Better days ahead for telecom?
Industry report predicts steady spending growth through 2006.
By Denise Pappalardo
Network World
ARLINGTON, VA. - There might be a light at the end of the tunnel for the U.S. telecom market, despite a seemingly continuous drumbeat of bad news.
Between now and 2006, telecom spending by carriers, consumers and businesses is expected to grow at an annual compound rate of 9% - from $681 billion to $963 billion - according to the 2003 Telecommunications Market Review and Forecast, which the Telecommunications Industry Association (TIA) issued last week.
While the industry will not soon return to annual growth rates of 15% seen in 1999 and 2000, steady growth is expected, says Arthur Gruen, chief economist on the TIA report and a principal at consulting firm Wilkofsky Gruen Associates. The telecom market expanded by only 3.5% last year and in 2001.
But the telecom market is on the rebound, Gruen says.
One of the biggest drivers contributing to growth will be high-speed Internet-access services, Gruen says. Although the FCC last week handed down a controversial order governing broadband, the ruling was a "positive" move for incumbent local exchange carriers (ILEC) because they will not have to share new broadband network deployments, says Matthew Flanigan, president of TIA.
The ruling is expected to spawn new DSL and even fiber-to-the-home deployments, according to some industry experts.
About 5.8 million DSL users today spend $5.7 billion on the broadband service. Those figures will nearly triple in the next four years, according to the TIA report. In 2006, there is expected to be 15.3 million DSL users who will spend $14.5 billion on services.
While TIA expects DSL to continue to grow, cable modem services will still lead the broadband market in 2006 with more users. But cable modem users don't spend as much as DSL users. In 2006, the report predicts, 16.9 million cable modem users will spend $7.9 billion on services, which $6.6 billion less than DSL users.
The primary reason is that cable modem services, on average, cost less than DSL. The average monthly fee for DSL today is about $80. The average monthly fee for cable modem service is about $43. The average differs so greatly because there are many more business-grade DSL offerings, which cost more than consumer services, than there are business-grade cable modem offerings.
Traditional wireless, wireless LAN, VPN, Gigabit Ethernet metropolitan services and IP convergence offerings are expected to drive growth, according to the report.
And although long-distance voice service growth is expected to remain at 2.5%, users simply are spending their dollars elsewhere. Wireless voice and data services are expected to grow at a healthy rate and even surpass longdistance voice by 2005.
Business and residential users spent $86 billion on wireless services last year. That amount is expected to jump to $130 billion by 2006. Not only are existing users expected to spend more on wireless services, but nearly 30 million more users will go wireless. There are expected to be 218.5 million wireless subscribers by 2006.
While wireless voice still will dominate, mobile Internet subscribers are expected to nearly triple by 2006. According to the report, there are 24 million wireless Web surfers. In four years, that number is expected to total 64 million.
While traditional data services such as frame relay, ATM and private line still have a steady following, more businesses are turning to VPNs to meet their corporate network needs.
Last year users spent $11.6 billion on VPN equipment and services, according to the report. In 2006 that number is expected to nearly double with users spending $21.3 billion on VPN equipment and services.
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