Cisco singled out as key beneficiary of 2010 carrier spending

Transition to IP and 3G mobile backhaul upgrades drive modest increase over 2009, firm states

Cisco is expected to be a chief beneficiary of a modest 1.5% hike in carrier spending in 2010, according to a bulletin issued this week by Avian Securities analyst Catharine Trebnick. Avian estimates that carriers will spend $57.8 billion this year to continue their transition to IP and on 3G capacity backhaul upgrades. 

AT&T and Verizon will account for 61% of the spending in North America, according to the Avian bulletin. 

Strength in mobile data demand is driving capacity/footprint upgrades in 3G wireless networks, Trebnick notes. This should translate into near term router revenue for Cisco and Juniper, especially at AT&T, she states. 

Wireline spending will focus on the edge of the network. AT&T and Tier 2 operators will focus on the transition from TDM-to-IP, and from legacy data services like ATM and frame relay to IP-VPNs and Ethernet, which will necessitate an increasing number of IP interconnections at the edge of the network, Trebnick states:  

We expect more managed services will be available as a result of the economic downturn in 2009 as there is an increase in the number of business and SMBs looking for IP VPNs, managed security, hosted VoIP solutions to maintain productivity and reduce overall operating costs. One data point we heard that businesses are using the Internet over the post office as a way to ship critical data.     

And what role does the federal stimulus package play in all this? Avian says its industry sources indicate the majority of broadband stimulus is benefiting local system integrators, consulting firms and states' balance sheets more than the local telecom, cable operators and suppliers. The second and third round has been combined, Trebnick notes, and the NOFA (Notice of Funds Availability) for broadband stimulus is expected in the first quarter of this year. 

Over all our theses is similar to 2009, Tier 1 operators are focused on mobile and Tier 2 operators are still spending at the edge of the network for managed services and IP interconnection.  

Acme Packet was also singled out by Trebnick as a key beneficiary of this year's spending activity among carriers.  

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