TIA Forecasts Sustainable Growth in Telecom Through 2011

The communications market is generally in good shape and, despite the shaky U.S. economy, should continue to see stainable growth both domestically and abroad through 2011. Thats the word from TIA and Wilkofsky Gruen Associates, which on Friday highlighted the results of their 2008 Telecommunications Market Review and Forecast, which looks at both carrier and customer spending on services and equipment.

Were now on an upswing, and we believe this upswing is a sustainable upswing, said Arthur Gruen of Wilkofsky Gruen Associates, which works with the TIA to produce its annual review and forecast.

Telecom spending in the U.S. increased 8.3 percent (with $1 trillion in revenue) last year, should rise an additional 9.3 percent this year and will see 7.2 percent CAGR through 2011, according to the report. Meanwhile, the forecast projects the global telecom market will hit $4.9 trillion in 2011.

During the late 90s and early 2000s there was a huge level of investment in anticipation of traffic growth, added Gruen, comparing todays situation with the economic downturn a few years ago, when telecom was at the epicenter of the slide and spending on telecom equipment plummeted from $45 billion in 2001 to $15 billion in 2003. The traffic growth did not immediately materialize, and then the recession followed, and what happened was there was a lot of this excess capability; the investment could not be monetized and there was a huge drop off in spending. Now were in a situation where the investment is not in anticipation of demand, its following demand. And thats why we think its a sustainable growth path.

But were not looking at anywhere near the overheated levels of 2000 and 2001, he added. Were looking at what we believe is sustained growth going forward. And even then well be at only a bit more than half the level of spending that we were in 2011 that we were in 2000-2001.

It comes as no surprise that the explosive growth in network traffic, fueled by data applications including VoIP and video, are behind this positive outlook. According to the study, bandwidth consumption doubled in 2006 and quadrupled last year, driving investments in fiber and gigE to support broadband wireline and wireless network upgrades. Meanwhile, service providers and business customers continued adoption of IP technologies and services such as IP VPNs, VoIP and unified communications has led to ongoing spending.

On the down side, wireline subscriber growth dipped to single digits in 2007 for the first time and there are expected to be 150 million U.S. landline subscribers in 2001, down less than 10 percent from last year. However, TIA said while subscriber erosion continues as more users move to VoIP and wireless, that erosion is moderating.

And while subscriber growth in wireless is slowing as the U.S. market for these services becomes saturated, TIA said the ability of newer wireless handsets and networks to support video, music and other applications means increased ARPU for wireless operators. Wireless service revenue is expected to hit $200 billion by 2011, exceeding landline revenue by 26 percent; 84 percent of the overall service revenue growth is expected to come from data services.



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