Convergence, wireless are fueling telecom spending

The telecom slump may finally be over - users are spending more on telecommunications services and a new report released last week shows strong growth in network equipment, wireless devices, wireless services, Internet access, unified communications and conferencing.

The Telecommunications Industry Association's (TIA) 2006 Telecommunications Market Review and Forecast, which is the group's annual assessment of the industry, shows the U.S. telecommunications business overall grew 8.9% in 2005, to $856.9 billion.

TIA President Matthew Flanigan says, "2005 was a strong year for the overall telecommunications industry. It seems the days of 2% to 3% growth like we saw in 2002 and 2003 respectively are behind us."

The report says that the U.S. telecom business will see double-digit growth in 2006, reaching $944.7 billion; by 2007 it will reach $1.2 trillion. TIA says companies moving to converged technologies, the consolidation of the service-provider market and rampant wireless usage all are fueling telecom growth.

The report states that in the enterprise "the long-heralded move to convergent technologies is now taking off." IP equipment and services are beginning to replace legacy technologies such as IP PBXs.

Last year corporate users spent $3.2 billion on IP PBX gear, compared with $859 million spent on legacy PBX equipment. IP PBX buying was up 22.4% compared with 2004 and is expected to reach $4.8 billion by 2009.

The TIA report says that between 2004 and 2005 the number of wireless users surpassed the number of traditional wireline telephone users. This significant change is contributing to continued wireless services and equipment purchasing.

In 2005 there were 194.5 million wireless users and 172.1 million landline users in the United States. In 2004 landline users, at 177.9 million, outnumbered wireless users, at 169.9 million.

In 2005 users spent $118.6 billion on wireless services, such as cellular, paging and Wi-Fi, compared with $103.3 billion in 2004. Users also spent $15 billion on wireless devices, such as cellular phones, pagers and PDAs. That's up 22.6% from 2004, when users spent $12.2 billion on wireless devices.

An uptick in fiber-optic service revenue is also contributing to growth and is a big change from the dark days of telecom. In 2001 fiber revenues reached $14.1 billion, then headed downward in 2002 and 2003, to $5.3 billion and $4.2 billion, respectively. 2004 was the first year of improvement, with 2005 solidifying that growth. In 2004 fiber revenues jumped to $6.8 billion, and in 2005 increased to $9.5 billion.

Copyright © 2006 IDG Communications, Inc.

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