a popular call-back service. 'CTI customers will no longer need to dial our call-back switch in North America but straight into the local node of the network,' chairman Ricky Wong said. The company would be able to offer a new range of services from day one of deregulation on January 1 next year, he said. CTI is buying 50 Cisco routers, providing 8,000 dial-up connections. It also is building its own network of leased lines to the US and Japan. Traditional telephone companies accustomed to selling voice services at a premium would face major challenges maintaining profitability of their businesses