Sluggish telco service growth predicted

Slow adoption of new high speed Internet services such as FiOS and U-Verse could spell difficult times ahead for telecom companies, warn researchers at Information Gatekeepers.

The new forecast by IGI, a Boston-based market research firm, projects that because of limited resources available to cutover new high-speed Internet technology, telcos will not be able to match the total number of high-speed accesses offered by cable companies until 2011.

Originally, the group had forecast the telcos to catch up with the cable companies by this year. Additionally, the group warns that the slower-than-expected growth in high-speed accesses could lead to short-term profitability problems for telcos.

“This will present a real test of will for the telcos’ management as they watch their wireline revenues decline while they continue to pour billions of dollars into the advanced networks,” says IGI president Paul Polishuk, who also notes that the new high speed networks will likely be “unable to turn… into profit centers as soon as they would like.”

“The time needed to place these technologies in service at each customer’s house is much longer than with the more standard DSL, and the ‘back office’ activities are much more involved,” adds Clif Holiday, IGI’s chief analyst and forecaster.

Overall, the report expects there to be around 70 million total high-speed accesses by the end of 2008, with about 33 million access points owned by telcos and 37 million owned by cable companies. By 2011, when the report projects cable companies and telcos to have a roughly equal number of accesses, the total number of high-speed connections in the United States will have grown to about 90 million.

Telcos’ DSL connections will continue to grow until 2011, when they’ll peak at around 35 million, according to the report. By that time, advanced high-speed systems such as FiOS and U-Verse will have grown to 10 million connections, or about 22% of telcos’ high-speed accesses and 11% of total high-speed accesses.