Report: U.S. Telecom Enjoys Wireless Lift
by Ed Sutherland, internetnews.com
February 16th 2006
After taking a nosedive in recent years, telecom spending enjoyed a 9 percent boost in 2005.
Increased wireless demand, network expansion and broadband Internet access was responsible for the $856.9 billion hike, according to the Telecommunications Industry Association.
The upward trend is expected to climb to 10.2 percent growth in 2006, leveling off at 9 percent annual growth, reaching $1.2 trillion in telecom sales between 2006 to 2009, according to the industry group’s annual Market Review and Forecast report.
“The U.S. is back on an upward path,” said Matthew Flanigan, TIA president, in a statement. The 2000 and 2003 period were dark times for the industry, which saw spending on networking fall more than 70 percent.
That turnaround is fueled by renewed demand for fiber-optic cable. Fiber’s comeback shocked Arthur Gruen of Wilkossky and Gruen Associates, the report’s author.
During the heat of the dot-com boom, companies envisioned network expansion and fiber as the answer. When those networks never materialized, the market for fiber also vanished.
Today the telecom industry “is looking at fiber for different purposes,” Gruen told internetnews.com. Rather than as network backhaul, fiber is getting more personal. Verizon and AT&T see fiber as the path to bringing television to homes, competing with cable. But any growth will be modest and firmly planted in reality.
“Fiber revenue in 2006 will climb to more than half that of 2000 and will be a catalyst for growth rather than decline over the next four years,” according to the report. Revenue from fiber equipment and facilities will reach $20.9 billion this year and experience 5.2 percent yearly growth for 2006 to 2009.
Part of the need for fiber will be to support growth of wireless service and equipment, according to Gruen. “Telephone calls are only a minor part” of increasing demand for wireless phones, according to Gruen. As music, video and data migrate to wireless devices, simple phones are “becoming mobile entertainment centers.”
Revenue from wireless services increased 14.8 percent in 2005 to $118 billion. Contrast the double-digit growth of wireless with a 1.4 percent decrease in landline revenue. This trend means “wireline guys are gone,” Gruen says.
But the future of landline revenue isn’t totally black. As wireless adoption in the U.S. reaches 90 percent, revenue will slow. Wireless companies will need to shift from obtaining new customers to offering more services, according to Gruen.
For landline firms, the current slide will flatten by 2007, and revenue will begin to increase by 2009. The gains will come as landline services begin offering bundled local and long-distance services, as well as flat-rate pricing.
Dial-up Internet access has breathed its last breath, according to Gruen. Broadband reached 41.2 million U.S. subscribers in 2005, up from 4.5 million in 2000.
Fueling the transition from dial-up is a dizzying array of discounts from landline carriers and cable firms. Almost 75 percent of subscribers will use broadband for Internet access by 2009, according to the TIA study.
U.S. telecom growth was topped by success internationally, according to the report. International telecom spending rose 11.4 percent in 2005, compared to the previous year. Middle East and Africa led the way, posting an 18.4 percent increase amounting to $66.7 billion.
“The telecom market has returned to its roots,” Gruen said. After a tumultuous start, the decade will see equilibrium as broadband dominates the industry. What can today’s findings tell us about the path ahead?
“The drivers today won’t be the drivers in five years.”