Total spending in the United States telecommunications industry rose 8.9% in 2005 to an estimated $856.9 billion, and is expected to climb 10.2% this year,reaching $944.7 billion, according to the newly released TIA's 2006 Telecommunications Market Review and Forecast.
The growth was led by double-digit increases in network equipment, wireless devices, wireless services, services in support of equipment, Internet access, unified communications, videoconferencing public room services and Web conferencing. The U.S. telecommunications industry, says the report, will grow at a projected 9.0% compound annual growth rate (CAGR) 2006-2009, reaching $1.2 trillion.
The Market Review and Forecast is an annual study published by the Telecommunications Industry Association (TIA; www.tia.org). The study is an overview of telecom’s interrelated market segments, including landline network, enterprise and consumer, wireless communications, and international markets.
Total international communications spending (not including the U.S.) reached $1.8 trillion in 2005, up 11.4% over 2004, fueled by double-digit increases in wireless transport services, Internet access, public network equipment and professional services in support of public network and enterprise equipment. Middle East/Africa was the fastest-growing region in 2005, with an 18.4% advance to $66.7 billion. Overall international telecommunications spending is expected to reach $2.7 trillion in 2009, growing at a 10.4% CAGR 2006-09.
“The statistics in our new report reveal the telecom industry is expanding once again,” says TIA president Matthew Flanigan. “The U.S. market is back on an upward path and the international markets are growing even faster. With revenues from international markets more than double that of the U.S., the global marketplace is clearly where companies must compete.”
A 5.4% increase in total U.S. equipment and software in 2005 marked continued gains in that sector, reaching $165.7 billion in 2005. A principal driver was revenue from wireless devices, which in 2005 reached $15 billion-a 22.6% increase over 2004.
Network equipment revenues rose over the past two years after falling 71% between 2000 and 2003, with increased spending on optical fiber cable being the principal driver. Rising traffic in the network is fueling the demand for fiber. Although not regaining its prior high levels, fiber revenue in 2006 will climb to more than half that of 2000, and will be a catalyst for growth rather than for decline over the next four years. Total revenue in the network equipment and facilities market is expected to reach $20.9 billion in 2006 and achieve a 5.2% CAGR 2006-2009, reaching $24.4 billion in 2009.
The U.S. enterprise equipment market expanded 6.9% to $98.3 billion in 2005. In the enterprise market, the long-heralded move to convergent technologies is now taking off, with Internet Protocol (IP) equipment and IP-based services beginning to replace legacy technologies. As legacy equipment ages, replacement demand, along with rapid growth in videoconferencing and unified communications, will continue to fuel spending.
Total spending on enterprise equipment is expected to reach $104.5 billion in 2006, a 6.3% increase over 2005.
“2004 was not a fluke year,” says Arthur Gruen of Wilkofsky Gruen Associates, one of the report’s principal authors. “The U.S. market is in a period of sustained growth.
Gruen notes, “Convergence finally hit its stride in the enterprise in 2005. Convergence in the enterprise has been a goal for a number of years, with several obvious benefits. But there had not been enough demand for users to trade up. Also, a lot of companies bought new PBXs late last decade in anticipation of Y2K. That equipment is now aged, leases are up, et cetera. And the market has opened for Voice over IP.”
Spending on transport services in the United States increased 4.2% in 2005, reaching $310.8 billion. Landline revenue continued to fall in 2005, recording its fifth consecutive year of decline, and wireless continued to grow at double-digit rates. Total landline revenue in 2005 reached $192.3 billion, a 1.4% decrease over 2004; wireless services revenue reached $118.6 billion in 2005, a 14.8% increase over 2004.
The downward trend in landline spending is the result of the erosion in landline subscribers. For example, with broadband Internet subscribership on the rise, the need for a second line to support dial-up Internet access has declined. In 2005, the number of wireless subscriptions (194.5 million) passed landline subscriptions (172.1 million), and with approximately two-thirds of the U.S. population subscribing to a wireless service, the market still has room for expansion.
TIA expects wireless penetration to rise to 88% by 2009, which would translate to 270 million subscribers. Landline subscriptions will continue to fall, the report says, but the rate of decline will moderate as services such as Voice over Internet Protocol (VoIP) and broadband video help landline carriers retain subscribers.
Internet access revenue rose 10.2% in 2005, fueled by rising broadband penetration. The U.S. broadband market has grown explosively from 4.5 million high-speed Internet access subscribers in 2000 to 41.2 million in 2005. Broadband Internet access has become a central offering for carriers. Landline carriers and cable operators are competing with steep discounts and faster speeds, which is propelling the market and hastening the transition from dial-up to broadband.
By 2009, says the TIA report, nearly three-quarters of subscribers will access the Internet via broadband connection.