Report: U.S. Telecom Enjoys Wireless Lift

After taking a nosedive in recent years, telecom spending enjoyed a 9
percent boost in 2005.

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 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.”

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